{"id":543563,"date":"2022-02-07T03:44:10","date_gmt":"2022-02-07T03:44:10","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/blackboards\/whats-driving-the-growth-of-education-management-companies-in-egypt\/"},"modified":"2022-02-07T03:44:10","modified_gmt":"2022-02-07T03:44:10","slug":"whats-driving-the-growth-of-education-management-companies-in-egypt","status":"publish","type":"blackboard","link":"https:\/\/enterpriseam.com\/egypt\/blackboards\/whats-driving-the-growth-of-education-management-companies-in-egypt\/","title":{"rendered":"What\u2019s driving the growth of education management companies in Egypt?"},"content":{"rendered":"

<\/a> What\u2019s driving the growth of education management companies in Egypt?<\/strong> Within Egypt\u2019s private education sector, we\u2019re seeing a notable increase in companies dedicated to managing schools, as we reported last week<\/a>. In this second part of our two-part series, we look at the factors driving this growth.<\/p>\n

Egypt is fertile ground for education management companies to grow<\/strong>, a source from a major international school tells Enterprise. This is firstly because the model of running schools as forprofit businesses has been widely accepted within MENA for 30 years, which is not the case in the US, for example. Secondly, we\u2019ve recently seen substantial and growing interest<\/a> \u2014 particularly from UK schools \u2014 in launching education franchises in Egypt, which are best served with support from a local player that understands the local context and curricula, the source adds. \u201cCombine those two things, and Egypt becomes a huge market for educational management, which you wouldn\u2019t find in many other places.\u201d<\/p>\n

Driving this growth is the strong demand for private and international education<\/strong>, Advisor to the Chairman of Esol Education<\/a> Tammam Abu Shakra, tells Enterprise. Esol establishes and manages schools in the Middle East, with brands<\/a> including the American International School and Cairo English School, among others.<\/p>\n

Know-how and access to capital give education management companies the edge: <\/strong>Experienced education management companies can better meet increasing demand for high-quality education than standalone schools or new entrants to the sector because their know-how, track record and reputation make them more capable of executing new projects, says Abushakra. \u201cFor the same reasons, they have greater access to capital and [growth prospects]. So, for example, they are more sought after by investors and real estate developers.\u201d<\/p>\n

Investors entering from other sectors are often ready to pay for expertise: <\/strong>Increasingly, investors from very different sectors \u2014 like agriculture or construction \u2014 want to get into education, but the industry requires specialized know-how that they often lack, says Eduhive CEO Karim Mostafa. An education operator working in Egypt needs to understand the regulation and jurisdiction bodies they\u2019re governed by, along with the target markets and how to fully utilize resources, he says. \u201cHaving a service provider that can manage schools for them is rare\u201d \u2014 and they\u2019re willing to pay for one.<\/p>\n

Another selling point is performance and efficiency: <\/strong>Management companies standardize certain school processes and operations, leading to greater efficiency and resource management, thereby reducing school costs, says Mostafa. Being run by a reputable education management company can also add a lot of sustainability to schools, says Egypt Education Platform (EEP)<\/a> CEO Ahmed Wahby.<\/p>\n

As well as providing their portfolio schools with access to high-caliber employees: <\/strong>\u201cParticularly in the Egyptian market, many schools are owned by people who aren\u2019t educators, so they don\u2019t always know if they\u2019re hiring the right caliber of people to run the place for them,\u201d says Wahby. \u201cFinding someone with the right know-how [to judge this] adds a lot of value to schools,\u201d he adds. Mostafa agrees that the expertise and extensive networks of quality management companies helps schools reach high-caliber employees.<\/p>\n

They can also be a vehicle for reaching more students and geographies:<\/strong> EEP was founded as a means of providing more variety in terms of the curricula offered and the income segments targeted, says Wahby. By having multiple streams \u2014 each with its own name and identity \u2014 the company can grow in multiple directions, rather than just one. \u201cThere\u2019s no one-size-fits-all approach, and this way each stream has its own direction of growth,\u201d Wahby says, adding that diversification \u201cwill enable us to grow even further, beyond Cairo\u201d to cater to different geographies and demand pockets.<\/p>\n

For operators, expansion through education management companies can be more cost-effective than simply owning multiple schools.<\/strong> After years of managing school franchises he owned, Mostafa founded Eduhive as a way to grow and attract more clients, he tells Enterprise. \u201cIf you look at ownership today, you\u2019ll see land prices have become very expensive. For a family to own and manage 2-3 schools would require EGP 1-1.5 bn,\u201d he notes. \u201cSo how do you grow in your sector? You partner to manage other ventures, where you\u2019re not the sole owner \u2014 or you don\u2019t even have to be an owner.\u201d<\/p>\n

School ownership involves sizable investments in land and CAPEX,<\/strong> agrees BalancED Education Managing Director Salma El Bakry. That\u2019s why having a mixed portfolio of ownership and management can be an ideal balance, she adds.<\/p>\n

But management companies themselves are asset-light and don\u2019t require huge investment<\/strong>, notes Mostafa.<\/p>\n

What\u2019s more defensive than defensive?<\/strong> Education in general is a pretty defensive industry, and accordingly so is education management, notes Wahby. One popular education management model \u2014 out of several \u2014 is for an education management company to take a fixed-rate percentage of a school\u2019s revenue, creating high earning potential, he says.<\/p>\n

But not everyone\u2019s fully on board with a rapid-growth approach<\/strong>, the off-the-record source notes. \u201cI think the critique of some education management companies is that they buy schools, consolidate them, and then \u2014 like venture capital \u2014 just move onto the next project,\u201d the source adds.<\/p>\n

Though players are also quick to point out that each approach carries benefits and risks: <\/strong>Companies that grow organically might be more at risk from the macro climate than companies that begin life as investment vehicles, operate more schools and have more financing \u2014 but the slower-growing companies also tend to have longer relationships with the schools they manage, the source notes. Neither model is necessarily better or worse than the other, with each carrying their own set of pros and cons, the source adds.<\/p>\n

The bottom line remains that management companies will only succeed if they\u2019re providing quality. <\/strong>\u201cYou have to be confident you can offer quality to invest in this sector. Because if you can\u2019t offer quality, you won\u2019t last long,\u201d says Wahby. The market need for an education vehicle not based on an owner\u2019s name, that\u2019s long-lasting, institutionalized and delivers a quality service is massive, he adds.<\/p>\n

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