The statistics are stark.
According to UNESCO, 30 million primary-age children in sub-Saharan Africa are not attending school.
Roughly half of these children will never set foot in a school during their lifetime.
Africa’s secondary schools can accommodate only one out of every three students qualified to attend them.
Only 6% of African youth attend any sort of higher education institution, much lower than the global average of 26%.
African governments have made big strides to address the continent’s education gap in recent years. Fifteen countries have eliminated primary school fees, putting basic schooling within reach of many more children. And sub-Saharan secondary school enrollment rates have climbed faster than in any other region of the world since the start of the millennium.
Still, Africa’s population continues to grow apace. Roughly half of the continent’s population is under the age of 15, and strained government budgets struggle to keep up with the accelerating demand for quality education. State-run schools are often overcrowded and run-down, with little in the way of books and supplies. Teachers are underpaid and frequently absent.
So, private institutions are helping to fill the void.
According to World Bank estimates, 20% of African students are enrolled in private schools, a proportion that’s doubled over the past two decades.
At Africa Capital Group LLC, we are investing heavily in this fast-growing sector through three key holdings – Curro Holdings, Advtech, and Centum Investment Company.
Curro Holdings got its start in 1998 with 28 students in a church vestry. Today, it operates 115 schools across South Africa and boasts a total enrollment of more than 43,000 learners. It has been one of the Johannesburg Stock Exchange’s best-performing stocks since its 2011 IPO. Its share price has soared 491% over the past five years, and, with an aggressive school rollout plan and new investments in tertiary institutions, the company’s future remains bright.
Advtech, another JSE-listed firm, runs 101 schools ranging from nursery school to college. Its student enrollment has climbed 13% over the past twelve months thanks in part to a school-leaving exam pass rate of 99%. The company aims to generate 30% of its revenue outside of South Africa by the year 2020, and management plans to double earnings per share by 2018. Advtech stock has nearly tripled in value since the start of 2013.
While it’s less focused on education than Curro and Advtech, Kenya’s Centum Investment Company aims to become a big player in the sector in the medium term. In 2015, the company formed a consortium with international school operator SABIS to build 20 new primary and secondary schools. It also owns a major stake in Longhorn Publishers, East Africa’s leading distributor of textbooks and curriculum materials. The company is one of the best performers on the Nairobi Securities Exchange, rising 168% since March 2012.
And school remains very much in session. With burgeoning education demand across the continent, we expect all three of these companies to continue to score well with students and investors alike.
For us as investors, the companies in the education sector in which we have invested offer us relatively stable, predictable business models featuring economies of scale, expanding margins and plenty of unmet demand.
Africa Capital Group LLC
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Coronado, CA 92118