African universities face huge, intersecting challenges. As a result, they are struggling to adapt.
Firstly, enrolments are rising without universities increasing their capacities to deliver quality education aligned to the continent’s needs.
Secondly, raising revenue through fees clearly isn’t the answer to funding shortfalls: the policy of co-financing education through tuition fees has failed to yield enough money over the years. Instead, private universities have mushroomed, mostly offering arts-based courses, which are cheaper to run. Public universities have also ramped up arts course enrolments at the expense of science, technology, engineering and mathematics. 
A related consequence is that staff are overburdened by their teaching loads and pay little attention to research. This is partly why Sub-Saharan Africa produces only one per cent of all global research. 
Thirdly, the introduction of tuition fees that began in the 1990s has continued to lock out poorer students who cannot pay. This amounts to lost talent the continent desperately needs.
The answer may lie in shaking up how universities approach businesses, including informal ones. Universities will be better able to make meaningful contributions to society by working with the private sector to develop innovations people actually need and want.
A more imaginative and engaged approach to the informal sector will, in turn, position universities as socially relevant and so help galvanise new sources of funding — a pressing need for universities across the continent.
Informal sector ignored
One trick policymakers are missing is involving the informal sector — which is growing across the continent — in development plans and projections. The informal sector employs around 80 per cent of the workforce and accounts for about 40 per cent of GDP overall. It is a space where some of the continent’s most imaginative and exciting innovations have thrived, from 3D printing to audio technology where new varieties of music are constantly being created in response to changing social, economic and political contexts.
Businesses in South Africa have created machinery to improve jewellery design while reducing labour intensity and time spent, for example. And — probably the most famous success story in recent years — the mobile money transfer system M-Pesa is another local innovative idea that has become a game changer in technology and business.
Universities should examine ways of supporting the growth of the informal sector and its formalisation through patenting innovations in order to raise more revenue.
“Effective university leadership is therefore critical for honouring commitments in an atmosphere of trust and mutual respect; so is managing partnerships effectively. The payoff will be bankable ideas that attract investment.”
African universities are also failing to engage properly with business in the formal sector. Indeed, African academics and international organisations have expressed doom and gloom about this.  They cite factors such as a lack of confidence among businesses in universities being able to undertake sophisticated research and innovation; the small size of industry and business; and the mismatch between university research strengths and regional industry sectors.
So how can university-industry collaboration become fruitful?
A good proportion of public financing for universities should go towards high-quality research to attract private investment into science parks, along with technology and business incubators in academic institutions. These initiatives may initially be modest, only involving small and medium-sized enterprises, but they could dramatically expand.
A good example is the Taifa laptop project in Kenya developed by the Nairobi Industrial and Technological Park, a joint project between the government and the Jomo Kenyatta University of Agriculture and Technology. The laptop was conceived within the Buy Kenya, Build Kenya vision, where the government works with universities and industry to develop world-class products for the local market and beyond. In this case, the government contracted the university to produce laptops for Kenyan primary schools to advance digital learning.
Robust engagement with universities in business is an urgent area for government investment because the returns from commercialised research can raise additional resources for funding other university programmes.
Revenue generated from such projects should be invested in scholarships and higher salaries for university researchers.
Banking on innovation
African universities face an additional challenge: how to move into the innovation sector. This can only happen if governments provide research funding, and few African countries have honoured their commitment to invest at least one per cent of GDP (gross domestic product) in research by 2010. 
There is also an opportunity for supporting innovation in the informal sector. For example, many African countries have embraced the use of motorcycle taxis, which are imported at great expense from around the world. But, if they gave proper support to engineering departments, African states could produce motorcycles and spare parts locally, rather than relying on expensive imports.
Upon maturity, ideas coming out of engineering departments could transition into a business enterprise and generate massive revenue for universities. Honda is a case in point: it sold 17 million motorcycles in the fiscal year ending in March 2014, making 1.66 trillion Japanese yen. A good proportion of the cash flow can be traced to Africa’s informal sector.
Nigeria’s booming Nollywood film industry is another space of digital innovation that universities could tap into. In 2014, Nigeria’s film and music industry grew by 33 per cent. Nigerian universities could turn their arts studios into commercial units that support the digital distribution of these products.
Part of the problem is that university researchers and innovators rarely meet with entrepreneurs and their counterparts in the private sector. Universities can start to change this by establishing or revamping offices that foster partnerships and using public funds for basic infrastructure: researchers, laboratories and equipment.
But industry can only work with universities if sure that its interests are protected and a return on investment guaranteed. Effective university leadership is therefore critical for honouring commitments in an atmosphere of trust and mutual respect; so is managing partnerships effectively. The payoff will be bankable ideas that attract investment.
Beatrice Muganda is director of higher education at the Partnership for African Social and Governance Research, in Nairobi, Kenya, @PASGR_. Beatrice is an education policy practitioner promoting partnerships for graduate teaching of social science research and public policy.