As Africa finds it increasingly challenging to educate its teeming millions, a partnership between local edupreneurs and impact investors may be key to tap the true potential of the education sector.
Africa is sorely in need of a solution to its education woes. Sample these alarming statistics from UNESCO. Of the 59 million children of primary school age who were out of school in 2013, 30 million lived in sub-Saharan Africa. No surprise then that about 38% of the region’s adults – 167 million people – still lack basic literacy skills, of which over 60% are women.
Further, the 2014 Gap report from UNAIDS notes that, in sub-Saharan Africa, approximately 80 percent of young women have not completed their secondary education, and one in three young women cannot read.
And, the links between lack of education and proliferation of poverty are as undeniable as they are intuitive. The Global Monitoring Report released by the World Bank in October 2015 projected that 347 million people are living in extreme poverty in Sub-Saharan Africa last year, while an estimated 284 million Africans lived in poverty in 1990. Even as the percentage of Africans living in poverty has decreased over time, the sheer numbers have grown.
Links between Poverty and Education
Another World Bank Report, “Poverty in a Rising Africa”, released in the same month, explores the links between poverty and education. It highlights that while total net enrollment of children in primary school expanded from just 55% in 1995 to 74% by 2012, an alarmingly low level of learning proliferated. Sample this: Adult literacy rates across Africa increased by only 4% between 1995 and 2012, compared to 17% in South Asia.
The report goes on to note, “Promoting women’s education can be game-changing for Africa, since investing in it significantly improves not only their own life chances but also those of their children.”
This makes it amply clear that education not only impacts poverty but also related aspects such as health and mortality, making the repercussions of lack of education painful indeed for a teeming population.
Bringing Edupreneurs Together
Against this sobering backdrop, I recently sat through a brainstorming session in vibrant Nairobi where edupreneurs from across Kenya had gathered for a networking event convened by my organisation, GroFin. Most entrepreneurs who came for the event are running schools either in the heart of Nairobi, its immediate suburbs, or upcoming environs such as Nakuru, targeting the emerging middle class who are trying to ensure affordable yet aspirational education for their children.
Understanding the Issues
As the edupreneurs voiced their concerns, it became clear that it wasn’t easy for most to access finance, as the infrastructure needs of schools make them a bigger challenge for financiers, who may not see returns on their investment for a longer gestation period than other, less capital intensive sectors, such as retail, for instance.
Another issue that emerged almost across the board was the lack of expert advice and support as these edupreneurs routinely negotiate a veritable landmine of land regulations covering long-term leases for schools, clarifying the end use of land, timing the roll-over of leases and undertaking negotiations with their landlords to ensure continuity of schools on leased premises. Owning enough land outright to run a reasonably sized school is after all quite outside the realm of possibility for most small-sized entrepreneurs, who must then also possess enough capital to develop the land and maintain the sprawling infrastructure.
The lease model for schools is one that most start-up entrepreneurs are only too familiar with, with all its attendant challenges of relocation, landlord dependency and lease negotiation hassles. Imagine developing a plot of land as a school, with all the supporting infrastructure for sports, extracurricular activities and recreation, only to find that you have to replicate all that hard work on a totally different premises in an unfamiliar location as the lease is up and the landlord has found a better paying tenant.
Of course, some properties, such as government plots earmarked for education, as well as church properties converted for academic use, do make for surer leases than others, but all edupreneurs cannot rely on the availability of such properties in the location of their operation, where accessibility of the property and student availability in the vicinity can be overriding parameters for a successful school operation.
Recurring land rental charges and possible relocation challenges make edupreneurs dependent on their financiers for a helping hand beyond money, in an uncertain environment where financial projections may not always be realised within the expected horizon. Patient finance and value added business counselling is then the need of the hour for such fledgling schools, on the understanding that they need a partner to work with, rather than a traditional financier guided solely by profit objectives.
Impact Investment as solution for Edupreneurs
Impact investors are uniquely positioned to help start-up and growing edupreneurs, as the development goals of impact investment institutions in terms of helping build sustainable social infrastructure align closely with the overarching need of the community to have more homegrown schools that can meet their education needs in an affordable manner.
As an impact investor, GroFin has achieved much success with budding edupreneurs both in Africa and the Middle East. In addition to finance, GroFin tailors business support services to help edupreneurs with their strategic and operational pitfalls that limit growth in the education sector. The results of our efforts are clearly seen through some of our success stories: