Technical and vocational training

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Technical and vocational training

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Country

South Africa

Sector

Education

Sub Sector

Formal Education

Indicative Return

15% - 20% (in GPM)

Investment Timeframe

Medium Term (5–10 years)

Market Size

The government is targeting over 2 million new enrolments in the sector by 2030.

Average Ticket Size (USD)

USD 1 million - USD 10 million

Direct Impact

Indirect Impact

Business Model Description

Establish or acquire tertiary level technical and vocational training facilities, including colleges, adult education centres and on-the-job learning offerings.

Expected Impact

Improve accessibility, quality and educational outcomes of young adults.

How is this information gathered?

Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.

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Disclaimer

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Country

South Africa

Region

South Africa: Eastern Cape
South Africa: Northern Cape
South Africa: Free State
South Africa: North West
South Africa: Mpumalanga

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Sector

Education

Development need
South Africa has one of the most unequal school systems in the world. More than three-quarters of children aged 9 cannot read. For each 100 learners starting school, 50-60 will reach Grade 12, 40-50 will pass Grade 12 and only 14 go to University.(1)

Policy priority
The Early Childhood Development (ECD) sector suffers from uneven resource provision - reducing the potential for ECD to enhance returns from later phases of schooling, especially for children from lower socio-economic backgrounds.(2) More adults are attaining upper secondary education yet are less likely to be employed than those with a tertiary degree.(4)

Gender inequalities and marginalization issues
South Africa has made good progress in eliminating gender inequalities relating to access to education, with the ratio of girls enrolled at secondary and tertiary level being greater than that of boys.(16)

Investment opportunities introduction
The education sector's low productivity is contributing to a skills deficit and constraining growth across the national economy.(5) It is a significant factor frustrating the country's commitment to addressing Apartheid's legacy of economic inequality.

Key bottlenecks introduction
Challenges including poor infrastructure and supply of qualified teachers are hampering quality within the basic education system.(1)

Sub Sector

Formal Education

Development need
Despite low access to tertiary qualifications, South Africa spends a larger share of its wealth on public funding of primary, secondary and non-tertiary post-secondary education than most OECD and partner countries.(4) Further, the ECD sector suffers from uneven resource provision - reducing the potential for ECD to enhance returns from later phases of schooling.(3)

Policy priority
Early Childhood Development (ECD) and upper secondary education - Despite the importance of the sector, ECD attracts only 1-2% of the total budget for public education.(3) The majority of the South African population has an upper secondary or non-tertiary post-secondary qualification (where most spending is allocated).

Gender inequalities and marginalization issues
Female participation in tertiary education has increased sharply, mainly in soft skills areas and not in STEM (science, technology, engineering and mathematics) fields. Few women in South Africa are researchers.(16)

Key bottlenecks introduction
Basic education is hampered by challenges including poor infrastructure and an undersupply of qualified teachers.(1)

Investment Opportunity Area

Technical and vocational training

Business Model

Establish or acquire tertiary level technical and vocational training facilities, including colleges, adult education centres and on-the-job learning offerings.

Market Size and Environment

Critical IOA Unit

The government is targeting over 2 million new enrolments in the sector by 2030.

There are 487 registered tertiary learning institutions in South Africa, 83% of which are private institutions. Private tertiary institutions accounted for 14.6% of the 2.29 million enrolments across the tertiary sector in 2016 and have grown their share of enrolments steadily, increasing from 9.9% in 2011.(12),(13)

The government is targeting over 2 million new enrolments in the sector by 2030.(10)

Indicative Return

GPM

15% - 20%

A listed education company that obtained half its operating profit from tertiary education brands in 2018 and 2019 has a price to earnings (P/E) ratio of 13.57% in 2021, and averaged an operating margin of 17%.(11)

Investment Timeframe

Timeframe

Medium Term (5–10 years)

Investment necessary to support scale operations and grow enrolments requires an extended term. Short term opportunities exist with established firms, including listed companies.(11)

Ticket Size

Average Ticket Size (USD)

USD 1 million - USD 10 million

Market Risks & Scale Obstacles

Market - Highly Regulated

Government commitments to grow access of South Africans from poorer households to free university education may shrink the addressable market.

Sustainable Development Need

The government is seeking to increase enrolments in colleges to 2.5 million students by 2030, up from around 400,000 in 2012. One strategy is to establish up to 12 new technical and vocational education and training (TVET) colleges by 2030.(11)

The government has also called for the introduction of community colleges to serve youth and adults who did not attend school or dropped out, enrolling at least 1 million such students by 2030.(9)

Gender & Marginalisation

Even though women's enrolment in secondary degree programs has improved significantly, participation remains limited to soft skills areas.(16)

Expected Development Outcome

Improved accessibility, quality and educational outcomes of technical and vocational training

Gender & Marginalisation

Increase women's participation in research and STEM (science, technology, engineering and mathematics) focused programs

Primary SDGs addressed

4 - Quality Education

4.3.1 Participation rate of youth and adults in formal and non-formal education and training in the previous 12 months, by sex

4.4.1 Proportion of youth and adults with information and communications technology (ICT) skills, by type of skill

4.5.1 Parity indices (female/male, rural/urban, bottom/top wealth quintile and others such as disability status, indigenous peoples and conflict-affected, as data become available) for all education indicators on this list that can be disaggregated

Current Value

(a) 15-24 years: male - 12% (2017), female - 15.2% (2017); (b) 35-64 years: male - 7.3% (2017), female - 8.7% (2017).(18)

N/A

Gender parity index: (a) Tertiary education - 1.257 (2007), 1.421 (2012), 1.393 (2016); (b) Enrolment in tertiary education by population group - Black African: 1.395 (2016), Coloured: 1.636 (2016), Indian/Asian: 1.521 (2016), White: 1.314 (2016). Percentage of 7–18 year olds with disabilities: 89.1% (2017), males: 89.1% (2017), females: 89.0% (2017).(18)

N/A

Target Value

The Action Plan to 2019 - Key priority interventions for the Post-School Education and Training (PSET) system include: provision of a diverse set of training opportunities, especially in STEM (science, technology, engineering and mathematics) subjects; skills development for sustainable livelihoods; entrepreneurial skills development; annual monitoring and reporting on the performance of the PSET system.(16)

The Department of Basic Education (DBE) continues to collaborate with the Department of Science and Technology (DST) to enhance access to information and communications technology (ICT) and appropriate technologies for the basic education system. DST's Technology for Rural Development Programme (TECH4RED) transfers innovative technology solutions towards improving the quality and outcomes of the basic education system.(18)

N/A

Secondary SDGs addressed

10 - Reduced Inequalities

Directly impacted stakeholders

People

Individuals seeking technical and vocational training, school leavers, with a minimum of Grade 10 completion, seeking further education and training

Impact Risks

Stakeholder participation and unexpected impact risk: Lower and more racially skewed graduation rates without equitable and quality primary and secondary schooling (14)

Impact Classification

B—Benefit Stakeholders

What

Provide affordable, quality alternatives to contact education

Risk

Mid-scale effect considering challenges managing trade-offs between commercial potential, quality and affordability

Impact Thesis

Improve accessibility, quality and educational outcomes of young adults.

Policy Environment

Growing technical and vocational education and training (TVET) and community college enrolments is central to government's strategy for improving access to post-school education and training.(9)

Financial Environment

Financial incentives: Private education institutions do not qualify for education subsidies. However the sector at large has been attracting interest from a range of investors in recent years, including entities such as the Carlyle Group, Investec and Actis.

Regulatory Environment

Programs offered by private institutions must be registered with the Department of Higher Education and Training (DHET), accredited by the Higher Education Quality Committee (HEQC) of the Council on Higher Education (CHE) and registered on the National Qualifications Framework (NQF) by the South African Qualifications Authority (SAQA).

The Education White Paper 6 on Inclusive Education (2001), the Higher Education Act (1997), the National Student Financial Aid Scheme Act (1999), the Further Education and Training Colleges Act (2006), the General and Technical and Vocational Education and Training Quality Assurance Act (2001), the South African Qualifications Authority Act (1995) and the Policy for the provision of distance education in South African universities in the context of an integrated post-school system (2014)

Private Sector

Stadio Holdings, ADvTECH, Educor Holdings, Old Mutual, Carlyle Group, Investec, Actis

Government

Department of Higher Education and Training, Council on Higher Education, South African Qualifications Authority, Umalusi