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 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 model is ready to be rolled out more and location. The agency reports that and , 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 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 , 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. funds such as Kaizen, which describes funds, but its 50-year track record investing in African education could be. As expertise grows in running in African education is through Aga offer indications of how profitable schools and colleges and as demand for focused on India’s $86bn education Khan Development Network. Aga Khan Listed investment vehicles skilled African human resources sector”.itself as Therethe “first are private 600 million equity Indians fund Education Services operates 19 high- Investors and education developers continues to grow, growth in African under 30 years and government quality schools in Kenya, and seeking benchmarks often look to listed education could be explosive. It is up to spending of $30bn is outstripped , catering to 9,100 students and entrepreneurs, including social Feije Riemersma | Dreamstime.com | Riemersma Feije by private spending of $43bn, while employing 600 teachers. The Aga Khan social returns. South Africa’s JSE-listed entrepreneurs, to provide the spending on education abroad is another are so great and the public sector can’t businesses. “People only cut education University Hospital in Nairobi, which ADvTECHcompanies Group for standards is ranked of 11th financial in the and investment opportunities as gateways $13bn. Investors say it is too early to get cope alone,” Khelifa told Africa investor. expenditure in tough times if they really became a teaching hospital in 2005 and local Sunday Times newspaper’s top into what could be a giant investment “If you provide the right quality, you have to,” he says. clear information on returns. celebrated its 50th anniversary in 2008, 100 companies, achieves good returns trend. In Latin America, the IFC and UK’s CDC can succeed.” He says that in Tunis and Group invested via fund manager Patria, Morocco, governments have supported Philanthropic backing which manages education fund Fundo de investors in education. Much investment in education IFC education investments Educação para o Brasil as well as other “Primary and second education concentrates more on social than are relatively low-risk businesses business returns. Ghana’s Ashesi private equity funds, into Anhanguera Curro Schools, South Africa: College, Ghana: before the IFC involvement) and range Educacional SA, a $1.8bn Brazilian because the business model is fairly University, an internationally-acclaimed straightforward and capital intensity In June 2010, IFC committed ZAR In April 2009, IFC committed $2.5m to from $20,000-$50,000. TTB has so far college network and educational services 72.7m ($9.8m) to Curro Holdings to Ashesi, a operating in disbursed the equivalent of $3.7m to 25 up by Patrick Awuah, has grown from 30 provider that has 250,000 students at expand its network to eight schools. Accra since 2002, which offers courses schools, with 32,000 students enrolled studentsindependent in 2002 not-for-profit to 464. Start-up institution funding set 54 campuses, 450 centres of distance Curro provides affordable, high-quality in computer science, management at participating schools. Another 53 was $10.5m in philanthropic funding, learning and 650 vocational centres. People only cut private education from kindergarten information systems and business additional schools join the training and by 2009 the university says it is administration. It will use IFC’s loan to programmes, and IFC has replicated education expenditure covering its operational costs but needs listed in 2006. in South Africa, and already has four build a permanent campus in Berekuso, this in Kenya and . After private equity investment, the firm more philanthropic funds for further African educators and investors are schoolsto the final in the year Western of secondary Cape and school a village 15 miles north of Accra, and Student Loans, Kenya: in tough times if they developments. The IFC gave $2.5m in hardly out of the starting blocks. Some Gauteng. Expanding operations in the permit Ashesi to double its number of IFC is partnering with Commercial Middle East and African funds say really have to two provinces and into Mpumalanga students to 800. Bank of Africa Ltd and Kenya’s campus at Berekuso, north of Accra. education investments will be part of will boost enrolment from 1,600 to Ghana Schools Programme: to introduce debtAshesi to finance University establishing takes pride a permanent in their portfolios. Tuninvest Fund in Tunis 6,400 pupils by 2017. This is a longer-established programme in the infrastructure is comparatively creating African leaders with strong reports good returns from backing an Braeburn Schools, Kenya: in which the IFC has worked with Ghana’s burden on students, including those low,” says Scott Featherston, Senior ethics and problem-solving skills and entrepreneur who turned Esprit into In December 2010, IFC committed The Trust Bank Limited (TTB) to set up fromstudent lower- loans and to cutmiddle-income the financial 100% career placement within six the country’s top private engineering $4m to Braeburn Schools, which has a $2.1m risk-sharing facility disbursed families eligible to attend but unable education, particularly involving months of graduation. However, it does school with 1,200 students. Hakim 13 schools across seven campuses in in local currency to support lending to to pay the entire tuition costs upfront. coursesInvestment such Officer as medicine, at IFC. “Tertiaryengineering, Khelifa of Tuninvest manages the $175m Kenya and Tanzania, serving more than private schools for construction and Demand for tertiary education is and science, cannot really be provided AfricInvest Fund II, focusing on equity educational materials. IFC also gave growing fast and the number of private on a commercially sustainable basis 40%not aim of students,for profits of and which has 20% given come $2m investments in small and medium to expand its student body by 50% by advisory services to help TTB better universities climbed from three in because of the capital intensity of the fromin financial extreme aid, poverty. currently Awuah assisting says he enterprises in north and sub-Saharan 20202,500 andstudents. to set Itquality will use benchmarks IFC financing process and monitor loans and for 1985 to 21 in 2008. Loans are offered infrastructure required,” he said, adding concentrated on philanthropic funding Africa, and has invested equity and quasi- for primary and secondary education, at 12%, with repayments in monthly that liberal arts, law, nursing, and similar as Ashesi would not offer a competitive equity into private schools in Kenya and including technical and vocational managerial capacities. The programme instalments over 12 months. There are courses can, however, be provided on Tunis, although he says it is too early to training. IFC will also provide technical wasschools successful to strengthen enough financial for a repeat and plans to defer payments until a student a commercially sustainable basis. He investors. measure returns. expertise to help design new green investment in May 2007 and the gets a job and to increase the current says returns on education are likely to returnThe USon Government’sinvestment to Overseasfor-profit Private “The sector has very great prospects, campuses and enhance environmental programme stands at 66bn cedis ($7m). KSh280m ($4.5m) portfolio by rolling be similar to other capital-intensive Investment Corporation provides debt especially in a country like Nigeria or and social standards of new school out to other universities and expanding sectors such as health and infrastructure, Kenya where it is clear that the private buildings. terms (compared to six to 12 months to KSh1.1bn ($13m). sector has to take over because the needs but may be less volatile than many American enterprises among others. Its TTB loans are now on three- to five-year financing and insurance support for

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