Financing the Durban University of Technology student village
Financing the Durban University of Technology student village

 


The Durban University of Technology (DUT) has embarked on a 10-year strategic plan to maintain its relevance and teaching success. One aspect of the plan is to increase student housing to a target of 30% of enrolment in facilities on or adjacent to its campuses. Research has found that students housed close to university campuses are able to use teaching and learning facilities maximally and perform better than similar students in university accommodation that commute to campus. This case study records the efforts and development impact of the DUT’s plan to build a student village on its main Durban campus.
 
The DUT is a multi-campus institution with facilities spread over five campuses in Durban and two in Pietermaritzburg. The main campus is the Steve Biko campus in Durban. It was formed as the Durban Institute of Technology in 2002 through the merger of ML Sultan Technikon and Technikon Natal. Four years later, when tertiary education institutions were restructured, the institution was renamed the Durban University of Technology.
 
The university has an enrolment of approximately 24 700 students, 6 000 of whom are accommodated in residences. Some 3 000 students live in residences leased by DUT around the CBD of Durban, with some within walking distance of its various campuses while several are up to 10 kilometres away. Residences that are situated far from the campuses are expensive for the university to run in terms of rental costs as well as the transport service it provides for students. Students at the far residences are disadvantaged by the necessary commute to campus and cannot use the libraries or facilities after hours when the buses have departed. Some of the accommodation the university leases is not conducive for studying and does not provide the standards of safety or security the university wishes to provide to students.
 
OBJECTIVE BEING ADDRESSED
The DUT has an unusually fragmented campus for a South African university but it is not alone in having an unsatisfactory student accommodation situation. In 2011 the Department of Higher Education and Training (DHET) published the findings of its investigation into student housing.
 
One of the findings linked the performance of students on state financial assistance to the availability of student housing and showed that students housed in facilities close to their campuses were able to make better use of learning facilities than those who had to commute to campus. Moreover, students who qualified academically for university places and for state financial assistance, but for whom there were no housing places available, had a much higher failure rate. The investigation concluded this was a financially wasteful outcome of public money on subsidising university teaching and financial aid to unsuccessful students. The study estimated that the current accommodation backlog was 200 000 beds in residences and recommended that the ideal level of student accommodation on campuses in rural communities should be 80%, with a 50% level in urban areas. The implication of these findings resonated with the DUT faculty’s experience. By accommodating more students in on-campus residences, the DUT would be able to significantly improve the level of academic support it could provide to its students.
 
APPROACH
The DUT has developed a strategic plan for teaching, research and infrastructure to fulfil its aspiration to be, according to its vision, a "preferred university for developing leadership in technology and productive citizenship". One part of the strategic plan is to raise the level of student accommodation from the present 12% to 30% of total enrolment over a 10-year period. The university intends to reduce the number of students staying in off-campus leased residences and increase the numbers accommodated in residences on-campus. The first step in that plan envisaged building a student village with 804 beds on the main Steve Biko campus and relocating students from distance accommodation to the new facility. The student village project was budgeted at R155 million, R65 million in funding coming from a capital grant from the DHET, but the university needed to raise the balance of R90 million from the market.
 
OUTCOMES AND MEASURABLE IMPACTS
DBSA has a long standing relationship with the DUT. The Bank financed previous university infrastructure projects. For the student village project the DBSA assisted the DUT to specify a request-for-proposals (RFP) for its financing requirements. DUT is regulated by the PFMA and hence it must procure goods and services (including loans) in a manner that is competitive, fair and transparent. As soon as the RFP was issued in February 2014, the DBSA moved quickly to carry out a due diligence on the DUT, assisted by the extensive understanding of the client on the part of the investment project team. In the competitive tendering situation for the DUT project, the DBSA possessed good market intelligence on recent student accommodation loans that it had bid for and therefore knew how to price the loan. The proactive approach used by the project team enabled them to submit an investment proposal to the Bank’s Credit and Investment Committee that was approved without referral in April. The DUT was informed that the Board Credit and Investment Committee approved the transaction. Negotiations with the DUT on the Bank’s offer were swiftly concluded and a loan agreement was signed in June 2014. Disbursement started the same month. Construction of the student village started on schedule but completion of the project slipped by four months due to unforeseen water problems on the site. The new student village will start housing students for the first time in June 2015. Future monitoring of the cohort of students housed on-campus will need to take place to measure the impact on academic performance attributable to their proximity to learning facilities.
 
SUSTAINABILITY
The DUT’s student village project is one part of a strategic plan the university has embarked on which is sustainably financed from redirecting operational expenditure from housing costs towards servicing debt on its capital programme. Financial savings that the DUT has been able to make by giving up leases on accommodation facilities located in the Durban CBD come from two sources. First, the university no longer has to lease buildings that are unoccupied during the vacation breaks. Second, the university is no longer paying transport contractors to bus students to and from their residences. These operational savings increase the DUT’s debt servicing ability.
.
 
© 2013 DBSA. All rights reserved