Monday, 31 January 2022

What is Egypt’s education management landscape, and how is it growing?

What is Egypt’s education management landscape, and how is it growing? The growth of dedicated education management companies is an accelerating trend within Egypt’s private sector education system, multiple education leaders have observed recently. Some believe it makes expansion easier for schools and operators. Today, in part one of this two-part series, we look at the education management companies active in Egypt, and how they’re growing.

What exactly is an education management company? Put simply, it’s an organization that manages schools, operationally and academically — often under a for-profit model. These companies might own and operate schools in their portfolio, or they could be school operators managing schools owned by other investors.

There are different kinds of education management companies operating in Egypt, notes Tammam Abushakra, advisor to the chairman of Esol Education, which owns and operates AIS, AIS West, and CES in Egypt, as well as seven schools in other countries. “There are entities like ours that began with an educator establishing one school which grew gradually and organically over time to become a multinational group of schools,” Abushakra tells Enterprise. Other companies begin as investment vehicles, with capital deployed to finance the acquisition of preexisting schools, or — less commonly — the establishment of new schools. These tend to be larger and grow more quickly, he adds.

Education management companies could be homegrown or foreign: “Some prominent education management companies have emerged within Egypt and some foreign companies are now active in Egypt,” says Abushakra.

Different companies could have different investment focuses: “Some education management companies with access to capital choose to invest in real estate, and others prefer to invest only in school operating companies that lease their campuses from real estate owners. There are also companies, or funds, that invest in school campuses but not in school operations,” Abushakra adds.

The number of education management companies in Egypt, and the variation in their nature and structure, has grown considerably in recent years — though it’s difficult to know precisely how many are active here, Abushakra says.

We do know of at least five others: Egypt’s two branches of the International School of Choueifat are operated by education management company SABIS. CIRA subsidiary Eduhive manages BCCIS, Regent British School, Saxony International School (SIS), and Swiss Ecole Lemania. The Dr. Nermien Ismail Language Schools (NIS) are operated by education management company Advanced Education for the Establishment, Management, and Ownership of Educational Facilities. BalancED Education Company owns the New Generation International School in Obour and Asten College in Taj City. And the Egypt Education Platform (EEP) manages the assets of the Egypt Education Fund, a 50/50 JV established in 2018 between EFG Hermes and GEMS Education to invest in Egypt’s K12 education sector. EEP currently has eight schools on its portfolio.

To clarify: EEP is the rebranded GEMS Education Egypt, the Egyptian management company that was set up to manage the four GEMS schools initially established in Egypt under the EFG-GEMS JV, notes EEP Director of Communications Amr Sherif. EEP has different streams, one of which is the GEMS Education Egypt stream, notes Sherif.

Egypt has roughly six new education management companies in the pipeline, estimates Eduhive CEO Karim Mostafa, without giving further details about the names or owners of these companies. Overall, the education management landscape in Egypt is still fairly new, but demand for these services is high, he adds.

The precise nature of education management partnership models can vary considerably, sources note. “It all depends on the structure of the agreement and the nature of the partnership,” says BalancED Education Managing Director Salma El Bakry. “We might have total ownership or might operate the school, without owning the asset.” Other options include JVs, property rentals or revenue-sharing agreements, she adds.

The most common model is probably one where an investor has land or a building, wants to set up a school, but doesn’t have the know-how, EEP CEO Ahmed Wahby tells Enterprise. “We then present what we believe is the right model to address this demand, creating a [mutually beneficial setup] for us and the investor.”

Some investors choose to fully outsource all logistical issues: Eduhive frequently works with investors that want fully-fledged school management solutions, says Mostafa. Then, the company has two roles: Pre-operation and operational.

This can mean tailoring a proposed business model, according to investor need: Eduhive’s pre-operation activities include extensive research, examining land allocation, curricula, and price points to create a business model that makes financial sense — which can then be taken to the investor, says Mostafa. Then, Eduhive oversees the design, construction, and licensing processes, to get the school up and running. “We work with consultants on design, hire and supervise building contractors, buy furniture, do all the marketing, teacher hiring and training,” he says.

But with management systems already in place, companies can also streamline services: EEP has multiple departments, including finance, accounting, procurement, HR, operations, and education. So any new schools joining the platform follow company policies, governance process and education provision, Wahby tells Enterprise. “It’s simple: We look for prospects relevant to our growth strategy, and our role is then to partner with those assets — whether by acquiring them, building new ones, or setting up management contracts. When they become part of our platform, we start offering them our management services.”

Dedicated superintendents might oversee the academics: Every principal at an Eduhive-managed school is responsible for curriculum delivery, and the company has a superintendent who works with the principals and schools to make sure all KPIs are met, says Mostafa.

How are these companies financed? It depends on the nature of their partnerships, sources note. Eduhive takes a fee — a fixed-rate percentage — based on the revenues and net income of the schools it manages, says Mostafa. “So it’s obviously in our best interest for investors to make a return,” he adds. For EEP, the mechanisms in place for revenue generation vary depending on its relationships with individual schools, says Wahby. “If we’re getting into a management contract, then we take a percentage. If we own the school — which in some cases, we do — then revenue generation is closely linked to the school’s profitability.”

Next week: We look at what’s driving the growth of education management companies in Egypt.

Your top education stories for the week:

  • CIRA reports 1Q2021-2022 financials: Higher startup and debt servicing costs squeezed CIRA’s bottom line last quarter, though rising enrollment rates boosted revenues.
  • Arizona State University is partnering with Galala University to create the first dual-degree program between a US university and an Egyptian public university.

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