South African small and medium enterprise (SME) finance firm Business Partners is seeing opportunity in the education sector, and recently launched its R150m (US$13m) Education SME Fund.
The fund will lend capital of between R500,000 and R25m to businesses related to education, from private schools to educational software to student accommodation.
Education remains a major challenge in South Africa and has a direct impact on the current skills shortage in the local economy, according to Gerrie van Biljon, executive director at Business Partners. He added that aspiring learners are being held back by a lack of physical infrastructure and access to good schools.
During a launch event in Cape Town last week, Van Biljon highlighted an increasing focus on private education in South Africa. Only 5.4% of the country’s schools are independent, compared to 24% in the US.
One of South Africa’s more well-known private education providers is Johannesberg Stock Exchange-listed Curro. Founded in 1998, Curro expects to have 40 schools by the end of this year, and is on track to operate 80 facilities by 2020.
The Education SME Fund will offer finance for a variety of purposes, including expansion, working capital, takeovers and management buy-outs. Van Biljon however emphasised that Business Partners is not a “charity” and will only lend to money-making companies.
The need for quality education is especially large in South Africa’s low-income rural areas. According to Van Biljon, the challenge is to build a profitable business by servicing the low-income sector.
He also sees opportunity in student accommodation as universities currently cannot cater for demand. South Africa has around 530,000 tertiary students, but universities only have 100,000 beds.
“As the country’s student population increases, the demand for housing students also rises. Both this, and the many other challenges, presents excellent business opportunities for entrepreneurs.”