Impact investing will help to solve education crisis
Impact investing in education in SA is a game changer as a means to facilitate high-quality education. At the Independent Schools Summit organised by the Gauteng department of education on September 13, Education MEC Panyaza Lesufi noted that 12% of pupils in the province now receive their education at independent or private schools, with the number of these schools growing 137% between 1995 and 2017. This growth, which is expected to continue to move towards the global average of 20%, is driven by the demand from parents for high-quality education.
Left to its own devices, it is neither likely that the private sector will deliver public goods, nor is it entirely appropriate. But an appropriate mix of incentives and regulations – that rewards the delivery of high-quality education and regulates equity and fairness — can make a significant contribution to improving education outcomes and enabling our society to develop its economy.
Old Mutual Alternative Investments manages one of the largest portfolios of impact investments in the country – with R12.4bn invested in housing, green energy and schooling. Investors in the Schools and Education Investment Impact Fund of SA — the Government Employees Pension Fund and its asset manager the Public Investment Corporation, Old Mutual and the Eskom Pension and Provident Fund — have strengthened the regulatory approach of the government by providing finance on terms that incentivises certain behaviour.
For example, we have placed a cap on school fees in an attempt to increase affordability, while still requiring acceptable commercial returns.
Ask any parent how they judge whether a school provides quality education or not, and they are likely to say: “Look at their matric results, look at what their pupils achieve in society, look at how my child can read and write.”
In terms of governance, we have introduced and annually require an independent audit of the overall quality of education, benchmarked against initial baseline systemic tests, followed up by annual systemic tests to monitor quality of education per school.
We piggybacked on the Annual National Assessment concept – each year the numeracy and literacy levels of pupils at the end of the key school phases such as grades 3, 6 and 9 — are tested. These tests are compared with targets that the school has set, and the cycle is repeated year on year.
The results are positive and a space has been created where a conversation about education standards across the various school phases takes place. The emphasis is not only on the final matric results but on every step of the learning process. These standards are both internal to the school, as it is comparing its results against targets it set a year earlier; and external, as the tests are conducted across a number of different schools and managed by an independent provider.
At certain schools, significant improvements have already been achieved, although this is not a simple linear process. For example, one of our schools achieved a dramatic 25% increase in mathematics results and a solid 9% in English.
The unforeseen still occurs – such as a key teacher falling ill, or new curriculum requirements being introduced. Teachers share their magic, seek guidance, get to grips with how to use systemic testing as a tool for improvement and strive to unlock the excellence that lies within each pupil. Over time as new schools grow, and pupils reach their final matric year, we expect quality results.
The key value that impact investing in education offers is that it aligns the creation of economic and social value.
Through the mobilisation of long-term commitment of capital, the private sector is invested in the future as it only sees returns in 10 to 15 years’ time. Parents, pupils, teachers, business folk and investors become excited about this approach, because they see the possibilities, and this creates the will that helps drive change.
As the independent school sector grows, impact investment in education can reach significant numbers of pupils. The Schools Fund’s R1.4bn investment will deliver education to 40,000 pupils across 51 schools in the next few years. It will also create more than 2,300 new permanent jobs, and build entrepreneurial businesses.
Young skilled African entrepreneurs who seek to tap into private sector levers and efficiencies, while still delivering a social return, continue to open quality schools at affordable fees.
The majority of corporate social investment (CSI) spend in SA is in the education sector, with 48% in 2016, according to Trialogue. A significant 15% or R213.7bn of our annual government budget goes towards education.
If we are able to align impact investing, CSI spend and public-sector resourcing, this can lead to significant inroads being made to deliver quality education, which will make a positive and lasting contribution to SA’s growth prospects.
THE EMPHASIS IS NOT ONLY ON THE FINAL MATRIC RESULTS BUT ON EVERY STEP OF THE LEARNING PROCESS
Steyn is the head of the Schools Investment Fund at Old Mutual Alternative Investment.