How the private sector can support South Africa's education system

Lala Steyn, head of the Schools Investment Fund located in the Impact Funds business unit of Old Mutual Alternative Investments.

The beginning of a new year is a time of introspection and evaluation for many industries – with South Africa’s education system no different as it enters a challenging 2017 school year. With the recent announcements relating to the Matric pass rates, as well as the influx of parents desperately seeking registration for the start of their children’s schooling year, a focus has once again been placed on South Africa’s education system – with many asking the question: “Are we doing enough?”

A recent report by the Organisation for Economic Co-operation and Development (OECD) ranked South Africa as 75 out of its 76 member states of the OECD. Coupled with low maths literacy and high dropout rates in the country, politicians and individuals alike have raised the debate around what can be done to improve the country’s education standards.

According to Lala Steyn, head of the Schools Investment Fund located in the Impact Funds business unit of Old Mutual Alternative Investments, the big questions around the current pass rates have their roots in a number of core challenges that face the country.

Steyn explains that, in order to overcome these challenges, greater emphasis needs to be placed on providing quality education in the pre-school, foundation and intermediate phases of basic education (Grade RRR to 6). “The quality of teacher training also needs to improve and adapt to engage the current generation of learners. Children entering the schooling system are very different to those 20 years ago, but for the most part the way education is administered has not changed. Quality and engaging teaching at the pre-primary and primary phases of school will assist to reduce the high drop-out rate which Equal Education has placed at 60% (i.e. only 40% of learners who start school finish Grade 12”.

However, Steyn says that the challenge to improve the schooling system in the country doesn’t solely lie within the public sector. “While the government continues to try and find solutions to the shortages and gaps, there is an opportunity for the private sector to further step into the circle and lend their support.”

She points out that the Department of Education does not have a sufficient budget to deal with the demand for new schools, despite a large portion of the national budget being allocated to education. “Currently, about 75-80% of the budget is allocated to the payment of teachers’ salaries, leaving insufficient funds to be allocated for the development and improvement of infrastructure itself. Finding a short- and long-term solution to this challenge is paramount, and the private sector can work more closely with government to establish and operate schools.”

As part of the private sector getting more involved, Steyn says that impact investing is increasingly becoming an effective driver of socio-economic development in South Africa. “Within the education space, impact investing is helping to facilitate the provision of high-quality education, while still yielding attractive returns for investors over the long-term.

“What is important to understand is that the improvements being made through impact investing in education aren’t intended to create a divide between the private sector and government. It isn’t an ‘us versus them’ scenario, but rather a collaboration to build a better society. The aim behind these impact funds is to ultimately support government in delivering quality education for pupils from historically disadvantaged backgrounds – in most cases working very closely together as partners in making this possible,” explains Steyn.

There are great success stories with schools funded by impact funds, but these lie in the approach taken. “Schools require leadership and effective management to be successful,” explains Steyn. “The schools also have an additional layer of support through a management company tasked to manage and support a group of schools.

“These funds also have feet on the ground to help ensure that these schools yield positive results. These school operators are passionate about providing quality education to their learners, understanding that quality education is their best marketing tool. In addition to this, Steyn says that in order to foster a culture of constant improvement in the standard of education, annual independent systemic tests are administered in grades 3, 6 and 9. This exercise also involves an intensive review and target setting exercise with the teachers and management of each school.”

Steyn points out that the Schools and Education Investment Impact Fund of South Africa was the first impact fund of its kind in South Africa and is a shining example of impact investing for quality education. The fund managed by Old Mutual Alternative Investments was established by the Old Mutual Life Assurance Company and the Government Employees Pension Fund through its asset manager the Public Investment Corporation. Recently the Eskom Pension and Provident Fund became the third investor.

“Impact funds are playing a huge role in solving some of the country’s education obstacles, providing tangible results and having a positive impact on society as a whole, while still yielding attractive returns for investors. It is through cooperation initiatives of this kind that we will be able to start seeing the light at the end of this proverbial ‘education crisis’ tunnel,” concludes Steyn.