South Africa currently has about 1 584 private schools in its education system, and the number keeps growing steadily. However, experts believe that there is still a demand for effective education at a good price.
“As a growing nation, with developing skills demands and needs, the requirement for more educational facilities exists and continues to rise,” Gerrie van Biljon, executive director at Business Partners Limited (BPL), said.
This demand is increasingly opening doors for entrepreneurs, and we are expecting to see more market entrants, as well as existing players, he said.
But despite this private education rush, entrepreneurs entering the sector face a range of tough challenges. “Similar to other small and medium entrepreneurs (SMEs), business owners operating in the education sector regard obtaining finance as particularly problematic,” van Biljoen said.
“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,” he explained.
“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.”
BPL has over the last two years financed 42 businesses within the education sector to the value of R97 million (about US$7.58 million) from the R150 million (about US$10.8 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.
Biljoen called on all entrepreneurs wishing to invest in this sector or expand their existing enterprises to contact his organisation.
Photo by Africa on the Rise