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Higher education in South Africa shows much promise with respect to knowledge production and dissemination, to contributing to social equity, economic and social development and democracy, and to the development needs of the Southern African region and the African continent. However, South African higher education is under considerable stress from domestic and international trends that are redefining the nature and role of public sector. In just a decade, the international university rankings have become dominant measures of institutional performance for policy-makers worldwide. Bolstered by the façade of scientific neutrality, these classification systems have reinforced the hegemonic model of higher education – that of the elite, Anglo-Saxon research university – on a global scale (Ordirika, 2014). This paper describes how South African institutions are adopting many of the policies and systems around international ranking, accreditation and publications, and also building in study abroad programs/international students mostly for generating revenue. The presentation will outline the impact of global ranking systems on the knowledge economy and describe how the rankings paradigm is forcing institutions into a costly and high-stakes “academic arms race” at the expense of more pressing development and social transformation priorities. It further explores the impact of global neoliberalism on the evolution of higher education in South Africa – particularly the trend of inadequate government funding for universities, loss of autonomy, infrastructural decay, falling academic standards, politicization and privatization of education. Given the significant developmental implications of investment in higher education, I argue that relegating this important public policy issue to the market forces is likely to promote further inequality in the society.