Private sector education players are struggling amid high land prices and red-hot inflation: The education sector is facing fresh challenges that are standing in the way of sustainable operations and the potential to expand their footprint, according to private sector insiders in the sector Enterprise spoke with. School operators are struggling to set up new branches and campuses to accommodate growing demand as a result of prohibitively high land prices, and soaring inflation is driving up operation costs. Operators are now calling on the government for a package of incentives to support investments in the education sector, particularly for private schools, our sources tell us.

They’ve already been feeling the pinch for a while: Since last year, higher energy, raw materials, freight, and shipping costs have been pushing building material prices higher and causing real estate and infrastructure developers to suspend or drastically reevaluate their projects. Smaller contractors — which would include those hired to build new private schools — have been among those most vulnerable to the rising cost of building materials in their projects. School operators we spoke with at the beginning of the year indicated that they’ve all but brought new projects to a standstill as a result of high construction costs.

Demand is on the up and up: Egypt’s growing population means that demand for schooling is also growing, creating a chronic shortage of classroom seats in the country, with private education remaining underserved. Data from Colliers International (pdf) estimated that as many as 2.1 mn classrooms would be needed by 2030 to plug the supply gap, especially with private sector K-12 student growth almost doubling in the last five years.

Private sector education players are actively growing to fill the gap, but there are significant challenges: The growth rate for private national schools fell back in the 2022-23 academic year, largely on the back of rising land prices, Private Schools Owners Association Chairman Badawy Allam tells us. There’s a shortage of appropriately priced land plots on offer from the government for private sector education, forcing investors to seek out resale options, which are still costly, Allam explained. Add these market dynamics to rising building costs and operating expenses such as teacher salaries, in addition to limitations on annual tuition fee increases, and you have an increasingly unsustainable economic model for these schools, he said.

Setting up large international schools is now looking like a more promising investment prospect, as investors and operators can set up campuses in satellite cities further away from densely populated areas, where land prices are relatively lower and allow for larger campuses to be built. International schools also charge higher tuition fees than national schools, which makes the return on investment more appealing, and will likely lure in more investors, Allam suggested.

But operators really need a helping hand: The education sector needs support from the government to be able to grow in a manner that’s economically attractive for investors, while also addressing genuine market needs in different areas in the country, Allam said. The government could strike a balance between serving market needs and meeting investors’ demands by offering land plots at attractive price points in governorates that are lacking in private sector education services, while providing investors and operators with facilitated funding options if they decide to set up shop in these areas, he suggested.

The issue of land allocation isn’t unique to the private sector, and has also been holding back the second phase of the government’s PPP schools program, according to our sources from the Finance Ministry. In 2016, the government had outlined a plan to build as many as 1k quasi-private schools this decade under public-private partnerships. Last we heard back in 2019, the government had signed public-private partnership pacts with five consortiums to build and operate 24 schools with a total of 910 classrooms as part of the first phase of the program. The Education Ministry had planned to launch a tender for 60 schools as part of the second phase of the PPP schools program by the end of 2019, but the selected bids for the second phase have yet to be announced, our source said.

These delays come despite strong investor interest, with some 25 consortiums, including regional investors, expressing their interest in the PPP schools program as they see significant potential return on investment, our source said.

Your top education stories for the week:

  • Egyptian universities land on international rankings: Seven Egyptian universities made it onto the 2023 Academic Ranking of World Universities(ARWU or the Shanghai Ranking) with Cairo University taking the country’s top spot.
  • Another American school incoming: Emaar Misr has launched a local tender to contractors to build an EGP 1.2 bn American school in its Belle Vie project in Sheikh Zayed. (Al Shorouk)
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