Budget 2026: Our financial outlook and shared responsibility

Dear colleagues

I write to share the context and key implications of the University of Cape Town’s (UCT) approved Council-controlled General Operating Budget (GOB) 2026.

We enter the year with cautious confidence: the 2025 financial year closed with an operating surplus of R68.6 million, our first positive result since 2021, and a favourable variance of R132.2 million against budget, the product of disciplined cost management and the collective effort of every unit. I am grateful for this shared commitment.

However, 2025 must be understood as stabilisation, not resolution. The 2026 budget carries a projected deficit of R85.3 million (-1.7% of recurrent operating income). It is a budget shaped by difficult choices and real external risks.

Government funding under pressure

State subsidy, block grant, constitutes 39.7% of our 2026 GOB income, budgeted at R1.991 billion (a 4% increase on 2025 actuals). That assumption is already under pressure: the confirmed allocation is over R14 million below our budget. To put this in context, every 1% shift in state subsidy affects our bottom line by about R20 million.

Beyond 2026, the sustainability of the National Student Financial Aid Scheme (NSFAS) continues to pose a systemic risk to the entire sector. NSFAS received only a 5% increase in its 2026/27 allocation from National Treasury, against a backdrop of rising application volumes and average study costs that will meaningfully exceed that percentage. Like all public universities, UCT is not insulated from the downstream consequences of those pressures.

Staffing costs: our largest challenge

Staffing costs account for 68.5% of GOB expenditure and approximately 70% of revenue. At R3.494 billion, the 2026 provision reflects a 5.3% increase on the 2025 budget. Over 12 years, staffing costs have grown by 115%, against subsidy growth of 83% and fee income growth of 96%. This divergence is our most significant structural challenge and staffing cost growth, if left unmanaged, remains an obstacle to achieving financial sustainability.

Emerging risks: geopolitics, oil prices and foreign exchange

The global geopolitical environment has become materially more volatile since the budget was finalised. Two consequences are directly relevant to our finances:

• Oil prices and domestic inflation. Rising oil prices, driven in part by geopolitical instability, have a direct pass-through effect into South African inflation, from transport and logistics costs to utilities, maintenance, catering and the general cost of goods and services.
• Rand weakness and foreign-currency-denominated costs. The Rand has weakened considerably against major currencies in recent months, and this has real consequences for our cost base.
• Read more about how these two factors affect UCT’s finances.

Financial discipline and trade-offs: what we ask of you

The 2026 budget was constructed with deliberate care. R65 million of the R110 million in costs paused in 2025 have been reinstated because deferring them further would have placed the academic project at risk. Against the backdrop of additional external risks, operating within budget is a shared institutional responsibility.

Given this context and, given the additional risks outlined above, it is essential that every member of this community understands and embraces what it means to operate within budget in 2026.

I want to acknowledge explicitly that these expectations place real demands on all of us. The cooperation that budget holders demonstrated last year during the 2026 budget engagement process, and the willingness to make difficult choices and to understand the broader institutional context, were evident and deeply appreciated. I ask for that same spirit of shared responsibility throughout this year.

Our path forward together: the financial sustainability plan

These challenges are not unfamiliar and they are not without a structured response. UCT’s Council-approved Financial Sustainability Plan, developed under the Ivy Helix Programme, is our evidence-based roadmap to enduring financial health. The plan addresses the key structural drivers of our financial challenge across a range of workstreams:

• Cost efficiency. Systematically identifying and realising efficiencies across our operational cost base, including through procurement reform, energy management, digitalisation of administrative processes and the rationalisation of duplicated functions.
• Capital and strategic investment. Ensuring that our limited capital allocation is directed at the highest-priority needs, occupational health and safety compliance, academic infrastructure and strategic initiatives with demonstrable returns, and that we do not compromise UCT’s long-term capacity for short-term financial relief.
• Staffing sustainability. Developing a workforce planning framework that aligns staffing levels and cost trajectories with revenue capacity, reduces reliance on churn provisions as a cost-containment proxy and positions UCT competitively in the academic and professional labour market without growing costs faster than income.
• Revenue diversification. Aggressively growing our third-stream income through Executive Education at the Graduate School of Business, commercial enterprises, our Semester Study Abroad programme and expanded research commercialisation through the Research Contracts and Innovation Office.

Remember that UCT has navigated the pandemic, structural funding crises and consecutive deficit years without losing sight of its vision and mission or its people. The 2026 budget is not simply a financial document. It is an expression of our priorities, our values and our obligations to our students, to our staff, to the communities we serve and to the long-term health of this institution. Operating within it, with discipline and care, is one of the most important contributions each of us can make to UCT’s future.

I commit to keeping you regularly informed of our financial performance throughout the year. Much has already been achieved, and we value your contribution towards these successes. However, we need to work a little harder this year in order to realise our financial sustainability goals. To this end, we welcome your comments and suggestions. Should you have any questions about the budget, please do engage with your faculty or departmental finance team. Alternatively you can channel questions or suggestions directly with the central Finance Department.

• Contact the relevant member of the central, faculty or departmental finance team.  

Sincerely

Vincent Motholo, CA (SA)
Chief Financial Officer

Read previous communications:

• From the UCT Executive
• Campus Announcements