Why there has never been a better time to invest in Education in Africa
Updated: Apr 12, 2022
Paying attention for more than just a few minutes, it's easy to be surprised by the decision of investors in education, technology in education and executive education programmes as they often invest in businesses and ideas with little or low levels of feasibility of being successful. The common misconception might be that education works in a very similar way to other industries and the corporate finance advisors to such investors who typically might be looking at revenue, profit margins and the micro and macro market indicators might be advising them as such. It's no surprise then that very attractive opportunities could be missed and those who are recommended might later proof to be costly.
At the individual decision level and the particular rounds of funding, there is a host of examples. But the easiest way is for example the macro at the international level where investors and speculators still have to spend what could be the biggest opportunity for educational growth, they probably will never - Africa.
As you review the statistics and projections on education in Africa, keep in mind that currently, African governments spend about 5 percent of GDP on education, which is the second highest of any region. A recent report from the African Development Bank provides recommendations on how governments can improve education spending efficiency and mobilize additional resources, because the region currently faces an annual $40 billion gap in education financing. On efficiency, the report recommends strengthening Public Expenditure Tracking Surveys, using performance-based financing to enhance outcomes, and raising teacher quality to scale back school repetition.
Of course, there is no such thing as a safe investment, but here's why board the train education in Africa sure feels like that. HolonIQ, KPMG and other relay figures - Africa has 260 million students studying 1.5 million schools.
The country has 600 million people aged under 25 years and about 27 million undergraduates. This is 4.5%. By comparison, the United States has about 17 million undergraduates on the population of about 100 million tranche under 25, obviously, which is about 17%. The only growth potential higher ed should be obvious.
With 400 million smart phone users, it is the second largest country on the planet connected. And the projected economic growth of Africa is strongly related to the service and the technology and function of education. If the country will continue to grow, the education system must also. National leaders know are likely to continue substantial investments and favorable policies.
In addition, most education in Africa is in English. All higher education is. This means that for US investors and innovators in particular, Africa should be a relatively easy market to understand and reach. More significantly, Africa allows 100% foreign direct investment in education.
The KPMG report predicts an annual growth of over 50% in online learning in Africa, due to the rapid growth of young and Internet connectivity. They expect companies in the market and continues the conversion of qualifications to grow 38% per year.
And like many young people, students and prospective students in Africa are very sensitive to the quality of education represented by the brand. In other words, known to US and European brands who get education in Africa now could really clean like kicking the growth of the country's chain speed.
Overall, the KPMG report is not subtle in the education market in Africa, saying: "The education market in Africa ... presents a lucrative opportunity for monetization. "HolonIQ said the environment, it" translates into a huge opportunity that the target market for education and skills development. "
It seems so.
Yes, education providers should not chase the money, they should follow a higher purpose. But this case is sitting in Africa too. With 30% of Africa's population under 14 years, the risk that education in Africa will not keep pace and is a real geopolitical threat. Help them to grow in size and quality is important on several fronts. And, if the education system of Africa can keep pace, growth will dwarf anything in China and not even compare with anything in the US
Yet investors and providers of education has been relatively slow to move and Africa. In 2018, funding for education in the United States was twice what it was in Africa and investment in education in China was nearly seven times greater. To an observer, which makes little sense.
He believes that if you have a platform MOOC or school lab or an application of random digital learning - investments with little hope of financial profitability and even less hope for education reform - flows venture capital like wine at a bacchanal.
Perhaps overstated. It is no exaggeration is what happens in the area of education in Africa. This feels very real. Let's see if the wizards of Wall Street and the sultans of Silicon Valley recognize.
Education is a market of $ 4 billion worldwide in urgent need of reform - so where in teaching outweigh optimistic about venture capital start-up building large businesses offering new solutions?
According EdSurge, $ 1.45 billion of venture capital (a mere 1.1% of the $ 130 billion in US venture funding) was invested in startups education in the United States in 2018; there were only 112 deals focused on education. Consistent with the trend across venture capital, this represents an increase of overall capital, but a concentration in fewer transactions (mainly large towers advanced).
Education is considered a difficult market for obtaining VC returns to scale. Sales in school districts and universities are difficult and slow models and freemium that go directly to teachers are struggling to monetize.
New software, content and financing solutions for learning outside the traditional school system are more compelling opportunities. This is particularly the case in vocational training where the return on investment of an education program or tool can be quantitatively measured in jobs and salary increases
While the industry of educational technology has increased over the past 15 years, some investors have become well known for their contributions to startups ed-tech. We have compiled a list of the most notable active investors in this sector at the moment. The first three on the list, the NewSchools Venture Fund, 500 Startups and LearnCapital, are known as the largest investors in the ed-tech entrepreneurs, but the seven watch it. As major investors in venture capital and investors in education, their current future trends and decisions provided help progress through the landscape of educational technology. What they invest today will shape the classrooms for schools, teachers and students of tomorrow. Take a look at this quick overview of the financial giants behind much of the technology in schools today and learn why they do what they do.
Opportunities for investing in private education IN Sub Saharan Africa
The recent growth of personal education and investment in education in SSA are characteristic of the worldwide education sector as a whole: emerging markets education investments increased quite 5,000% between 2001 and 2015. Education businesses have five key attributes that make them attractive for investors: 1) demand is typically greater than supply; 2) prices grow faster than inflation; 3) they need long-term revenue visibility;
4) there's access to negative working capital; and 5) barriers to entry are high. However, despite strong business fundamentals and investor attractiveness, there are challenges specific to investing within the education sector: regulatory complexity and uncertainty; long gestation periods; high levels of fragmentation; lack of corporatization; and a skills shortage (i.e., in qualified teachers). Different investment opportunities are fitted to different sorts of investors and SSA has opportunities for investors of varying risk appetites, return expectations, investment capabilities, and social impact objectives. These include early-stage commercial investors, commercial and strategic investors, impact investors, and donors and foundations.
As noted, the private investment requirement for subsequent five years in various education sectors is estimated to be $16–18 billion. it's important to notice that the non-formal sector makes up an outsized share of personal provision, which the formal sector comprises a various set of providers. Only 10%–20% of those have a revenue scale large enough to merit attention from institutional investors. This translates into a more realistic investment requirement of ~$1.5–$2.0 billion over subsequent five years within the formal sector.
What is the way forward?
In conclusion, we take a wider lens on the region with five observations as made in a 2017 report from caeruscapital.co:
1. Policy challenges are present, but they don’t change fundamentals — the outlook for investors is extremely strong.
2. A window exists for proven global education providers to enter the African education market, with the proviso
that they need to contextualise their approach to Africa.
3. there's significant potential for local conglomerates to become education providers, and this sort of diversification is observed in other emerging markets.
4. Africa is an innovation platform and may be leveraged
to develop solutions for global replication. Sub Saharan Africa’s unique market challenges have already produced many globally relevant and applicable innovations, within education also as other sectors.
5. Setting national learning goals would refocus the general public versus private debate for policymakers. Change is far needed but too often hindered by ideological concerns. Strong leads to
the private sector in line with learning goals might be more quickly and widely disseminated, potentially through PPP models.
These five observations are a mirrored image both of the challenge and therefore the opportunity for education in SSA. Harnessing the continent’s enormous potential, while addressing a number of the key issues that are hindering its growth and development, is that the greatest challenge ahead for the governments, investors, companies, donors, not-for- profits, and individuals engaged within the region. The potential for investment and therefore the potential for impact have rarely been greater.
There has seldom been a far better time to take a position in education anywhere especially considering the chance to form a true impact.