While the government has made education a key priority of its reform agenda, the potential for investment in private services is growing. According to the World Bank, in 2016 the youth unemployment rate reached 48% for those between the ages of 15 and 24. Indeed, as this number remains high, many Ghanaians with the means are turning to private education providers to prepare them for the local labour market.
As of 2016, 22.5% of students in the tertiary education system – including universities and vocational institutions – were enrolled in private establishments. In comparison, private school enrolment stood at 27.3% for kindergarten, 25.3% for primary, 21.9% for junior high and 7.5% at the senior high school level that same year. While private education is more attractive for younger learners, increasing the number of pupils attending non-public universities remains a burgeoning area of investment on the back of expanding student demand. Between 2010 and 2016 the number of private tertiary institutions grew by 14, to reach 65 in total. Private providers offer additional capacity and broader educational options to the nine public universities in the country.
The government recognises these institutions as maintaining a critical function in filling a gap in the sector. As such, the Ministry of Education announced plans in July 2017 to abolish the 25% corporate income tax rate on private universities. The move is in recognition of their vital role in the sector and an attempt to bring down tuition fees. The cut follows a number of other tax breaks and incentives rolled out across the economy as part of the 2017 budget to bolster the private sector and raise investment into key industries (see Economy chapter).
Indeed, Kwesi Yankah, the minister of state in charge of tertiary education, told a conference in Kumasi that the tax “stifles further investment in education and makes it difficult for private universities to avoid fee increases.” At private institutions, tuition fees can exceed GHS20,000 ($4800) per semester, a rate that is out of reach for a significant portion of the population with annual income standing at just over GHS7000 ($1680) per capita. The tax break will help alleviate financial burdens at private institutions, which are often constrained by their own rising expenses. Authorities expect universities to pass those savings on to students. In 2015 the total unit cost for a pupil at a public tertiary institution stood at GHS7440 ($1780), an increase of 66.8% on 2014.
While tuition can be burdensome for some families, the potential return on investment is attractive. Private providers often try to distinguish themselves through international partnerships and specialisations that prepare students for the demands of the labour market and, as such, most private tertiary institutions have not struggled to fill their places.
Private Equity Solution
In Ghana, as in much of Africa, private education offers a strong investment opportunity. At the basic and secondary level, the local market has already seen significant foreign investment via private equity firms. In mid-2017 AfricInvest, a mid-market private equity firm, signed a preferential deal with Ghana’s International Community School, a private K-12 institution, to upgrade facilities, fund expansion, secure international accreditation and reinforce its leading position domestically and in West Africa. This type of investment has not yet been employed in the domestic tertiary market, even though private equity firms have been involved in regional education for some time. The $275m platform rolled out across nine African markets by UK private equity firm Actis, under the Honoris United Universities brand, could provide the model by which Ghana could do so.
Like much of the continent, the country has a significant youth cohort and a growing middle class, both important drivers of higher education demand. Given the dynamics of the local market, this is unlikely to be the last private equity investment in the sector.
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