This paper sets out the background to developments in higher education in South Africa which have taken place since the change to a democratic government in 1994. It contextualises these developments, firstly, within the broad context affecting higher education internationally, including globalisation and the neo-liberal economic paradigm that has become dominant. Secondly, it outlines the South African political, social and economic context and provides background on the extent of poverty and inequality in South African society. The paper considers the role of Higher Education (HE) in general terms, and specifically the role of the South African HE system during the current period of social transformation. This role has been framed by the tension between the goals of economic development on the one hand and social equity and redress on the other (Badat, 2001, Jonathan, 2001). The paper then sketches the higher education policy context from 1994, outlining the key policy values, goals and strategies and pointing to shifts in policy formulation and implementation. It explores some central themes and areas of tension and contradiction in higher education policy which have relevance for the role of higher education in development in South Africa.