Despite this spending – reported at 7% of South Africa’s GDP annual spend and about 20% of the total State expenditure – there is still a demand for effective education at a good price. This demand is increasingly opening doors for entrepreneurs with technical skills to start or expand enterprises that satisfy this need, explains Gerrie van Biljon, executive director at Business Partners Limited (BUSINESS/PARTNERS).
“As a growing nation, with developing skills demands and needs, the requirement for more educational facilities exists and continues to rise. Likewise, as the need for quality education has increased over the last few years, we are expecting to see more market entrants, as well as existing players, such as Curro, Spark Schools and AdvTech, expanding,” says van Biljon.
As World Teachers Day, celebrated globally on 5 October 2016, acknowledges the dedication and resilience of teachers uplifting and propelling local children to a brighter future, van Biljon says that entrepreneurs are also playing a role in building the foundation of South Africa’s future leaders.
“Entrepreneurs play a direct role in the education sector with some 1 584 private schools in the system, with this number steadily growing. The number of private tertiary education facilities opening from special training institutions, specialist schools, and training facilities, is also on the rise.” He adds that entrepreneurs also play an indirect role which ranges from developing specific software products for use in the education system to offering stationery and school clothing.”
While a clear demand for such businesses, van Biljon explains that challenges remain for entrepreneurs entering the sector. “Similar to other small and medium entrepreneurs (SMEs), business owners operating in the education sector regard obtaining finance as particularly problematic.
“The underlying asset of a school to be financed can be regarded as ‘specialised’ which poses issues for financiers who may not regard this as an acceptable format of collateral. Other major challenges facing entrepreneurs include compliance requirements, the high capital outlay required to get going, the time it takes to build the numbers of school attendees, and thus the income, and then to find suitable staff.”
To minimise barriers to entry for entrepreneurs seeking to facilitate a sustainable future for South Africa’s future leaders, BUSINESS/PARTNERS has over the last two years financed 42 businesses within the education sector to the value of R97 million from the R150 million Business Partners Limited Education SME Fund. The majority of funding was allocated to pre-primary schools, private schools and student accommodation, which are seeking to correct the shortfall of accommodation available to students at tertiary level.