The article explores the continuing effects of race-based inequalities in South Africa, with a particular focus on university education; it seeks to understand what lies beneath the persistence of race-based thinking. A conceptual framework which aligns everyday racism as a daily practice and the normative yardstick of human capabilities is outlined before examining an empirical case study of a student development programme at one South African university. The policy and historical context of the case study is sketched before proceeding to an interpretation of 70 qualitative interviews with black and white students who have participated in the programme. The data was analyzed for evidence of personal and interpersonal dimensions of racism, but also for evidence of self transformation enabled by the programme. The article argues that persistent though race inequalities still are in South Africa, there is the possibility of change and the development of inclusive social relations among diverse students through education, and that it is then the responsibility of a university to fashion critical educational opportunities that can foster this potential and reconfigure views, attitudes and relationships.