The Higher Education Act, 101 of 1997 (HE Act) provides in section 53 that the Registrar may register an applicant as a private higher education institution if the registrar has reason to believe inter alia that the applicant-

1. is financially capable of satisfying its obligations to prospective students;
2. with regard to all of its higher education programmes-
   1. will maintain acceptable standards that are not inferior to standards at a comparable public higher education institution;

This obligation is then fleshed out in regulation 13, applicable to private higher education institutions, in the following terms:

1. In the application contemplated in regulations 3, 4 and 5, an applicant must submit proof that –
   1. its income is or will be sufficient to sustain its programmes in an acceptable manner; and
   2. it has or will have a stable financial position that will enable it to maintain operational continuity.
2. In the application contemplated in regulations, an applicant must submit proof that it has established financial surety or guarantees to ensure that the institution meets its obligations to its enrolled students.

Item 31 determines that "in terms of Regulation 13(2), an applicant is required to set up surety or guarantee to ensure that the applicant is able to meet its obligations to students for as long as it remains a registered private higher education institution. the surety agreement must be structure in such a way that it takes into account enrolment fluctuations."