Our investors include DFIs, fund of funds, family offices, sovereign wealth funds and private investors. Although we are not an impact investor, we do play a key role in improving the impact of our investees, particularly around the environmental, governance, and social aspects, as we believe there is a correlation between social/impact and financial return, and we in turn demonstrate the impact of our investment to our investors. This holds true in the educational sector where an improvement in the governance, for example, of an educational institution will go a long way in improving the transparency of decision making and accountability. This will help a typical family run school convert into a professionally managed organization that can help effectively balance the educational aspects with the financial returns.
Many market entrants find investing into education for the first time a challenging market. What top five factors would you recommend new investors consider before investing into education in Africa?
- The need for patience in the educational sector is key for an investor simply investing in a school does not guarantee quick returns and a longer term horizon is warranted to build professional and technical capacity.
- The need for a specific skill set is also required to bridge the balance between the educational curriculum and the underlying business aspects, and having a collaborative senior management team that grasps hese two concepts is key.
- Getting a detailed understanding of the underlying end-user of the institution is also fundamental – how much do they value quality education and what lengths would they go to to obtain this education; is it the brand they ar e attracted to, the facilities, the curriculum, the location…having a solid grasp of this allows for planning the investment.
- Every educational institution is different and applying a common methodology will not work across every school. Strategies have to be tailored to each and every investment in the sector.
How does doing business in Africa differ to the other markets that you have worked in?
Although our funds primarily have an African focused mandate, the differences are numerous: including the governance aspects are significantly behind developed economies, the liquidity in the capital markets, the ease of doing business etc.
Numerous entities have preconceived ideas about investing in education. What’s the greatest misconception about investing in education, and what’s the reality?
That every institution can be run the same way or have a similar strategy and can be easily transformed. For every educational investment requires a different strategy and requires emphasis on the educational aspects before any investment returns.
I believe sub-Saharan Africa holds great potential for educational investment. The demographic factors – growing population and youth demographic; the macro and micro-economic factors – growth rates, rising disposable incomes, make for a dynamic market.
Early years vs K-12 vs Higher vs Vocational –Where is the greatest need and where’s the best return?
This will depend on the market and area. Many students who graduate from high-school in Africa will look to go abroad for higher and vocational education under the perception that foreign university or college education is better. This could imply that (i) there is a return to be made in investing and transforming a higher education institution to world class levels to attract the students who move abroad and (ii) focus on the K-12 educational stream to provide the student with a better ability to go abroad for education. Ultimately it will depend on the appetite of the investor.
Bricks and mortar vs educational technologies? Which sector will attract the greatest investment in the future?
Technology is fundamental to delivering a quality education, whether it’s smart boards, online curriculums, delivery through tablets, distance education, etc. However, depending on the ethos of the school, bricks and mortar cannot be replaced as the facilities of the school are very much part of the brand of the institution, they facilitate the building of soft skills, and various fundamental programs centered around community, innovation, environment, and social aspects of an institution require ‘traditional’ bricks and mortar structures.
AfricInvest is a private equity fund manager with a pan-African office and has been investing on the continent for over 20 years. AfricInvest has managed assets over $1b US, made over 100 investments in Africa, and executed over 60 exits across 26 African countries. We have a mandate across a number of sectors which includes education; and in this sector we have invested in technical universities in North Africa and a pre-eminent school in Kenya. We provide growth capital to organisations that have ambitions to become champions in their sector and play a hands-on role on the Board without taking on