Learning Pays
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Business COVER STORY Education lifetime. Many studies show this is one of are highest at lower levels of schooling, skills and trained human resources to the top investments any family can make especially primary schooling, and also drivethe coming this growth. five years “Education and urgently is Africa’s needs in the future. higher in less-developed countries. There most powerful antidote to poverty,” At the national level, human capital UNESCO Director-General Irina Bokova a farming district as general education told a summit last year. The World levelsare also increase. benefits for a locality such as Bank, the biggest funder of education Following trends in An economy needs to be supported worldwide, speaks of the need to countries such as India, in other ways to keep growing and Learning pays transform a generation and start creating produce enough jobs for those who have the human resources and skills to fuel private schooling no longer been educated. Hundreds of thousands Africa’s fast-paced growth for coming means elite schools of unemployed graduates in Tunisia years. and Egypt in recent weeks show what Most big institutions focus on helping happens if the economy does not keep governments to provide education. For theory says social investments into up with its potential. Investors hope instance, the African Development Bank education by the government and the democracy and governance reforms will DIVIDENDS Group in 2009 invested $299m into private sector boost future productivity unleash the potential of educated Arab education, including higher education, and improve living standards. Returns youth and boost the economies. science and technology, sector reform, teacher training, construction and rehabilitation of schools. The second of Low-cost education models the UN’s eight Millennium Development Goals is to achieve universal primary The poor are willing to pay for textbooks. Schools are normally full a education by 2015. Governments cannot education because of the low quality of week after opening. The model includes meet the enormous needs alone, even government schools. “Private schools for a no-hidden-cost daily fee payment when they get aid to offer free primary the poor have emerged in huge numbers to avoid high upfront costs, micro- schooling. More than one in three adult in some of the most impoverished slums insurance so the student can complete Africans are illiterate. UNESCO says and villages in Africa,” says Professor schooling if the parent should die or 32 million African children are not in James Tooley of Newcastle University. become disabled; nutritious hot lunches primary schools and, even if present “They cater for a majority of poor and even de-worming. They also use improvements continue, the gap by 2015 children and outperform government innovative teaching methods to achieve will still be 23 million. There are huge schools, for a fraction of the cost.” constantly improving results and the inequalities based on gender, language He said that in poor areas of Nigeria model is ready to be rolled out more and location. The agency reports that and Ghana, 70% of students are widely. global aid to basic education in sub- in private schools, more than half Bridge International Academies Saharan Africa was $1.65bn in 2008, is another low-cost school model. Africans spend more than $8 billion down from $1.72bn in 2007 and far short statistics. In Makoko, where many live in Developed in east Africa, and opening of the $11bn estimated as needed each housesin schools built unregistered on stilts sunk on intoofficial the Lagos a year on private education. year for Africa’s low-income countries to lagoon, Tooley’s researchers found 32 in 2009, it delivers high-quality reach the target of education for all. private schools serving 4,500 children educationits low-cost for for-profit less than primary $4 per childschools Tom Minney assesses a growing Africans at all levels put a high per month. Payments are made by investment opportunity premium on education and are already traders, achieving 14% better grades mobile phone so individual schools paying for it. Education costs per student inof impoverishedmaths than children fishermen in government and fish do not handle cash and funds are range from ZAR 140,000 ($19,300) schools. In Nairobi’s Kibera slums his available centrally. Omidyar Network, a a year at top South African boarding team found 76 private schools, enrolling Cover and holding image: Getty/Gallo images Getty/Gallo image: holding and Cover schools or $16,900 at American day more than 12,000 students compared by eBay founder Pierre Omidyar and schools, to $7,400-$8,900 a year for east hisphilanthropic wife Pam to investment create opportunity firm created for here is one resource in threefold. The world’s youngest The International Finance Corporation African scholarship programmes down to children. people to improve their lives, invested Africa that it is increasing population also represents one of the (IFC), a member of the World Bank $45-$60 a year at the basic schools being to Tooleyfive government and Ken and schools Lisa Donkohfor 8,500 set its supply fast, where biggest global business opportunities group, has estimated private schooling rolled out by social entrepreneurs and up Omega Schools in 2008 and already International in 2009 and participated T African productivity is at between 10-40% of primary and others in eastern and western Africa. have seven low-cost private schools equity$1.8m ofinto not-for-profit a second round funds of infunding Bridge double the rest of the world returns – although only a few pioneers secondary schooling in Africa, and in Ghana’s Greater Accra and Central in 2010 to help the company scale and far outstrips developed countries have– which started combines to invest. profits and social towards 40% for Kenya, Nigeria, Ghana Finding profits in size and impact. Within two years – young people. There are already a Africa’s private education market is and some other countries. On very Returns on investment in education to invest in,” says Tooley. For $60,000, of founding, there were 12 Bridge billion Africans, and another billion are vast and grows every year. Following conservative assumptions, the market OmegaRegions. buys “Ghana land, is builds, a terrific furnishes country International schools. The network expected to join the throng by 2050. An trends in countries such as India, private already represents turnover of US $8.4 a personal level, the investment cost is and opens a 12-classroom Omega aims to expand into new sub-Saharan estimated 422 million Africans are under schooling no longer means elite schools billion a year, growing exponentially. howcan be much identified a student at different or her family levels. spends At Africa countries and to establish 1,800 15 years old. In 2011, 33 million babies but is also for lower- and middle-income on fees for school and further education, computer lab with 11 computers, and schools by 2015, which will create jobs are expected, who will eventually need families. In many areas, even slums in Skills lag plus the opportunity cost of not starting solarSchool panel with as kitchen, well as office accounting and toilets, and for 15,000 education workers in local education, and numbers keep growing as Kenya and Nigeria, more than half the Africa is home to seven of the top ten work. The return on investment is how payment packages, stationery and communities. births outstrip deaths and net migration children go to private schools. fastest-growing major economies for much more she expects to earn in her 50 | MARCH - APRIL | 2011 2011 | MARCH - APRIL | 51 Business COVER STORY Education For investors, returns are measured current portfolio includes lending to not- focuses on high-quality care, research for equity investors and is included as the dividends and capital gains they and postgraduate medical education in the JSE’s SRI (Socially Responsible can realise from their investment. Two develop and construct a new high school in major clinical specialties. Financial Investment) Index. In the latest results critical shortages prevent the explosive facilityfor-profit at theschools: American $13.5m International to Citibank to performance is not indicated. to June 2010, ADvTECH’s education growth in quantity and quality of School Lagos; $6.8m to expand and Investment fund Swedfund supports division contributed 86% to group education as another booming African build a new campus for the American eCap east Africa, set up by diaspora revenue and revenue was up 9% to consumer services business: sources International School of Bamako; and Kenyans Eva and Anne Kagiri to export $1.6m to renovate and expand the MKFC Stockholm College e-learning declined by 2% to ZAR 105m ($14.8m) American International School of courses to Kenya. Online courses offered dueZAR to635m recessionary ($88m). Operatingconditions profit for of finance and school managers’ skills, Monrovia. In the past it has supported include environment and sustainable discretionary spending on tertiary including in finance, management, development, alternative energy, education and delays in rolling over Stuckadministration at the and blackboard? operating efficiency. School Ltd in Kumasi, Ghana. economics, hygiene, tourism, IT and and awarding adult basic education The potential for equity investment into theThe for-profit Aga Khan International Fund for Economic Community management. Although it is early days tenders. At the current price of 570c it education in Africa is huge, as other Development, operated by the 49th offers a 3.8% dividend yield, a trailing regions have proved. International hereditary Imam of Shia Ismaili leading countries such as South Africa PE of 14.47 times and return on equity investors are reviewing prospectuses for Muslims, runs successful private equity for education as a for-profit investment, of 28.6%, according to Bloomberg.