Johan Fourie's blog

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Posts Tagged ‘education system

Can private schools save South Africa?

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NorthernAcademy

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.