black board

Monday, 18 November 2019

Why foreign teachers are still in high demand despite a spike in hiring costs in post- float Egypt

Despite the impact on school financials thanks to high salaries and hiring costs, foreign teachers are still in demand at international schools in post- float Egypt: Egypt’s top international schools have borne substantial cost increases in the wake of the 2016 EGP float and a volatile macroeconomic climate, especially those whose staff is significantly made up of foreign teachers. This has prompted complex and sometimes difficult decisions about whether to continue paying international teaching staff in foreign currency how to maintain generous benefit packages that schools need to offer if they’re going to remain competitive in what is truly a global labor market. Schools hiring foreign teachers also need to budget for extensive (and expensive) recruitment processes, all while remaining compliant with the Education Ministry’s directives and tuition fee caps.

Despite a spike in the cost of hiring teachers post-devaluation and the ministry’s cap on tuition, schools we surveyed believe that foreign teachers are too essential to give up and are still worth the higher cost to schools (and parents) of hiring them.

Why? Factors from perceptions of quality to a school’s branding, parents’ expectations, and the need to find compatible staff.

Which schools are we looking at? Defining what constitutes an international school is not always straightforward. For this survey, we chose a sample that included 15 of the more high-profile international K-12 schools listed on the General Authority for Investment’s (GAFI) website as offering different combinations of the national, American (SATs) and British (GCSE and IGCSE) curricula, and the International Baccalaureate. These schools have a high level of accreditation by bodies established outside of Egypt and essentially determine their own curricula and programming, says Massimo Laterza, assistant head of Alexandria’s Schutz American School.

But other definitions of international schools can be much broader: In 2016, Tarek Talaat, then head of the Private and International Education Sector at the Education Ministry, identified some 260 international schools operating in Egypt and implementing curricula from outside the country.

And this part is important: Some of these schools follow a for-profit model, while others are community-associated and owned by parental associations that are regulated by the Social Solidarity Ministry. Other schools we looked at are affiliated with their respective governments or otherwise exist in a niche. These schools are not subject to curriculum review or approval from the Education Ministry. Similarly, they are largely exempt from the ministry’s caps on tuition and stipulations that tuition be paid in EGP. Examples here include Cairo American College, Lycée français du Caire, the British International School in Cairo, NCBIS and the Maadi British International School, many of whom give admission preferences to foreign schools, but most of which also accept significant numbers of Egyptian nationals.

Another quick note: The schools we’re looking at include some of the most expensive in the country. Based on publicly available figures, tuition at these schools ranged from EGP 85k to well over EGP 400k per year. Schools on with lower revenue bases find it more difficult to hire foreign teachers.

Counting the costs: For the dozen or so schools we’re focused on, teacher salaries and benefits make up the bulk of annual costs. These costs alone constitute anything from 65-80% of the yearly operational budget, say representatives from Cairo American College (CAC), the British International School in Cairo (BISC), the British Columbia Canadian International School, the American International School in Egypt (AIS), El Alsson National and British International School, and Schutz American School. This generally excludes the cost of teacher recruitment, says Laterza. That’s a separate line item on the income statement to support administrator travel to recruitment fairs overseas, fees paid to recruitment agencies, and in some cases, finders’ fees if teachers are successfully hired.

How does that translate into salaries? International teachers are on the high-end of the salary scale. Starting annual net salaries at these schools begin at around USD 30k (or EGP 481k) for newly-qualified teachers, going all the way up to USD 90k (EGP 1.4 mn) per year for vice-principals and principals. All or most of the salary is doled out in foreign currency. International teachers will also generally receive benefits that include housing or a housing allowance, medical insurance, contributions to an offshore pension plan, and an annual travel allowance to their home country.

Some Egyptian teachers with international qualifications are on similar salary schemes as their non-Egyptian peers, but do not receive the same additional benefits for resettlement, the schools said. At public schools, the situation is dramatically different, with annual salaries ranging from EGP 24k-84k. Salaries at private schools teaching domestic curriculum tend to fall in between, but much closer to the public school scale than to the international one.

Despite the economics — the EGP cost of salaries having effectively doubled since the float — schools are pursuing foreign teachers with the same vigor as before. While salaries are not determined by nationality, for most of the top international schools we spoke to, non-Egyptian faculty members made up around 80% of teaching staff (El Alsson being the notable exception, with foreign staff making up around 40%). Schools tell us that these ratios were largely the same since before 2016.

That has proven costly in the post-EGP float climate and regulatory environment: These schools have been hit by a number of economic and regulatory decisions that have made the pursuit of foreign teachers harder, namely the EGP-float in November 2016 and the Education Ministry’s 15% cap on annual fee hikes introduced in May 2017. These were exacerbated by a stipulation that fees for Egyptian students must be collected in EGP rather than foreign currency — a ministerial directive that predates the devaluation. Schools that accept payment in foreign currency can be fined or even taken over by the ministry, said Karim Rogers, executive director at El Alsson. The impact of these factors on their books has been substantial. AIS, for instance, sustained a loss of EGP 60 mn in the 2016-2017 school year, while the British Columbia Canadian International School saw its costs double, school officials told us.

Furthermore, global competition is forcing schools to pay higher salaries: “When we recruit teachers who come to Egypt, we can’t compete directly with Dubai, Qatar or China, where both the salaries and the cost of living are whopping,” says Rogers. “So we offer competitive salaries on a par with the other top 10 schools in Egypt.” International schools face a dilemma, says Laterza. They want to offer the most competitive rates for faculty members in an international market, and for a broader group of high-quality academic staff in the local market, while keeping fees reasonable. Balancing these different considerations is not easy. “We’re competing to recruit international educators in a market for international educators, but we’re also competing in the local market to hire people who will also be sought after by other schools. And we’re trying to remain competitive without forwarding higher costs onto families,” he adds.

Higher salaries and other benefits are also critical for employee retention: “A lot of teachers will come and try the school and the country for two years. If they like it, they’ll stay another two years. If they still like it, they’ll make their life here — buying or leasing a flat, getting a car,” says Rogers. “We have expats who’ve been living here 10, 20, or even 30 years, having started this way.”

For parents paying high tuition fees, foreign teachers are a school’s selling point: For these schools, and others like them, such costs are deemed absolutely necessary to attract and retain the best teachers available. This doesn’t preclude Egyptian teachers, but given the expectation that teachers will hold international qualifications, most recruits come from overseas and have extensive experience of the curricula taught at the school in question. BISC, for example, actively seeks teachers with senior-level British and International Baccalaureate (IB) experience, while CAC is looking for specialists in US and international curricula, as well as an understanding of US educational values. “I think it is an unstated assumption in the community you’re trying to serve that, if they’re paying significant tuition fees to send their children to, for example, the top British school in Cairo, a large share of the teachers will come from Britain,” says Laterza. This sentiment was echoed by officials we spoke with in other schools, including the American International School.

Some schools are also required to limit their hiring to teachers certified to teach a specific curriculum: To be eligible to provide diplomas certified by the Canadian province of British Columbia, the province’s education ministry has mandated that the British Columbia Canadian International School recruit teachers who have completed the Canadian ministry’s five-year teacher certification program, Karim Mostafa, CEO of Starlight Education — which owns the school — told us. “We are a British Columbia offshore school, so we have to hire British Columbia-certified teachers,” he said. As such, only the school’s Arabic, religion, and Egyptian social studies classes are taught by Egyptians.

So if they’re not changing the makeup of their teachers, how are these schools adapting to this climate? If you’re a parent whose kids go to one of these schools, then the first answer that comes to mind is a tuition hike, with some schools raising tuition by the maximum 15%.

#1- Some schools have chosen to amend their approach to compensation to adapt to the FX rate: “We used to pay our international teachers purely in USD or GBP, but when the devaluation kicked in we started paying in EGP. If a teacher wants to buy foreign currency, we can assist by giving a supplement — but we can’t take the full hit of the exchange rate,” says Rogers. The supplement could consist of USD 500-700 for teachers on a starting salary, he adds. The bulk of the salaries are paid in EGP but then international teachers have a small proportion of their salary paid in foreign currency. Other schools continue to pay international teachers primarily in foreign currency, and simply bear the FX translation costs and foreign currency risk. “Schools must collect tuition and expenses in EGP and then find ways to convert and transfer the salaries of foreign teachers to their country of origin, while Egyptian teachers receive transfers of EGP into their local bank accounts,” says Laterza.

A risky strategy: Schools that take this approach are facing more bank fees and foreign exchange risk. The school bears the risk that the EGP goes down against the GBP / USD, so the same teacher costs them more in their EGP-denominated financials. And the school bears the cost of paying bank fees to (a) exchange the funds into the foreign currency and (b) to transfer the currency abroad. The school will also probably have to maintain a higher balance of USD / GBP in the bank account, meaning they miss the opportunity to make more interest income. USD / GBP accounts pay virtually no interest. EGP accounts pay a very high interest rate.

#2- The 15% cap on tuition fee hikes does not apply to new students: While the ministry's 15% cap on tuition fee hikes have limited returning students as a source of revenue, this cap doesn’t apply to incoming new students. Schools are basically allowed to set whatever fee they wish for incoming students in their bylaws, which remain fixed for a set period of time. This has allowed the British Columbia Canadian International School to mitigate the impact of the EGP float, as they locked-in higher incoming tuition in 2015. “this has allowed us to make a faster recovery [from the impact of the EGP float] than other schools,” Starlight’s Mostafa tells us.

It also helps to not be regulated by the Ministry of Education: Association-owned schools and schools affiliated with embassies are not regulated by the Education Ministry — so they don’t face a cap on tuition or a requirement that Egyptian students be charged tuition only in EGP. They’re also exempt from the ministry’s 15% cap on tuition hikes. A review of their websites show that schools including the Lycée Français du Caire, BISC, NCBIS (pdf) and MBIS all collect tuition fees in foreign currency. CAC, for example, stipulates in its tuition and fee schedule that “all fees must be paid in USD.” Many of these schools charge ancillary fees (including bus fees, membership fees and one-time deposits) in EGP. You can dig deeper into the trend in CAC’s annual report (pdf).

Ultimately, the schools maintain that ethos and identity trump market pressures: For international schools, the makeup and credentials of their teachers is a core part of the “product” they offer, so schools have worked hard to keep teacher salaries unchanged (and the ratio of Egyptian to non-Egyptian teaching staff constant) despite the macroeconomic headwinds. “Our ratio is what it is for identity and culture reasons,” says Rogers. “This is not about costs; this is what suits us.”

Monday, 18 November 2019

Your top 5 education stories for the past week

Your top five education news stories in Egypt during a very slow news week for education:

  • The government has denied that it is considering killing universal access to public education and begin imposing fees. The story made it to the foreign press, with Sputnik Arabic noting the story.
  • Egypt’s education sector is still a very viable and attractive investment destination, argues Chairman of the British Egyptian Business Association Khaled Nasr in an op-ed piece for El Watan. Nasr does not address issues such as the cap on foreign ownership and the limit placed on how much schools can raise tuition — which limits both investment and revenue.
  • EFG Hermes’ Egypt Education Fund is expecting to close a new acquisition before the end of the year “to expand the platform’s service offering range.”
  • The Education Ministry’s reform program is a key driver in expanding smart tablet production in Egypt, Prime Minister Moustafa Madbouly said on Saturday, according to Al Shorouk.
  • Higher Education Minister Khaled Abdel Ghaffar advocated for joint academic research cooperation with Belarussian universities in energy, healthcare, manufacturing, and water, at a meeting with his Belarussian counterpart on Sunday, Al Masry Al Youm reports.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2018 Enterprise Ventures LLC.