{"id":545577,"date":"2022-04-04T04:02:22","date_gmt":"2022-04-04T04:02:22","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/blackboards\/with-rising-inflation-schools-might-see-lower-enrollment-rates-or-shifting-student-body-compositions\/"},"modified":"2022-04-04T04:02:22","modified_gmt":"2022-04-04T04:02:22","slug":"with-rising-inflation-schools-might-see-lower-enrollment-rates-or-shifting-student-body-compositions","status":"publish","type":"blackboard","link":"https:\/\/enterpriseam.com\/egypt\/blackboards\/with-rising-inflation-schools-might-see-lower-enrollment-rates-or-shifting-student-body-compositions\/","title":{"rendered":"With rising inflation, schools might see lower enrollment rates \u2014 or shifting student body compositions"},"content":{"rendered":"

<\/a> As inflation drives up overall costs and tightens budgets, a trend of transferring children <\/strong>to less expensive private schools has gathered steam<\/strong>, Eduhive CEO Karim Mostafa said recently<\/a>. Lower-middle income schools are seeing an estimated two-three times the enrollment rate of high-income schools, education investment platform Lighthouse Education Deputy Chairman Mohamed El Sherif noted in February.<\/p>\n

So are high-income or upper-middle income schools seeing enrollment rates drop? So far, no<\/strong>, say sources. Demand for private education is so high that existing school enrollment rates remain high too. For high-end schools, it\u2019s business as usual. Middle-income schools could see a change in the composition of their applicants, but not reduced enrollment. But a slowdown is possible for new schools entering the market, facing inflation and the devaluation.<\/p>\n

A large segment of Egyptian society will always prioritize education spending: <\/strong>Though we\u2019re currently seeing considerable cost cutting, \u201ceducation is sacred to the Egyptian family,\u201d says Mostafa. Squeezed families will cut down other spending habits to allocate money to education whenever they can, he adds.<\/p>\n

Wealthier families may weather the storm of inflation: <\/strong>Parents whose children attend international schools with annual tuition fees above EGP 140k are likely to have more disposable income to withstand inflation and devaluation, Elsewedy Capital Holding CEO Haytham Sabry tells Enterprise.<\/p>\n

For those attending the most expensive schools, it \u201cwon\u2019t even cause a dent,\u201d<\/strong> El Alsson Executive Director Karim Rogers tells Enterprise. People whose children attend the likes of CAC, BISC, Malvern or NCBIS pay annual fees of around USD 20-25k or EGP 300k. If they can afford this, they\u2019re unlikely to have to look for lower-priced options due to inflation, Rogers says.<\/p>\n

Schools above the EGP 150k price point don\u2019t seem to be facing enrollment problems: <\/strong>\u201cI haven\u2019t heard from schools with tuition fees over EGP 150k that they\u2019re finding it hard to fill their seats,\u201d says AIS Director Kapono Ciotti.<\/p>\n

AIS reports stronger-than-usual enrollment levels:<\/strong> \u201cWe haven\u2019t seen the economy play a negative role \u2014 even with inflation,\u201d says Ciotti. AIS retained almost 97% of its students from 2021 \u2014 above normal levels of around 95%, he notes. \u201cI\u2019d say our re-enrollment is stronger than ever. Our new enrollments are very strong too.\u201d<\/p>\n

El Alsson has seen parents stretched, but no drop in enrollment rates: <\/strong>El Alsson, which has fees of EGP 140-190k, has \u201ca handful\u201d of parents struggling due to recent price hikes, says Rogers. \u201cBut I haven\u2019t seen anyone leave saying they\u2019re moving to something cheaper.\u201d So far, enrollment numbers this year have been within the expected range, says Rogers. \u201cI think people are stretched. But if they\u2019ve chosen us, they\u2019re committed. And they probably want to continue here.\u201d<\/p>\n

Schools in Eduhive\u2019s portfolio have seen a slight enrollment slowdown, but not enough to constitute a drop<\/strong>, says Mostafa. Projected numbers for this admissions season are steady, but the enrollment process is slower than in 2015, before rampant inflation. \u201cI used to fill 100 vacancies by January or February, but now it might take until April. You still fill up, but it just takes longer.\u201d<\/p>\n

Middle-income schools \u2014 including those with EGP 60-100k fees \u2014 will more likely see enrollment changes, as parents target lower price points, <\/strong>say Rogers and Sabry. \u201cThe middle class is the most hit segment of society, so here you\u2019ll definitely see parents downgrading schools to get lower fees,\u201d Sabry says.<\/p>\n

But they\u2019ll see a change in composition<\/strong> \u2014 not a lessening of overall demand: <\/strong>Enrollment rates will stay strong because Egypt\u2019s demand for private school education is just so high, sources agree. As some parents move to less expensive schools, others will take their place, says Sabry. \u201cI don\u2019t think this downgrading will affect admissions. It just affects the composition of the parents.\u201d<\/p>\n

The Gulf English School (GES) shows these changes at work: <\/strong>The Gulf English School, which Rogers calls a \u201ctotally Egyptian school with an international perspective,\u201d has the same owner as Modern English School (MES). It filled with 600 students immediately after opening, says a source speaking off the record, noting that some parents left MES and went straight to GES. \u201cGES is full, because its fees are EGP 60-80k, and it has good facilities, teachers, curricula and management. It\u2019s really good value for money, so it\u2019s oversubscribed,\u201d notes Rogers.<\/p>\n

But even if enrollment in existing schools isn\u2019t hit, significant challenges remain<\/strong>, sources note.<\/p>\n

Sweeping demand for private education could allow low-quality players easy market access<\/strong>, Rogers and Mostafa fear. \u201cThere\u2019s a definite market for B- to C-class schools. It\u2019s very profitable,\u201d notes Rogers. Costs can be kept low if you don\u2019t hire expat teachers or seek international equipment or resources. \u201cBut some schools seem to target anybody with a bag of money,\u201d he adds.<\/p>\n

New schools that haven\u2019t yet proven themselves in the market could face lower enrollment rates<\/strong>, says Sabry. Established schools generally have long waiting lists, but new operators will need to heavily invest in school construction, while trying to attract students as costs are exceptionally high, he adds. The situation could slow market entry for new schools, including international franchises, Ciotti agrees.<\/p>\n

And high-end schools could see inflation and the devaluation hit their margins hard, because they pay expat teachers in FX: <\/strong>\u201cHigh end schools will see their margins affected. It\u2019s enrollment that\u2019s not affected,\u201d says Sabry. They might have to decrease the number or quality of their expat teachers, to pay less, he speculates. While Rogers hasn't yet felt the crunch when it comes to paying expat salaries, the EGP slide puts him in a more difficult position than he\u2019d anticipated when budgeting. \u201cWe have a buffer, but it\u2019s usually USD 1 or USD 1.5 over the value of the EGP \u2014 which when we set it was around USD 15,\u201d he notes. The USD is currently trading hands at EGP 18.30.<\/p>\n

Will these trends continue for the rest of 2022 and into 2023? Yes, and they\u2019ll become more acute<\/strong>, says Sabry. But it\u2019s hard to predict by how much. \u201cJust as in 2014 and 2015, the markets were in turmoil, but you didn\u2019t know where the bottom was.\u201d<\/p>\n

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