Gift of the Nile

The long view for international education in Egypt

Despite all the problems associated with Covid-19, Mansoor Ahmed reminds us that many longer term data point to further growth in international education. Egypt is a case in point.

Demographics

Egypt is the most populated Arab Country, with a population of 101 million people as of October 2020, approximately 31% of whom are of school-going age. Consequently, Egypt has the largest student population in the MENA (Middle East and North Africa) region, estimated at 23 million K-12 students in 2020, with Greater Cairo accounting for 20% (4.6 million) of the total number.

The population is expected to reach 128 million by 2030.

Urban development and infrastructure

West and East Cairo have both undergone significant expansion over the last decade in terms of infrastructure and population growth. Many families that can afford to move are moving from the old, congested city centre to new communities in West and East Cairo. Currently the existing estimated household units in Greater Cairo are approximately 5.5 million and these are expected to increase to 6.1 million by 2030, based on Colliers International data analytics.

Masterplans for upcoming new cities require provision of education facilities as an anchor to attract residents of Cairo to relocate to new urban centres. These includes The New Administrative Capital, Mostakbal City, and New Alamein City, among others.

With population growth driving demand for residential properties – there has also been changes in household preferences; from single units to community or gated developments. These offer not only the comfort of security but also social infrastructure (health, education, retail, leisure and entrainment) within the communities. This changing behavior has also fueled the demand for community schools across Egypt, mostly in Greater Cairo.

Education in Egypt

Education is considered as one of the main pillars for Egypt’s development. The Egyptian constitution mandates that every citizen has the right to free education provided by the state, with a minimum of 4% of the Gross National Product of government spending allocated to education. Current expenditure on education in budget 2020/21 is projected to be EGP 424 billion (US$ 27 billion) compared to EGP 73.1 (US$ 4.65 billion) billion in 2013/14, a Compound Annual Growth Rate (CAGR) of 28.5% over the last seven years.

Demand for education

The increase in population is expected to create demand for additional school seats. Based on Colliers projections, an additional 11.0 million new seats will be required in Egypt by 2030, out of which 2.1 million will be in the private sector. While in Greater Cairo an additional 2.3 million seats will be required by 2030 out of which almost 1.0 will be in the private sector.

New residential communities are already attracting a number of international branded schools, such as the Kent College School Cairo in Orascom’s new development, “O West” in West Cairo. We have also advised four more International branded schools and three National schools in 2020 which are scheduled to open their campuses in Cairo between 2021 to 2023.

The K12 education sector in Egypt, particularly the private K12 education sector, offer several excellent opportunities for education operators, developers and investors. However, it also poses a number of challenges including bureaucracy and attracting and retaining qualified staff. Nevertheless, Egypt represents one of the most attractive destinations in the Middle East for investors aiming to gain a foothold in the education sector in the region.

Key drivers

The sector is forecasted to grow organically driven not only by demographics and by several other key factors:

Private sector

Low Private Sector Participation

Market share of the educational private sector in Eqypt was only 10.6% in 2019/20, up from 9.5% in 2014/15. The share is expected to reach 13%, creating an additional demand of 2.1 million seats at Egypt level and almost 1.0 million in Greater Cairo, thus creating opportunities for private sector investors and operators.

Interest in private education

Rapid growth of private sector enrolment

Enrolment at private schools had grown at a CAGR of 6.3% compared to 3.6% CAGR in public schools, thus indicating a preference for private education amongst parents in the country. Supply of private schools has also grown at 4.4% CAGR between 2014-15 and 2018-19, which is more than double the rate of growth in public schools, which indicates increasing investor interest in the sector.

Regulation

Regulatory Initiatives

The Education Ministry has outlined a mechanism providing private sector K 12 schools with an avenue for exemption from the 20% cap on foreign ownership previously imposed by the ministry.

Disposable income

Increasing income levels

Increasing levels of income level are enabling parents to seek admission into reputable higher education institutions in Egypt – both local brands and International Branch Campuses (IBCs) – and international institutions worldwide. The demand for regional and international branded school is also increasing, offering growth opportunities for the regional and international investors and operators.

Other factors to consider

Location

Location and price point

Greater Cairo remains the most attractive market for the private sector, constituting 20% of the Egypt population, 51% of the total private schools and 54% of total students in private schools. Household income levels are also relatively high in Greater Cairo, and capable of supporting branch campuses of international schools with an annual tuition fee of US$ 8,000 to US$ 12,000 as ‘the sweet spot’.

However, by 2030, there is also expected to be over 37,000 households in Greater Cairo, which will be able to afford to pay fees of over US$ 15,000 per annum, creating demand for international branded schools.

Curriculum

2. Curriculum

The British curriculum remains the most popular among the top private schools in Cairo, followed by American, IB and Canadian curriculums. German, French, Swiss systems are also in demand. Moreover, almost 35% of these schools offer more than one curriculum.

Affordability

3. Affordability

As with any other city, affordability is a major factor in deciding demand for private education in Greater Cairo due to varied income level between households. The income level and number of children in a household decides the expenditure on education and consequently what tuition fees schools should be charging.

Demand

4. Demand

Our analysis clearly tells us that there is not only substantial demand for international curriculum (British, IB, American, Canadian, German, French, Swiss etc.) offered by local or international operators, but also by 2030, there is expected to be over 37,000 households (HH) who can afford to be pay over US$ 15,000 per annum creating demand for international branded schools, although these will be spread rather unevenly in different locations.

So, Covid-19 nothwithstanding, if Egypt is anything to go by, and it is by no means atypical, the evidence suggests that strong underlying factors will continue to drive growth in the private sector so far as international education is concerned.

Mansoor Ahmed is Director (Middle East & North Africa): Development Solutions | Healthcare | Education | PPP at Colliers International. With over 500 international and five regional offices in, Egypt, Dubai, Abu Dhabi, Riyadh and Jeddah, Colliers International offers both broad global in-depth local knowledge of the private education sector.