Low-fee and private – but still too pricey

Cash-strapped parents seeking an alternative to public education are buying into the growing phenomenon of cheap private schooling, but most “low-fee” private schools don’t accommodate those South Africans considered indigent.

An August report compiled by the Centre for Development and Enterprise said that, by international standards, South Africa’s low-fee schools generally cater to the working class rather than the very poor.

Fees of less than R7 500 a year are considered “low fee” by the report. This is more than double the amount considered “low fee” in India, where a school must charge R2 000 or less a year in order to fit the description.

And in Kenya, a chain of low-fee schools charges only R360 a year by providing standardised curricula, employing high school graduates and almost completely eliminating administration costs.

Through their cost structure, these schools are “able to reach the truly poor and not just the working class”, said the report.

Low-fee private schooling is showing an upwards trend — the number of private schools in the country increased by 44% between 2000 and 2010 whereas the number of public schools decreased by 9%.

Statistics report
However, according to the educational statistics report released by the department of basic education earlier this year, the national average of pupils in independent schools is only 3.9%, although analysts say this is likely understated and the reality could be closer to 8%.

With a clear demand for low-fee schooling alternatives, the new schools battle to stay afloat financially and keep fees down at the same time. As it is, 254 schools out of the 706 belonging to the Independent Schools Association of Southern Africa charge annual fees of R46 700 or higher.

Almost 180 schools charge between R30 500 and R46 700. Only 64 of the schools in the group charge R10 500 or less.

The average annual household income in the country is R120 000, and the average black-headed household income is R70 000, so the costs remain generally prohibitive.

According to research conducted by the International Finance Corporation cited by the Centre for Development and Enterprise, teacher costs make up 85% of private schools’ cost base. Paying competitive, market-related salaries was found to be the greatest challenge.

“The sector cannot offer salaries that compete with the packages in the public sector, not only in terms of the salaries themselves but [also] because public sector teachers receive about 35% on top of their salaries in benefits, such as housing allowances, medical aid and pension contributions,” said the report.

Among the highest paid teachers
South African public sector teachers are among the highest paid in the world, in terms of purchasing power parity, it said. “Only high-fee private schools are able to match or exceed public school teacher remuneration.”

The schools faced significant capital costs in building or renting space and implementing technology.

Smaller schools battled to secure loans or credit from retail banks, with the Finance Corporation finding that principals or entrepreneurs provided personal collateral for loans taken out by more than half of low-fee private schools.

In order to cover costs, independent schools can apply for state subsidies, but they are subject to a number of regulatory requirements and the extent of subsidy is based on geographical location as well as fee structures and prices.

The national department of basic education and some of the provincial departments are “very supportive of independent schools”, said the report; nevertheless, it argued that more could be done to support them financially.

“Given the significant cost savings to the state in terms [provided by private schools] of both recurrent and capital costs, why should the state subsidy not be raised to, say, 90% as in Chile and Pakistan?” suggested the report.

Collaboration
One funding mechanism has been put in place, marking a collaboration between the private sector and the state. In December 2011, Old Mutual set up the Schools and Education Investment Impact Fund of South Africa — a trust worth R1.2-billion.

This fund finances infrastructure requirements, skills training and educational facilities. Its main contributor is the Government Employees Pension Fund, through the Public Investment Corporation.

The fund has facilitated agreements with two private school chains, amounting to loans of R460-million.

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Thalia Holmes
Thalia Holmes

Thalia is a freelance business reporter for the Mail & Guardian. She grew up in Swaziland and lived in the US before returning to South Africa.

She got a cum laude degree in marketing and followed it with another in English literature and psychology before further confusing things by becoming a black economic empowerment (B-BBEE) consultant.

After spending five years hearing the surprised exclamation, "But you're white!", she decided to pursue her latent passion for journalism, and joined the M&G in 2012. 

The next year, she won the Brandhouse Journalist of the Year Award, the Brandhouse Best Online Award and was chosen as one of five finalists from Africa for the German Media Development Award. In 2014, she and a colleague won the Standard Bank Sivukile Multimedia Award. 

She now writes and edits for various publications, but her heart still belongs to the M&G.     

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