Impact Investing & Education–Learning to make a difference in Africa

Africa’s education story is waiting to be written, but whether it will be written by Africa’s children is a pressing question that haunts the emerging continent.

Consider this – Sub-Saharan Africa (SSA) still has 30 million children out of school, and tertiary education is suffering from severe capacity constraints. SSA is also the worst-performing region globally for educational quality and learning outcomes, with up to 40% of children not meeting basic learning outcomes in literacy and numeracy. Moreover, by 2035, the number of Africans joining the workforce (15–64) will exceed that of the rest of the world combined, but SSA’s education systems are not meeting workforce needs.

Sounds like a challenge for any government? It certainly is, and one that no government can possibly rise to. A report highlighting the key role that the private sector is poised to play in Africa’s education landscape then comes as a fitting response to this challenge, replete with a powerful foreword by Liberia’s President, Ellen Johnson Sirleaf.

This definitive report by Caerus Capital is aptly titled “The Business of Education in Africa”, focusing as it does on the contribution of the private sector and on how government can act as the steward of the whole education system.

“The Business of Education in Africa” paints the current landscape of private education in Sub-Saharan Africa, goes on to discuss how African governments can better engage with private education players, highlights opportunities for investing in private education in SSA and delves deep into case studies of interesting companies in education in SSA. It ends with case studies of the education market in South Africa, Nigeria, Kenya, Ethiopia, Senegal & Liberia that may well be some of the most comprehensive insights into the education markets of these key African economies as on date.

While Sustainable Development Goal (SDG) 4 mandates that governments have and must continue to commit to access to a free, quality education for children, statistics highlight that around one billion African children will need to be educated over the coming three decades. Keeping pace with this demand requires enormous investment in schools, universities, and other infrastructure; recruitment and training of teachers, school leaders, and support staff; and learning materials. Public education systems will struggle to keep up with this unprecedented increase in demand.

The report notes that the private sector is already playing a significant role in SSA. While publicly reported data compiled by UNESCO indicates that the private sector has a share of 13.5% in the education sector across 15 countries, the report’s own surveys indicate that the actual share of private schooling might be 21% (or one in five pupils), and this number is only set to rise (to one in four) over the next five years.

However, this enormous opportunity comes with the significant challenge of financing private players in education, with the report identifying a private investment requirement of US$16–$18 billion over the next five years.

The report highlights that education makes for a compelling investment opportunity because it delivers wider benefits in the form of high individual, social, and economic returns, and investors & donors are consequently willing to secure lower financial returns, or even a purely social return on investment.

Impact investing that focuses on social returns over purely financial returns then comes to mind as a lasting solution to the financing woes of private sector schools. While impact investing is a nascent field and impact investors in Africa are few and far between, some stories of positive change in local communities are already being written.

Be it Kenya’s Nairobi International SchoolTanzania’s Daystar SchoolRwanda’s Highland SchoolGhana’s Firm Foundation or South Africa’s Zambesi Akademie, these small businesses hailing from across the African education landscape have one strong link that binds them all — GroFin.

Firm Foundation Ghana–GroFin Client and School of Choice

Firm Foundation Ghana has become the school of choice for parents in the catchment area and is consistently the top performing school in the Ga West area for the Basic Education Certificate Examination (BECE). An average of 25% of students that obtain their BECE at Firm Foundation continue their education through tertiary institutions.

The school’s student population had grown dramatically from an initial intake of 358 students in 2008 to 1,095 students in 2009. By the start of the school year in 2010, the student population had risen to 1,625, putting significant pressure on the school system and parents.

Selorm Abotsi is an example of a Grade 5 learner at Firm Foundation. Many of her school mates have had to endure a transport route that included a 30-minute walk from homefollowed by a 1-hour bus ride leaving them exhausted before they attended a single class. Rapid growth in the Ga West region was stretching the Firm Foundation facilities and the lack of transport infrastructure was limiting students’ capacity to learn due to the fatigue of the morning commute. These challenges led entrepreneur Michael Boakye Yiadom to seek the finance needed to extend the school’s facilities and provide transport to their students.

In 2011, Firm Foundation approached GroFin for funding to accelerate their facility expansions so that they could accommodate the demand for places from new students.Three buses were also purchased to overcome the transportation problems from remote areas. A loan of US$ 1.1M was used to pay off a bank loanpurchase the busescomplete a laboratorybuild a classroom block, a girl’s dormitory and provide seed capital for a secondary school. Besides the financial support, GroFin provided business support services, completely revamping the school management software and assisting to streamline operations. The innovative payment scheme has created an opportunity for parents to match their school fee payments with their income cycle thus helping to reduce bad debts and give access to private education to a greater number of families.

“Our partnership with GroFin has enabled us to reach new areas with quality education and open doors of opportunity for the next generation.” Michael Boakye Yiadom.

Since GroFin’s investment, the student population has increased by over 30%, growing from 1,625 students to 2,130 and the number of staff employed from 85 to 128. Revenues have risen from 700,000 to 1.2 million Ghanaian Cedi.

“Our relationship with GroFin has been very good. Without them, we wouldn’t have come this far,” says Mr. William Klormegah, the accountant of Firm Foundation Montessori Academy.