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Booming African education businesses boost class grades

Johannesburg – The explosion of education businesses in Africa means that the continent could soon rival Asian countries like India as the next big hit with school investors.

Africa faces significant challenges in the education sector including overcrowded classrooms and ailing infrastructure, which according to academics leave millions of youth with skills suitable only for manual labour.

In a 2015 report the World Economic Forum ranked South Africa last in the quality of mathematics and science education and close to last at 139 out of 143 in the overall quality of its education system.

However, rising incomes among the continent's vast population have created a pool of customers willing to pay for better schooling for their children.

That in turn is driving an explosion in education businesses that means Africa could soon rival Asian countries like India as the next big hit with school investors.

Private schools are springing up everywhere from Lagos to Kenya offering annual fees from $2 000 to as much as $16 000 and pulling in big profits.

Britain's Pearson, the publishing firm behind the Financial Times, is backing companies involved in rolling out affordable academies. In January the company tripled its investment to $50m in a fund that backs emerging-market ventures that provide education to budget schools.

"By any metric - demographic growth, economic growth - or by demand for better educational outcomes, the circumstances are ripe for African education to significantly improve in the next two decades," said Katelyn Donnelly, the head of Pearson's Affordable Learning Fund, set up with $15m in 2012.

Breakneck growth  

Other investors include Dubai-based GEMS Education, Bridge International Academies and AdvTech [JSE:ADH], which last week said it had attracted a takeover bid that sent it shares sky-rocketing.

PSG Group [JSE:PSG] is the major shareholder in Curro Holdings [JSE:COH], a low-cost private schools operator in SA that is growing at a breakneck pace, both operationally and in the stock market.

Earlier this year, Curro met its target of completing 40 academies five years ahead of time, from just 12 schools in 2011. It says it should double that number by 2020.

Shares in the company have surged nearly eight-fold since listing on the JSE four years ago, valuing it at nearly $1bn. As the quality of education in South Africa has declined, Curro's popularity has risen.

"We like Curro, we like the theme, especially considering that their competition is the government, which has shown to be ineffective," said Michael Treherne, a fund manager at Johannesburg investment firm Vestact.

A vast difference

According to a report last month by South Africa's Centre for Development and Enterprise, enrolments at independent schools in South Africa doubled in the last 15 years to half a million children.

In the Nigerian commercial capital Lagos, there are now 1.5 million children at 18 000 private schools, according to Britain's Department for International Development.

Many middle class parents complain about public schools, saying they lack facilities and are overcrowded.

"For me it is the numbers. There are too many children in the classes and, of course, there's not much attention given to a child," said Wanjiru Muchiri, who spends nearly $6 000 a year for her three children to attend private school in Nairobi.

Ghanaian car rental businessman Clifford Bannerman-Lawson, who pays $2 000 a year to put his 6-year old through a private school, said: "If you take two children, one from a private school and one from public, there is a vast difference."

For many other parents however, the choices on offer remain too expensive and their children continue to struggle through public schools where classrooms may be a patch of grass under a tree, or a dilapidated shack with a leaking roof.

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