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 Entrepreneurs in education sector growing to meet demand, says SME financier

 

 South Africa is eager to find solutions to the current problems that face the education sector ranging from lack of adequate schooling and accommodation facilities to a declining matric pass rate. According to Business Partners Limited (BUSINESS/PARTNERS), to complement government initiatives, a potent mix of passion for education and an entrepreneurial mind-set is needed to turn the current education crisis into a sustainable opportunity within the industry.

Since launching the R150 million Business Partners Education SME Fund in October 2014 – with a view of supporting the small and medium enterprise (SMEs) industry in the educational sector by offering finance over a five year period – the company has witnessed a strong uptake, with 34 transaction totalling R88 million in value being concluded to date.

According to Gerrie van Biljon, executive director of BUSINESS/PARTNERS, while there is a gap in the market to improve the education sector, obtaining finance for education facilities has traditionally not been easily accessible in South Africa. He says that this was as a result of local financiers regarding this type of investment as high risk due to the specialised nature of the sector and the compliance requirements that are expected by the Department of Basic Education.

He says that due to the huge demand within South Africa to improve and expand the sector, BUSINESS/PARTNERS launched the Education Fund to aid SMEs that are seeking to augment the shortcomings in the education system with innovative, viable or scalable projects.

Analysing the 34 transactions concluded, van Biljon says that the majority were allocated to companies operating in the pre-primary education level, followed by school centres and crèches. He adds that they have also noticed a growing need for financing amongst private primary and high school owners, with nine institutions having recently received funding via the Education SME Fund. “Private schooling is becoming a focal point as more parents acknowledge the value of good education.

“With approximately 25 800 public schools and only 1600 independent schools in South Africa, we are increasingly noticing a demand for private schooling and alternative education facilities, especially in the middle income bracket where education fees are typically R40 000 per annum. Parents are now more willing to spend more for peace of mind that their children are receiving the right attention and quality of schooling.”

A number of specialised training services were also established or expanded as part of the Education SME Fund’s transactions.

Van Biljon says although a number of student accommodation facilities were funded, there remains a strong demand for student accommodation as evident from the recent student protests. “There are an estimated 530 000 students that are in need of accommodation and only 110 000 spots offered by the universities or other educators, with the balance offered privately. While investment in student accommodation offers moderate returns, it is a long term investment which reaps long term benefits.”

Highlighting how passion and business acumen can enable entrepreneurs to thrive in the sector, van Biljon points to one of the Fund’s successful applicants, Erna Storm, a 58-year-old marketing expert and entrepreneur. Having sold her successful media and marketing agency in 2004 to seek a venture with a lasting positive social impact, the idea to enter the education industry sparked after Storm visited a small preschool in Centurion about two years ago. A short year later, she had built a group of three top-quality preschools, Thrive Preschool and Aftercare Academy.

The Thrive system – Storm’s unique education model – is intensively researched and absorbs the best aspects of international preschool systems. Her idea was to develop a quality preschool based on proven best practices that can be replicated consistently to cater for the huge demand in the market.

Van Biljon says that Storm’s vision for the fledgling business is huge. “Storm saw an enormous market opportunity in that working parents need child care and are willing to pay a premium price to ensure that their children’s educational careers start off well. While the preschool market is highly fragmented, the market is ripe for a high-quality preschool offering.”

He explains that Storm approached BUSINESS/PARTNERS to finance the purchase of the third school’s property, rather than use her own capital. “It was a strategic decision, based on her expansive vision for Thrive. If she were to use only her own capital, the number of schools that she could establish would remain limited, but in a strategic partnership with BUSINESS/PARTNERS, the growth of Thrive is potentially limitless.”

Van Biljon concludes: “Similar to Storm, we have identified the same opportunity within the education sector, and as such we will continue to fund SMEs with the aim of turning the country’s educational challenges into opportunities for sustainable development and contribute to job creation and growth of the South African economy.”


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