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During the last two decades state funding of higher education [HE] in South Africa has decreased substantially (especially if public expenditure of HE as a percentage of [gross domestic product] GDP is used as a yardstick). HE institutions were forced to increase tuition fees and rely more on the third income stream to balance their books. In the process increases in instruction/research staff did not keep up with the increase in student numbers. During the period 1986-2003 qualifications awarded to students per full-time equivalent instruction/research staff member increased over time - indicating greater efficiency of the HE sector in delivering more teaching output. High-level research in the form of publication units in accredited journals, however, stagnated during this period. In recent years until 2007, however, publications in accredited journals increased substantially. This was mainly the result of broadening the number of accredited journals by the Department of Education. In this article two indicators, linked to the current funding formula for higher education, to measure academic output of [higher education institutions] HEIs are defined and applied to the output of institutions for the period since 2002. It is concluded that there is large variability between HEIs as far as teaching and research output are concerned. A cause for concern is that the majority of the research is conducted by just a few HE institutions.