{"id":557098,"date":"2021-09-06T04:00:17","date_gmt":"2021-09-06T04:00:17","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/blackboards\/expanding-private-schools-outside-of-cairo-is-tough-so-how-are-school-operators-doing-it\/"},"modified":"2021-09-06T04:00:17","modified_gmt":"2021-09-06T04:00:17","slug":"expanding-private-schools-outside-of-cairo-is-tough-so-how-are-school-operators-doing-it","status":"publish","type":"blackboard","link":"https:\/\/enterpriseam.com\/egypt\/blackboards\/expanding-private-schools-outside-of-cairo-is-tough-so-how-are-school-operators-doing-it\/","title":{"rendered":"Expanding private schools outside of Cairo is tough. So how are school operators doing it?"},"content":{"rendered":"

<\/a> Given the challenges of private school expansion beyond Cairo, why and how are <\/strong>school operators doing it? <\/strong>Egypt\u2019s demand for private school education is soaring, with K-12 private school enrollment growing at almost double the rate<\/a> of public school enrollment. But private school expansion is heavily Cairo-focused. High land costs, low earning power, and the challenge of assessing demand means expansion in the governorates just isn\u2019t worth the effort for many operators, sources told us last month<\/a>.<\/p>\n

But some operators say there\u2019s a strong business case to expand into the governorates:<\/strong> Huge demand, low competition, and the chance to develop Egypt\u2019s education system are great reasons to expand in the governorates, they believe. Cost-effective expansion is possible through targeted service provision and acquiring reasonably-priced land, they say. It could accelerate massively if the government provided land at no cost, through public-private partnerships, they argue.<\/p>\n

This pool is pretty small, though.<\/strong> For CIRA<\/a> and its subsidiary Eduhive<\/a>, expansion beyond Cairo is a key strategic priority. By 2023, it will have over 25k seats in Upper Egypt alone at K-12 schools and higher education establishments, says CIRA CEO Mohamed El Kalla. And BalancED Education<\/a> is eyeing country-wide expansion, chairman Ahmed El Bakry previously told Enterprise<\/a>. It\u2019s investing EGP 1.2 bn over three years to increase its portfolio of schools from the one it has now to a targeted 4-6.<\/p>\n

So why do it if it\u2019s hard? There\u2019s substantial and growing demand:<\/strong> Expanding in the governorates means entering markets whose rapidly growing populations are underserved, says El Kalla. \u201cYou\u2019re tapping markets at high demand points. You just have to be creative in how you respond to that demand. It can\u2019t be a brick-and-mortar approach.\u201d<\/p>\n

Private school operators coming from Cairo have a competitive edge: <\/strong>Operators that successfully launched schools in Cairo\u2019s fast-paced market are a step ahead of local operators, says Eduhive CEO Karim Mostafa. Competition in the governorates is far lower than in Cairo, and operators coming from the capital have the knowledge and resources to be tough competitors, he adds.<\/p>\n

So how can expansion be cost-effective? By tailoring services by region: <\/strong>When CIRA assesses demand, it calculates how to deliver high-quality services needed in a particular location, and parents\u2019 ability to pay for these services, says El Kalla. Some 20% of Cairo\u2019s population might want so-called upper-middle class services, but this isn\u2019t the case in the governorates. So operators need to tailor their service provision, he adds. \u201cEvery single element of your education supply chain \u2014 from the choice of land, to school construction, to the educational content and delivery cycle \u2014 needs to match the local dynamics of the community.\u201d<\/p>\n

This could mean allocating more resources to teacher training, and less to construction:<\/strong> While private schools in the governorates don\u2019t need expensive buildings to attract students \u2014 as schools in Cairo do \u2014 more investment in content and education delivery may be needed, says El Kalla. Teachers in the governorates may need extra training, while students may need more remedial programs to be on a par with their Cairo peers, he says. Teacher training in the governorates is essential, but quite straightforward, believes BalancED Education managing director Salma El Bakry.<\/p>\n

To assess which services are needed where, and at which price point, CIRA groups different locations in clusters.<\/strong> Locations are clustered according to their economic activity, resource availability, and growth prospects, says El Kalla. This could mean categorizing governorates based on their most prominent industries or the spending habits of their citizens, he adds. Clusters aren\u2019t determined by geographical location. \u201cA look at the poverty matrix and human development reports shows that it\u2019s not about geography. We sometimes have Assiut and Mansoura in the same cluster.\u201d<\/p>\n

It uses this information to create brands: <\/strong>CIRA\u2019s different brands<\/a> provide services based on the needs of the clusters, says El Kalla. \u201cEduhive, ESI<\/a>, Rising Stars \u2014 each focuses on educational clusters. They aren\u2019t bound by geography.\u201d<\/p>\n

Another way to cover the cost of governorate expansion would be for schools to expand in groups, sharing CAPEX costs,<\/strong> Ahmed El Bakry previously told us.<\/p>\n

But the land cost issue must still be resolved for expansion to be attractive: <\/strong>\u201cAs an operator, you don\u2019t want to burden yourself with high land costs,\u201d says Mostafa. \u201cYou have to be very careful with the price of land you choose.\u201d<\/p>\n

One approach? Selecting lower-priced land in the government\u2019s new urban cities:<\/strong> CIRA launched<\/a> the Regent British School in New Mansoura because costs in the new urban cities are much lower than elsewhere, says Mostafa. \u201cApartments in Mansoura cost more than apartments in Cairo, so to open a school there would be very expensive. Going to the new cities like New Assiut and New Alamein is a smart way to turn around the high price of land in the governorates.\u201d<\/p>\n

Prices in landlocked governorates remain outrageously expensive,<\/strong> say Salma El Bakry and BalancED Education executive manager Mahmoud Hamza. Locations that don\u2019t have a desert background can\u2019t expand to become new cities, meaning that land is scarce and very expensive, they add.<\/p>\n

Widespread land provision to school operators at no cost, under the Education Ministry\u2019s <\/strong>public-private partnership program<\/a><\/strong>, would be a better solution, sources argue. <\/strong>The government should provide land for school expansion without charge, so operators could build and operate schools at a reasonable price for residents \u2014 likely ranging from EGP 30k-60k depending on the governorate, says Salma El Bakry. \u201cExcluding the price of the land is very important in the business formula.\u201d<\/p>\n

The problem with the current PPP process is that it\u2019s too long and bureaucratic,<\/strong> says El Kalla. The only way education PPPs can work for now is with publicly-owned institutions, like public banks, he believes. \u201cThey operate with a private sector mindset.\u201d<\/p>\n

For now, a comprehensive PPP mechanism offering land to education providers at no cost doesn\u2019t seem to be on the cards:<\/strong> \u201cIf government-owned land was going to be offered at a reduced rate or for nothing under a PPP framework, I\u2019d be the first to sign up,\u201d says Mostafa. \u201cBut I don't feel that's really on the table.\u201d<\/p>\n

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