Business Monthly

The Journal of the American Chamber of Commerce in Egypt

The Journal of the American Chamber of Commerce in Egypt

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Education 101 for Investors

February 10, 2021

 

A recent Colliers International research shows that social infrastructure — open spaces, retail, restaurants, healthcare, education and other commercial activities — has a tangible positive impact on real estate demand.

In Cairo and across the region, schools remain a key catalyst for increasing sale prices and rental rates of residential properties. According to the Centre for Economic Performance at the London School of Economics, academically strong schools boost neighborhood property prices by as much as 12%.

Cairo communities can achieve a 15% premium by offering quality private schools, with tuition and fees in line with local income levels.

Egypt has the largest K-12 population in the MENA region, estimated at 23 million in 2020, with Greater Cairo accounting for 4.6 million.

Education is a vital pillar in Egypt’s development story. The constitution gives every citizen the right to free education provided by the state, with a minimum of 4% of GNP allocated to schooling. The 2020-2021 education budget is projected to be EGP 424 billion ($27 billion) compared to EGP 73.1 billion ($4.65 billion) in 2013/14.

West and East Cairo have undergone significant expansion over the past decade in terms of infrastructure and population growth. Estimates place the number of households in Greater Cairo at 5.5 million and increasing to 6.1 million by 2030, based on Colliers International data analytics.

The master plans for new cities call for education facilities as an anchor to attract residents to the New Administrative Capital, Mostakbal City, New Alamein City and others.

With population growth driving demand for residential properties, there has been a growing preference for community or gated developments that offer security along with social infrastructure. This has fueled the demand for quality community schools.

With the Colliers analysis and projected population growth of 2.5% a year, Egypt is expected to have 128 million people by 2030 compared with 101 million last year. K-12 enrollment will reach 34 million in 2030. In Greater Cairo, with a population growth rate of 1.7% annually, K-12 enrollment will go from 4.6 million today to 7 million in 2030.

Egypt’s public school enrollment is expected to increase 3.6% from 20.9 million in 2020 to 29.8 million in 2030, requiring 8.9 million additional seats. Private school enrollment is expected to rise 6.3% from 2.5 million in 2020 to 4.6 million in 2030, requiring 2.1 million more seats.

New communities are attracting a number of international schools, such as Kent College School Cairo in Orascom’s O West development in West Cairo. Besides advising Kent College School Cairo, the Colliers International education team also advised four more international branded schools and three national schools in 2020, which are scheduled to open by 2023.

That makes Egypt one of the most attractive destinations in the Middle East for investors aiming to gain a foothold in the region’s education sector due to the following factors:

Growing population, young demographic

With the largest K-12 population in the MENA region, Egypt is expected to need 11 million more seats, including 2.3 million in Greater Cairo, by 2030. Currently, there are 12.5 million primary students (ages 6-11), or slightly more than half the total. Preparatory/intermediate stage students (ages 12-14) represent nearly a quarter of the total, followed by secondary students (ages 15-17 years) at 17%. Finally, there are 1.4 million pre-primary students (ages 4-5), or about 6%.

Private schools

The market share of the private sector was 10.6% in the 2019-2020 school year, up from 9.5% in 2014-2015. The private share is expected to reach 13% by 2030, creating demand for an additional 2.1 million seats nationwide, about half of them in Greater Cairo.

Enrollment at private schools rose at a compound annual growth rate (CAGR) of 6.3%, compared to 3.6% for public schools in the period between 2014 and 2019.  The capacity of private schools grew at a 4.4% CAGR between the 2014-2015 and 2018-2019 school years, more than double the rate for public schools.

Regulatory initiatives

The Education Ministry has outlined a mechanism for private K-12 schools that provides a path to an exemption from the previously required 20% cap on foreign ownership.

Greater Cairo remains the most attractive market for the private sector with 20% of Egypt’s population and half of the country’s private schools. The area also has a relatively high household income, a significant factor with annual tuition at many international schools ranging from $8,000 to $12,000.

By 2030, nearly 37,000 households in Greater Cairo could afford to pay over $15,000 per annum in tuition fees, creating demand for international branded schools.

The total number of students enrolled in Cairo increased steadily at a CAGR of 4.1% between the 2014-2015 and 2018-2019 school years, going from 3.8 million to 4.4 million. Based on that CAGR, there were an estimated 4.6 million students in 2019-2020.

Private student enrollment stood at 1.3 million in 2019-2020, growing at a CAGR of 5.6% versus 3.5% for the public sector. The private sector accounts for only 29% of total enrollment in Cairo, indicating significant growth potential.

Curriculum and location

The British curriculum remains the most popular among top private schools in Cairo (31%), followed by the International Baccalaureate (29%), American (26%) and Canadian (7%).  German, French and Swiss systems also are available. Nearly 35% of schools offer more than one curriculum.

In terms of location, the majority of schools in East Cairo are at full capacity. That has led investors to focus on building new schools in New Cairo and the New Administrative Capital.

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