Posts Tagged ‘Curro’
When I was an Economics student 12 years ago, the academic literature we read, by South Africa’s leading economic thinkers and social scientists, were lamenting the poor performance of the then South African school system. There was little doubt that what needed to happen was to improve the quality of the schools for the 80% South Africans who were still stuck, despite massive transfers of resources to these schools, in a system that had been crippled by apartheid-era policies.
Fast-forward to today. A generation has now passed through the system, and there has been almost no improvement. Of 100 Grade 1-students that go to school, only 37 can hope to pass matric. With teacher trade unions opposing policies that might improve teacher quality, our Minister of Basic Education seems paralyzed. Corruption often means that budgets are either unspent or spent inefficiently. There is little hope that things will soon improve.
But there is an alternative. Over the last few years, private schools have become an alternative for middle-income families that want a better future for their children. Take Northern Academy in Polokwane, run by the JSE-listed Curro Group. Despite school fees that are around R21000 per year, with a similar amount for boarding, the school has more than 5000 students, 111 classrooms and 66 hostels. In the 2016 matric exams it was the top-performing independent school in the province.
Curro now has schools across all nine provinces. In the last four years, its share price has tripled. Its profit motive means that it must satisfy its client base: if it performs poorly by employing poorly-qualified teachers, its clients will go elsewhere. That is the miracle of the market-system that Adam Smith identified: profits are a way to signal that a firm is doing something right. If profits fall, the firm better improve its products or services or it will go out of business. If profits rise, like in the case of Curro, other firms will notice and enter the market, offering their own product and service which they hope will eat into the profits of the dominant firm.
One fear is that Curro will monopolise the market, charging fees that allow them to earn monopoly profits. This is unlikely in the education sector, though, as there are few barriers-to-entry. Consider the SPARK schools, with tuition also around R21000 per year, that have opened since 2013 in Gauteng and the Western Cape.
A second fear is that a well-run private school system will create further divisions in a country characterized by high levels of inequality; those that are able to afford the high school fees of good education will stand to benefit vis-à-vis kids from poor households forced to attend poor-quality public schools. This is likely to happen if private schools are limited to those that can afford to pay for them. But they need not be.
In Sweden, where equality-of-opportunity is almost a religion, more than 10% of kids are enrolled in private schools. A major education reform in 1992 allowed primary and secondary schools to receive public funding based on the number of students they have enrolled. These schools are not allowed to discriminate or require admissions exams, and they are not allowed to charge parents additional school fees. (They are allowed to accept donations, which are often used to expand school facilities or offer financial support for the poorest students.)
Anyone can start a for-profit school in Sweden. Many offer an alternative curriculum, or provide a service to international, religious or language groups. Others are designated sports or artistic schools. The point is simple: if a public school is not providing the services its community wants, an entrepreneur with the ability to identify a gap in the market will step in to deliver a better service.
This is what we need in South Africa too. The 2017 Budget allocated R243 billion to the Department of Basic Education, which is 16% of our total consolidated spending. With 11.2 million school-going kids in South Africa, that is slightly more than R21000 per kid.
What if every parent in South Africa received a government voucher of R21000 per student which they could deposit at any school they want, public or private? A larger amount could be given to those living in rural areas, and possibly those living in previously disadvantaged areas. This empowers parents to choose the schools which they believe will serve the interests of their kids best.
There are concerns with private education too, of course. One would want to make sure that facilities are of good quality, that teachers and curricula meet certain standards, and that there is some security that students’ interest will be served if a company that provides these services goes into liquidation. But those concerns pale in comparison to the atrocious outcomes of the current school system, where facilities are often non-existent and teachers unqualified.
Imagine the opportunities this will create for entrepreneurs. A community leader in an area with poor public schools can now take the initiative, appoint educators from within the community and use the vouchers to pay their salaries. Imagine Cricket South Africa partnering with an entrepreneur to build a chain of elite cricket schools, with CSA providing the facilities and coaches and the vouchers paying for high-quality education.
An important research literature suggests that mother-tongue education is critical for student success: with a voucher system, if there is a demand for secondary education in Sesotho in a specific community, expect an entrepreneur to spot the gap. Another concern for the near future is the dearth of university-trained teachers: private school chains will have an incentive to fix this, either by training their own teachers on the job, or by investing in teacher training colleges.
We need a new plan for education. I’d hate to see my colleagues 12 years from now write papers still lamenting the poor state of the South African education system. We keep throwing money at a problem that cannot be fixed by money alone. The Basic Education budget grew 7.3% in 2017. If we continue doing this, we are likely to fail a second post-apartheid generation.
*An edited version of this first appeared in Finweek magazine of 23 March.
There is little doubt that one of the main constraints to South African economic development and prosperity has been the failure of our education system. The new government in 1994 inherited an intolerably unequal system, with white kids receiving world-class education while black kids obtained such a poor quality of education that only the really talented ones could escape the poverty cycle. Two decades later, while the racial inequality has abated with many more black kids in good-performing schools, the sad reality is that too many poor South Africans are stuck in schools where they learn basically nothing.
But the problem runs deeper than the sorry state of South Africa’s schools. As Nic Spaull points out, our poor performance in matric (the final year of high school in South Africa) is rooted in weak foundations in grades 1-3. And in truth, those weak foundations in school are often rooted in weak foundations at home.
The field of early-childhood development is an exciting and challenging new area of research. More and more studies show the large gains from investments in the early years of a child’s life. James Heckman, probably the leading scholar on education economics, writes:
A critical time to shape productivity is from birth to age five, when the brain develops rapidly to build the foundation of cognitive and character skills necessary for success in school, health, career and life. Early childhood education fosters cognitive skills along with attentiveness, motivation, self-control and sociability – the character skills that turn knowledge into know-how and people into productive citizens.
Heckman investigated the Perry Preschool programme in the United States and calculated a return on investment of between 7 and 10% per year through better school and career achievement as well as reduced costs through remedial education, health and criminal justice system expenditures. The graph above shows how the returns to education investment falls as the level of education rises. While Rulof Burger’s research shows that these returns may not be exactly true for South Africa (the quality of education for many kids is so poor that they don’t gain anything from an additional year in school), my expectation is that South Africa’s return on investment will be much higher at these very early levels.
But what are these early investments? They can be many things: providing mothers with tool-kits containing basic necessities for newborns (an ongoing study within the Economics department at Stellenbosch University is testing the effect of exactly this), providing young mothers with information about early childhood nutrition and health (see, for example, the Ilifa Labantwana programme), improving the way teachers interact with kids in nurseries with limited resources (my mother-in-law is doing her PhD on this topic!), or something as simple as a television programme.
The latter, at least, is the finding of a new NBER paper on the effects of Sesame Street, a well-known television and radio programme that has expanded across the world, including to South Africa, in the guise of Takalani Sesame. Melissa Kearney and Phillip Levine, the authors of the new study, show the large gains from something as affordable as a TV programme for kids: not only in terms of immediate outcomes but, as Kearney and Levine show, also later in life:
Sesame Street is one of the largest early childhood interventions ever to take place. It was introduced in 1969 as an educational, early childhood program with the explicit goal of preparing preschool age children for school entry. Millions of children watched a typical episode in its early years. Well-designed studies at its inception provided evidence that watching the show generated an immediate and sizeable increase in test scores. In this paper we investigate whether the first cohorts of preschool children exposed to Sesame Street experienced improved outcomes subsequently. We implement an instrumental variables strategy exploiting limitations in television technology generated by distance to a broadcast tower and UHF versus VHF transmission to distinguish counties by Sesame Street reception quality. We relate this geographic variation to outcomes in Census data including grade-for-age status in 1980, educational attainment in 1990, and labor market outcomes in 2000. The results indicate that Sesame Street accomplished its goal of improving school readiness; preschool-aged children in areas with better reception when it was introduced were more likely to advance through school as appropriate for their age. This effect is particularly pronounced for boys and non-Hispanic, black children, as well as children living in economically disadvantaged areas. The evidence regarding the impact on ultimate educational attainment and labor market outcomes is inconclusive.
Early childhood development is one of the few expenditure categories that would win support across the political spectrum. National and provincial funding should therefore not be an issue. Trade unions that plague the transformation of the education system are less involved at the preschool level: there is thus no reason not to rapidly expand early childhood programmes across South Africa, particularly in poor areas.
I also see a lucrative private sector opportunity, although Curro has already entered this space with its Curro Castle model. What we really need, though, is an affordable model for millions of poor families unable to afford preschool. Why can government not institute a voucher scheme for every kid to attend a nursery of their choice and let the private sector provide the services?
A national nursery scheme won’t have an immediate effect on South Africa’s growth or prosperity. But a new generation of kids will grow up without the inequalities in cognitive abilities that are already entrenched when they reach school. Instead, a successful national preschool system can show voters and bureaucrats (and hopefully trade unions) the benefits of private sector participation, which will allow the system to be expanded to primary and perhaps even secondary school.
Perhaps it’s just wishful thinking, but, in my opinion, this is the most effective (and affordable) way we can begin to address the massive inequalities so persistent at present.