South Africa is a nation facing an education crisis. Year after year, we discuss the negative analyses of our matric results and our performance compared with other nations.
In 2014 our education sector ranked 146th out of 148 countries in the World Economic Forum’s Global Information Technology Report, and the standard of mathematics and science education was ranked 148th out of 148.
Yet this reality is juxtaposed against the hope one experiences when sitting in classrooms at many schools across the country. Here there is little doubt that, at a school level, youngsters are learning, and equipped with this knowledge, they are hankering to take on the challenges our country faces.
Many have asked why the state can’t ensure the provision of quality education and others ask what the private sector is doing to turn this worrying big picture around.
There are many suggested solutions to answer these questions, but one of the more recent game-changers in this country is “impact investing” – that is, making financial investments that help to facilitate the provision of high-quality education.
Much has been written about the huge growth in the number of independent schools (still informally called “private” schools), from a low base of 1 174 in 2009 to 1 681 this year – with an emphasis placed on the growth of affordable independent schools.
The public debates on these schools are often characterised by polarised positions that, quite frankly, miss the point. Those who are proponents of privatising education often argue that the state should simply outsource education, because the private sector has consistently delivered better results than the public sector has. Others argue that independent schools should be curtailed because they undermine the state system and are not only inherently inequitable but also constitute an infringement of human rights.
But the ideological positions in such debates fail to understand the education predicament South Africa faces: when confronting a crisis, the call should be to get “all hands on deck”, rather than to hold an ideological debate about “public versus private”.
The point often missed is that these debates essentially centre on how to deliver opportunities for children to realise their potential. Why should we be debating fixing the toilet that cost schoolboy Michael Komape his life at Mahlodumela Primary School in Chebeng village, Limpopo, in January last year? Shouldn’t we simply be fixing the toilet?
Ultimately, all initiatives that deliver on the promise of opportunities for children, and every single opportunity for each child too, should be welcomed and acknow-ledged when they pass muster – as tested by criteria appropriate to the promises and how fully these are kept, as well as the opportunities and how effectively they are delivered.
The key value that impact investing in education offers is aligning the creation of economic value with the production of societal value. By mobilising long-term commitments of capital, the private sector has invested in the future because it sees returns only in 10 to 15 years’ time.
Parents, pupils, teachers, business people and investors become excited about this approach because they see the possibilities, and this creates the kind of hope that helps to drive change.
Solutions become easier
The scale of investment can be significant – the effect created can benefit large numbers of pupils. When impact investing, corporate social investment spending and public sector resourcing become aligned, finding solutions becomes easier.
The Schools and Education Investment Impact Fund of South Africa, established by the Government Employees Pension Fund and its asset manager, the Public Investment Corporation, as well as Old Mutual, was the first impact fund of its kind and is an example of impact investing for quality education.
As the manager of the fund, I can say that the intention was, and remains, to support government in delivering quality education for pupils from previously disadvantaged backgrounds. This is an innovative initiative that makes use of pension finance, in the form of loans, to create additional high-quality schooling opportunities for pupils at affordable independent schools. These schools must provide quality education, and their fees are capped to increase the number of parents, caregivers, custodians and others who can afford them.
So how does impact investment work? The schools fund mentioned above and other investors provide a loan or equity to a ring-fenced company that owns the school property and repays the loan. Nonprofit companies that employ the teaching staff are the managers of the schools. A private company specialising in management provides services to the schools, such as financial management, and is responsible for good governance.
In cases of underperformance, the state – as the custodian of the broader public interest – can hold these companies and individuals accountable and take action to address the needs of the child, the parent, the staff and the investor.
The measure of the success of this kind of investing is both the quality of education provided and the commercial return. The state plays an important role because it is the regulator and its approval is required for myriad matters that affect a school, from the approval of building plans to the approval of a registration application and the allocation of a subsidy.
Impact investing in the education sector is changing the face of the independent schooling landscape in the following ways:
• New schools are being provided for pupils where there is a need, lessening the burden on the state to provide them;
• Existing small-scale school operators are scaling up from one school to many – for example, the Basa (Business and Arts South Africa) schools in Soweto and Royals in Pretoria;
• Young and skilled black African entrepreneurs who seek to tap into private sector levers and efficiencies, while still delivering a social return, have opened quality schools at affordable fees in the past few years – for example, the African Schools of Excellence, the Pioneer Academies and the SPARK Schools;
• Private equity investment has grown, albeit mainly in the middle to upper end of the market – for example, the expansion of Curro, AdvTech and Reddam;
• The schools fund, which was the first significant impact fund in the education sector, has been followed by others. For example, the United Kingdom-based 1886 Investment has established Summit Education, the Pearson Affordable Learning Fund has made its first investment in South Africa and high-net-worth individuals are providing backing to new initiatives; and
• Many school managers have fresh approaches to how quality education should be provided and these may well result in technology-based breakthroughs that can be used throughout the schooling sector.
There is no reason why these benefits can’t be extended to the public education sector if mutually beneficial private-public partnerships can be clinched.
Across the country the Schools Fund has already allocated third-quarters of a billion rand to develop schools in which 13 777 pupils are already being educated.
The fund has approved finance to build schools that will accommodate 24 780 pupils and create 1 497 permanent staff positions. Of these, 972 will be teachers. The schools fund intends to partner with many more schools and this will create further schools and jobs.
Partnerships are in place with Basa, Royals, Meridian and Prestige, which are providers of high-quality education and exhibit astute financial management as well as good governance. These school operators have also shown the ability and desire to add scale to their operations to benefit a greater number of pupils.
In 2014, the Queens Private Schools (part of Royals) received a 100% matric pass rate and 42% of candidates achieved bachelor passes. The Basa flagship school, the Basa Tutorial Institute, received a 99% matric pass rate and 61% bachelor passes. Northern Academy in Polokwane was the best-performing independent school in Limpopo, and the top three performers, who each received six or more distinctions, are now studying actuarial science, electrical engineering and computer science.
Without the state, the private sector, the public and the pupils, little can be achieved. What we need is more initiatives like these – and others – so that South Africa can become a winning nation and offer quality education to all our children.
Lala Steyn is the manager of the Schools and Education Investment Impact Fund of South Africa