Private schools cash in on demand for a good education

2013-01-17 00:00

A GOOD education can cost a lot of money — and it can make a packet for the discerning investor, too.

Demand for decent schooling is fuelling a growth in private colleges where parents can expect to pay anything between R2 000 and R4 000 per month.

Siphamandla Shozi, an equity analyst at Coronation Fund Managers, said companies such as financial services giant PSG have poured in large amounts of capital through Curro Holdings to roll out schools in the low- to medium-fee range. Curro Holdings started with three schools and now have 27 in SA.

“… the demand for good schools is high and the standard of public education is poor. Plus, due to the high demand for these schools, the above inflation fee increases also ensure that they became strong cash generation businesses,” said Shozi.

Piet Mouton, chief executive of PSG, which owns a 57,5% stake in Curro Holdings, said an average of 13% of the schoolgoing population globally attended private schools. In SA, the average is four percent.

“In SA, there is a macro opportunity because spending in education in the past was skewed, where white schools had too much money and black schools had none. Now the lines are more blurred and government should spend more on upgrading township schools and rural areas to right the injustices of the past,” he said.

PSG has invested almost R700 million in Curro Holdings.

Mouton said they wanted to find a solution to the country’s education crisis and had bought a disadvantaged school in Polokwane with 340 matriculants, all but three of whom had passed.

Experts agree that fees are likely to increase above inflation every year between eight percent and 10%, which is good news for investors but bad news for parents.

Azar Jammine, chief economist at Econometrix, an economics analysis company, said the average per capita income for a family in SA was between R5 000 and R7 000 a month and about 20% of that went towards education, which was necessary because many households feared being left with no future job prospects.

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