Scope for SMEs in education

FUNDING: MONEY MIGHT BE AN ISSUE FOR ANYBODY WANTING TO OPEN A SCHOOL, THOUGH

Business Partners Limited has invested R97m in education SMEs in three years.

The education sector in South Africa remains a catch-22, with public schools struggling to yield positive results and private schools being too costly.

This challenge signals a gap in the market and provides an opportunity for small and medium enterprises (SMEs) in the private education sector to flourish.

Business Partners Limited’s (BUSINESS/PARTNERS) regional manager David Morobe points out that R246.8 billion was allocated to basic education in 2018 by government.

“This is 14.8% of the consolidated budget and although less than previous years, it amounts to more than what more developed countries such as the US and UK spend.

“However, the results do not reflect this investment, with 78% of grade 4 learners being unable to read, whilst in the US this figure is reported at 4% and in England, 3%.

“This is according to the Progress in International Reading Literacy Study released in 2016.

“On the other hand, enrolment in the private school sector has seen a 2.7% decrease in enrolments in 2018 on top of a 4.9% decrease in 2017, while some of these schools struggled to fill their grade 1 classes,” he notes.

He adds that entrepreneurs should be mindful of the fact that there is a real demand for services and products that improve learners’ academic performance. “However, if SMEs in the private education sector are going to successfully start and grow their businesses, they will need to consider providing an affordable option to remain competitive, as the gap in the market for affordable private education is undeniable.” Morobe points out that while quality and affordable education is an issue which needs to be rectified, there are also significant challenges when entering this sector. “Like most other SMEs, obtaining funding can be difficult.”

This is because the underlying asset of a school can be regarded as “too specialised”.

“Other challenges include compliance requirements, the high capital outlay, the time it takes to enrol attendees to generate income, as well as finding suitable staff.”

BUSINESS/PARTNERS has a R150 million Education Fund for SMEs which has financed 42 businesses within the education sector to the value of R97 million over the last three years.

Most was allocated to pre-primary and private schools as well as student accommodation.

78% of grade 4 learners in SA cannot read.