{"id":635312,"date":"2024-07-29T00:00:00","date_gmt":"2024-07-29T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/blackboards\/govt-explores-ways-to-boost-dwindling-private-education-investment\/"},"modified":"2024-07-29T00:00:00","modified_gmt":"2024-07-29T00:00:00","slug":"govt-explores-ways-to-boost-dwindling-private-education-investment","status":"publish","type":"blackboard","link":"https:\/\/enterpriseam.com\/egypt\/blackboards\/govt-explores-ways-to-boost-dwindling-private-education-investment\/","title":{"rendered":"Gov\u2019t explores ways to boost dwindling private education investment"},"content":{"rendered":"

Private education investment could use a shot in the arm:<\/strong> Despite government incentives aimed at attracting funds into the education sector, private investment continues to be stifled by a number of headwinds. Rising costs due to inflation and high interest rates, coupled with inflexible tuition fees, threaten to squeeze investor margins. As a result, private sector participation has seen a drop in recent years. Pundits discussed the obstacles facing private investment in the education sector and how the government is working to address them during the third annual Education Investment Summit<\/a>, which Enterprise attended earlier this month.<\/p>\n

Private players are increasingly dropping out of the sector: <\/strong>The private sector\u2019s share in educational investments has dropped to 9% from 10% in recent years, CIRA Education CEO Mohamed El Kalla said. The drop comes on the back of several factors, including the private sector\u2019s inability to keep pace with demand for new schools due to surging population growth, he explained. This is compounded by declining revenues from tuition fees, which have risen by only 30% compared to significantly higher cost increases, he said.<\/span><\/p>\n

ICYMI-<\/strong> The Education Ministry in September 2023 introduced a tiered system of caps on tuition<\/a>fee increases at private schools<\/a>, with higher-priced schools facing tighter limits. <\/p>\n

Still, others see promising returns to reap:<\/strong> Despite these challenges, some private players believe the sector remains highly profitable. While periods of high inflation and interest rates dampen investor returns, the sector\u2019s profit margins can reach 35-60%, said Ihab Rizk, the investment director of education, agriculture, and food at the Sovereign Fund of Egypt. Egyptian families still spend significant sums on education, with an estimated EGP 50 bn annually \u2014 38% of which goes towards private tutoring and extracurricular books, said Rizk.<\/p>\n

The education sector faces a funding gap of USD 7 bn in the current fiscal year<\/strong>, General Authority for Investment and Free Zones (GAFI) head Hossam Heiba said at the conference.<\/p>\n

The government has earmarked some <\/strong>EGP 294.6 bn for education spending<\/a><\/strong> during the current fiscal year, marking a 28.2% y-o-y increase and accounting for nearly 4.5% of all government spending planned for the current fiscal year.<\/p>\n

Remember- <\/strong>The government wants private investments to make up 48% of total investments<\/a> in Egypt during the current fiscal year and 51% by the fiscal year 2026-2027<\/a> and 70% by 2030. <\/p>\n

TO REEL IN PRIVATE PLAYERS-<\/p>\n

The government is taking steps to grow the sector as well as to boost private <\/strong>investments, including:<\/strong><\/p>\n

#1- The PPP education program: <\/strong>The government plans to offer 24 schools to the private sector in the next two months as part of the second phase of the private-public partnership schools program<\/a>, Ater Hannoura, head of the Finance Ministry\u2019s Private Partnership Unit, said at the summit. Under this system, the government provides land and licenses to private operators, who in turn build and operate the schools.<\/p>\n

Remember:<\/strong> The PPP program was launched in 2016 to enhance private sector participation in education. The government signed public-private partnership pacts with five consortiums in 2019<\/a> to build and operate 24 schools with a total of 910 classrooms as part of the first phase of the program<\/p>\n

#2- Tax breaks:<\/strong> The Investment Law offers attractive incentives for education investors, including 30-50% revenue tax deductions over a seven-year period. To further encourage investment, GAFI has extended this incentive program by three years<\/a>, pushing its deadline from 2026 to 2029, said Heiba. <\/p>\n

#3- Room to grow:<\/strong> The Education Ministry aims to build 20k new classrooms a year in densely-populated cities to address overcrowding, said Yousry Abdallah, Assistant Education Minister for Educational Buildings. Over the past ten years the ministry has invested over EGP 44 bn to build over 128k classrooms across all educational levels. <\/p>\n

As it stands:<\/strong> There are some 29.6k school buildings \u2014 9% of which are privately-owned \u2014 in the country that house 61.8k schools. <\/p>\n

But what do private players really want? <\/strong>Last month, we spoke with<\/a> a number of education sector veterans to find out what their demands are, what other challenges they are facing, and how the government can help out.<\/p>\n

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Your top education stories for the week:<\/strong><\/p>\n