{"id":555083,"date":"2021-11-01T03:50:19","date_gmt":"2021-11-01T03:50:19","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/blackboards\/why-private-sector-education-likes-large-scale-public-private-investment-platforms\/"},"modified":"2021-11-01T03:50:19","modified_gmt":"2021-11-01T03:50:19","slug":"why-private-sector-education-likes-large-scale-public-private-investment-platforms","status":"publish","type":"blackboard","link":"https:\/\/enterpriseam.com\/egypt\/blackboards\/why-private-sector-education-likes-large-scale-public-private-investment-platforms\/","title":{"rendered":"Why private sector education likes large-scale public-private investment platforms"},"content":{"rendered":"

<\/a> Why private sector education likes large-scale public-private investment platforms: <\/strong>This year has seen the increase of public-private partnerships in large-scale education investment vehicles. Last week<\/a>, CIRA and Al Ahly Capital Holding announced (pdf)<\/a> they\u2019re starting a new company to invest in middle-income education providers. Al Ahly CIRA for Educational Services will launch with initial capital of EGP 2 bn.<\/p>\n

It joins three other large-scale education investment platforms:<\/strong> CIRA and Elsewedy Capital Holding are establishing<\/a> an EGP 2.5 bn private university in New Damietta through a new joint venture, Cairo Egypt for Education (CEE), with the New Urban Communities Authority allocating land. We also have the Lighthouse Education platform<\/a>, which aims to raise EGP 500 mn in a first close, with contributions from Misr Ins. Holding, the Sovereign Fund of Egypt, Banque Misr, and the Suez Canal Bank. Then there\u2019s the EFG Hermes Education Fund, which has received a EGP 250 mn commitment from the SFE. The fund was set up <\/span>earlier this year<\/a> as a 50\/50 JV between EFG and GEMS Education to invest in Egypt\u2019s K12 education sector.<\/span><\/p>\n

But what makes these so appealing for the private sector? <\/strong>They\u2019re fundamentally stable investments allowing for long-term investments and delivery of high-impact, cost-effective, affordable, quality education, private sector partners in these JVs tell Enterprise. They ultimately see them as a much more successful model for public-private partnerships in education than what was previously put out.<\/p>\n

The size and scale of these platforms makes them inherently stable: <\/strong>Large-scale investment vehicles help to tackle the fragmented nature of Egypt\u2019s education sector, says Elsewedy Capital Holding CEO Haytham Sabry. \u201cWhen you establish an education platform, you invest maybe ten times more than the next guy. So you want to make it successful, and you\u2019re also helping to create the momentum that will keep it going. This all provides stability.\u201d<\/p>\n

\u2026And essential to meeting Egypt\u2019s growing population: <\/strong>Egypt\u2019s population is growing at such a rate that only large-scale initiatives can meet local education\u2019s needs, notes CIRA CEO Mohamed El Kalla.<\/p>\n

The private sector likes to think in the long-term: <\/strong>Long-term investment in an education platform is crucial to the partnership, El Kalla says. \u201cWe like to create well-governed company structures, with all partners in it for the long haul.\u201d<\/p>\n

This allows for much more than one-off projects and schools:<\/strong> Investing in an education platform, rather than investing on a project-by-project basis or in a single school, means operators can attract stronger talent and spend more on education development, Lighthouse Education CEO Mohamed Elsherif tells Enterprise.<\/p>\n

\u2026And a diverse and innovative lineup of projects: <\/strong>The Al Ahly CIRA partnership is open-ended in terms of its time frame and will consider a wide spectrum of investment prospects, says El Kalla. It\u2019s currently targeting investment in a mix of K-12 schools, universities and technical colleges. But it\u2019s also prioritizing innovative projects, to support the education sector as it continues its rapid evolution, El Kalla says. In five years, we could see Al Ahly CIRA investing in e-learning or edutainment, he adds.<\/p>\n

JV platforms see financial commitment from public and private partners: <\/strong>Al Ahly CIRA constitutes a joint investment by both Al Ahly and CIRA into project buildings, CAPEX, structure and the new company itself, says El Kalla. \u201cIt\u2019s debt plus equity for the two organizations, and we\u2019re expecting a good ROI,\u201d he adds, without giving a specific figure.<\/p>\n

This helps make expansion easier, especially in governorates:<\/strong> Al Ahly CIRA is particularly targeting projects in the governorates, says El Kalla. \u201cWe will have a huge focus on Upper Egypt between now and 2024. Then it will largely be on the Delta.\u201d The new company is currently looking for mid-size education operators \u2014 with 2k students or more \u2014 to acquire, he notes.<\/p>\n

PPP platforms also allow the investor options for a successful exit:<\/strong> \u201cExits are easier because you have something big that you can be listed in the bourse through an IPO,\u201d says Elsherif.<\/p>\n

Why does the gov\u2019t like them? Private sector management:<\/strong> The management of each of these education platforms is purely private sector, but public sector input reassures other investors that proper due diligence has been done, Elsherif says.<\/p>\n

\u2026And private sector expertise: <\/strong>Through the partnership, Al Ahly CIRA seeks to combine global expertise with local know-how, to create something affordable for the middle class, says El Kalla. This is exactly what it\u2019s doing with Cairo Saxony University for Applied Sciences and Technologies, Egypt\u2019s first private tech university<\/a>, he adds. \u201cCairo Saxony is built on CIRA\u2019s understanding of the sector, but we\u2019re also partnering with practitioners in Germany and Switzerland.\u201d The innovation in that approach is what really excites Al Ahly Capital, he adds.<\/p>\n

The model allows for consistent service delivery and easy replication,<\/strong> says Sabry. The aim is to synergize all operations and have a centralized management system, he notes. \u201cThis means we can ensure consistency of quality in teachers and in materials. We can learn from our mistakes and directly apply those lessons to multiple schools.\u201d<\/p>\n

So impact is high while costs remain relatively low: <\/strong>Applying the same standards and processes for curriculum design, teacher hiring and impact assessment guarantees quality education, says Sabry. Centralized business processes reduce costs significantly, he adds. \u201cDoing this, we achieve affordable quality education.\u201d<\/p>\n

What could further spur growth? Tackling the land price issue. <\/strong>High land costs<\/a> remain the outstanding challenge when it comes to giving these large-scale vehicles scope to invest effectively in education programs, note El Kalla and Sabry.<\/p>\n

Regardless, these platforms provide the best model for PPP in education \u2014 far superior to what came before: <\/strong>These investment vehicles are fundamentally different to the gov\u2019t PPP schools program<\/a>, say all three leaders. \u201cWhat we\u2019re doing has nothing in common with the government\u2019s PPP schools program,\u201d says Elsherif. \u201cIn the government program, the schools are owned by the government. The private sector operates them and will hand them back at a later stage.\u201d The government\u2019s PPP program consists of isolated small projects, rather than a large-scale vehicle, adds Sabry.<\/p>\n

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