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July 2016

Africa’s rising middle class is creating a demand for low-cost private education and student housing across the continent.





Propelled by economic growth and urbanisation, the African middle class is growing rapidly, stimulating demand for private education and accommodation in this sector.

According to the African Development Bank, today Africa is considered as having the world’s fastest growing middle class. A reduction of income inequality, a robust and growing private sector, stable and secure employment, quality and accessible tertiary education and well-developed infrastructure are all driving the impressive growth of this social segment.

Many middle class families look to send their children to private schools that provide better, yet affordable, education compared to government schools, creating opportunities for investors and businesses to cater to this demand.


In his report on Private Equity Investment in Africa’s Education: Building a Skilled Labour Force for, Kurt Davis Jr., an investor, advisor and consultant at Barclays, states that there is a clear macroeconomic argument for investing in Africa’s education sector.

“Sub-Saharan Africa has a population greater than 800 million which is growing at 2.3% per year and of which 40% are under the age of 15. According to a recent UNESCO report, Sub-Saharan Africa spends 5% of GDP on education thus being the second highest regional proportion after North America and Europe at 5.3%,” says Davis.

According to the same UNESCO report, the number of school age children will rise as the population of 5 to 14 year-olds is expected to grow more than 34% over the next 20 years, therefore increasing the need for educational spending.

“On the ground, the demand for high quality education is palpable,” says Davis. “Across the region, booming economies are creating middle class families and middle class paying employment opportunities. Yet, these same countries do not have affordable educational offerings to meet the demands of its population.”

In Ethiopia and Mozambique, the literacy rate sits around 42 and 56% respectively and in Nigeria, the literacy rate is just above 60%, says Davis. “In all three countries, families are moving into the middle class and looking to ensure that their kids continue to move in the same direction. In order to achieve that ‘middle class dream,’ many Africans look to send their children to private schools that can provide better, yet affordable, education compared to government schools,” he says.

As middle class families in Africa choose to send their children to private schools, Davis notes that there is a growing thirst for private schooling that can both incorporate a local curriculum and components of internationally recognised programmes such as International Baccalaureate (IB) and A Levels (United Kingdom system).

“In many countries, middle class families are willing to pay for private education that may cost five to ten times the price of the government school because only then can their children gain access to the world’s best colleges and universities. In Mozambique, some families are willing to pay USD 20,000 plus as compared to the government school fees of few hundred dollars. With long waiting lists, private schools are looking to expand rapidly. This expansion generally involves purchasing or building larger facilities, recruiting international staff and acquiring educational materials among other things,” he says.


Davis says that private equity investors can play a role by providing capital for facility expansion which is core to most families’ concerns.

“In purchasing a permanent facility as well as equipping it with modern installations, private schools attract the best students as well as higher fees. Private equity investors also play a role by recruiting stronger faculty, including principals, and purchasing the best material at an affordable rate through their international networks. These three changes to the business are only small components of the value added by private equity investors,” he says.

According to Davis, in Nigeria and Kenya, the penetration of private schools is around 40% and it’s growing. “In other markets, such as Ethiopia, Tanzania, and Mozambique, penetration rates are barely noticeable despite emerging economies that demand an equally emerging skilled labour force,” he says.

While the primary school market presents a big opportunity for investors, the college and university level is more a hidden gem, says Davis.

“In many emerging African economies, jobs go unfilled because the local labour force does not provide workers with the needed education and experience beyond basic primary education to perform them. Many countries have maintained universities that are not up to international standards and could use the assistance of private investors,” he says.

Increasing demand for education also opens opportunities in the housing sector. According to Ben Woodhams, Managing Director, Knight Frank, Kenya, the recent wave of expansion by both public and private institutions of higher learning, locally and across the East African region, has caused a dramatic increase in demand for student accommodation as enrolment increases significantly.

“In 2015, the total student population enrolled in public and private universities in Kenya touched a historical high of 507,700. This was more than double the 218,600 recorded in 2011. This scenario creates opportunities in the Kenyan market, attracting private investors to capitalise on the shortage of accommodation,” he says.

For Davis, Ethiopia, Kenya, Nigeria and Ghana are the most attractive countries when it comes to investing in education due to their literacy rates and population sizes.


In early 2015, the Pan African Housing Fund (PAHF), a real estate-focused private equity fund that is managed by South African-based Phatisa, struck a joint-venture deal in Kenya to build studio apartments in Nairobi, mainly targeting students from nearby educational institutions. “PAHF said it will put up 1,400 studio apartments, a USD 200 million project planned on a six-acre parcel of land, with an initial investment of USD 3 million,” says Woodhams.

Looking at private schools, Bridge International Academies is now Kenya’s largest chain of schools with more than 200 schools. Kenya-based private equity fund Fanisi Capital recently made an investment in Hillcrest International Schools to support building sports and music facilities.

“The successes of education investments in Kenya continue to inspire investors in other African countries. Kenya has seen drastic growth in school participation. There’s still room for achievement. There’s still more students than there are affordable schools,” Davis wrote in a recent article for AFK Insider.

Middle Eastern investors are also realising the opportunities in Africa’s education sector with Dubai’s GEMS Education setting up schools in Kenya and Uganda, the Dubai Chamber of Commerce has reported.

For Davis and Knight Frank there are definitely regulatory and cultural challenges within the market. However, Davis says the opportunity for growth and the returns are hard to ignore. As the middle class in Africa grows and as emerging African economies demand a skilled labour force, education will be the only solution to meet this demand.

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