AfricInvest, a US$1 billion asset, mid-market private equity firm has backed International Community School, a private school in Ghana, in a preferential share deal recently. Private equity firms have continued to make significant investments in education in Sub-Saharan Africa over the past years.
The investment is the sixth for AfricInvest’s third private equity fund, which is now 50 percent deployed. Terms of the transaction were not disclosed. The capital will be used to upgrade the school’s facilities and help support its expansion plans within Ghana as well as the broader West African region. Ismail Talbi, who led the deal on behalf of AfricInvest, and Skander Oueslati, co-head of the private equity firm’s sub-saharan business, both take board seats as part of the deal.
“As public-sector budgets get tighter, educational administrators are under more and more pressure to find new ways to do more with less, and that opens the door to a wider field of public-private partnerships” said Gossy Ukanwoke, a higher education investor & Founder at Nigeria-based Beni American University Research & Development.
Dalberg, a global development advisory firm estimates that there is a funding gap of over US $1trillion for education in sub-Saharan Africa (SSA) and an urgent need to focus attention towards the education system. SSA has more than 30 million primary and 90 million secondary school children currently outside the system. And with about nine million children out of school, Nigeria has the highest population of out of school children (OOSC) in the world.
“Looking ahead, tuition costs for the 30 million African students pursuing post-secondary education between 2015 and 2030 will be US$ 270 billion. The average government budget allocation to higher education is 0.63 percent of Gross Domestic Product (GDP); even if this all went towards student financing, there would be a gap of US$ 255 billion” Dalberg stated in document titled ‘The Impact of Private Investment in Education in sub-Saharan Africa.’
In Nigeria funding for basic education has come primarily from federal and local government resources over the years; state governments have tended to prioritise tertiary education relying on local governments’ resources for primary education.
The Federal Government Nigeria’s education spending averaged nearly $2 USD billion annually between 2010 and 2014, which amounts to 7.8 percent of aggregate FG spending or 0.5 percent of real GDP.
Experts say private equity firms’ participation in funding education would improve a general lack of accountability inherent in current practices which lead to inefficiency in use of resources. Some estimate that these challenges account for 40 – 45 percent of allocated funds.
One of the most promising impacts of private equity investment is that it will support the growth and integration of the entire education system across students, education providers, employers, governments and private investors. These include public – private partnerships, tailored student financing solutions, and venture capital funds.
