The South African Department of Science and Technology Ten Year Plan seeks to move the system of innovation toward growing a knowledge economy. It sets ambitious targets for scientific production (PhD graduates; world share of scientific publications) whose attainment in part rests on the effectiveness of the universities. The paper commences with a thumbnail sketch of the system of innovation. This is followed by a discussion of the international ranking of universities and South Africa's standing. Next we provide a comparative analysis of the domestic ranking of universities. A limited survey of five countries shows that concentration of research in a cluster of universities is 'normal'. Turning to the South African case we use the national R&D Surveys (HSRC, 2008) to examine the changing diversity among the universities over the merger period. This reveals two concentrations, the first comprising the 'Big Five' research institutions and second the 'Next Six.' This implies a double gap in the distribution of universities according to research expenditure and appears to be a feature unique to the South African higher education system. We then unpack the meaning of the targets of the Ten Year Plan and analyze the potential of the universities to meet these in the light of the gaps. The paper concludes with suggestions for policy.