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Temperatures rising

Attendees of EducationInvestor Global’s third annual MENA event in Dubai last month explored the shifting sands of the region’s education landscape, headroom for growth and where new opportunities lie, writes Simone Rensch

More than 100 delegates assembled at The Address Hotel in Dubai Marina last month for EducationInvestor Global’s annual MENA Conference to explore the changing landscape of education across the region, the challenges it faces and opportunities for local and international education businesses.

Playing host for the third time in the United Arab Emirates, this publication pulled together a line-up of high-profile panellists and presenters from across the Middle East to discuss how the market is changing – exploring shifts in consumer demands and demographics, through to regulatory nuances.

Raza Khan, chief executive of Al Najah Education, launched the day’s proceedings with a keynote presentation titled The show’s not over. Khan sought to restore a positive sentiment around the K12 market in Dubai, which has recently been hampered by pessimistic reports suggesting the sector is saturated. Khan said commentators are ill-informed. As the ecosystem changes, he added, it’s important that we “review the market to assess where it is going”. As Dubai’s education market matures, consumers have become more sophisticated and selective in their education choices. It’s therefore crucial that operators find the sweet spot, with the right fees, location and curriculum, Khan stressed. 

“Our market is changing. It’s becoming more diverse and we are seeing an increasing shift to private education from consumers who previously looked to the public sector,” said Khan. Recently, schools have opened in Dubai with swathes of empty seats, and some have been forced to close, he added. But he remains optimistic that, with the right strategies and offerings, investors and operators can still find “great success and returns on investments”. There is scope for growth in the mid-market British curriculum space, and in the premium and super-premium if the product is “super-fantastic”. 

Following Khan’s keynote speech, Beatrice Cernuta, a director in EY-Parthenon’s education strategic unit, delivered a presentation titled, Temperatures rising: Gauging the education investment climate. She explained that across MENA, public educators are under mounting pressure because of increasing numbers of children living there, and as a result governments have a “desperate need” to fill gaps in the education system. This is particularly acute, she said, in Saudi Arabia, where there are 10 million school-aged children and the government is pushing hard to privatise education. “The government is really keen to promote innovation and support private operators to come into the market,” said Cernuta. It’s a good time for operators that have a local presence, but international players lacking a local partner might be wise to bide their time, she added. She added that there are significant skill gaps in the region and, as the public higher education sector struggles to address this challenge, there are “real opportunities” for private operators.

After the first networking break of the day, Basim Ibrahim, investments attraction and development manager at the Saudi Arabian General Investment Authority, outlined the opportunities for education investors and operators under the kingdom’s Vision 2030 initiative. “There’s never been a better time to invest in Saudi than today,” he stressed. Saudi Arabia is spending more on education than any other public sector, with $51 billion allocated in its 2019 budget. GEMS’ acquisition of Ma’arif Education Group, the largest private school operator in the country, in a $500 million deal, marks the first entrance by a big international player. This illustrates that the market is “open to all foreign investors and operators,” he said, adding that, with 6,000 new schools needed by 2030, there’s room for international players – and the investment authority can help with arranging partnerships, applying for licences and more. 

Next, Ross Barfoot, partner at law firm Clyde & Co, set out how to open up shop in the UAE by giving an overview of different ownership structures. In most cases, a foreign player needs a local partner, whether through a ‘scheme of arrangement’ or a joint venture. 

Circling back to the previous presentation, Barfoot explained that in Saudi Arabia, rules have recently been relaxed to permit 100% foreign ownership of companies and of land. “As long as you get the licence, there’s no issue with owning and operating your own schools in Saudi anymore,” he said.

After the presentations, the first panel of the day took to the stage. Moderated by EducationInvestor Global editor Josh O’Neill, who also chaired the event, the panel welcomed Nicholas Fry, vice-chairman of King’s Group; Imad Ghandour, co-founder and managing director of CedarBridge; and Anthony Taylor, head of real estate at ENBD REIT to discuss Building a blueprint for success. Panellists explored the investment theses underpinning education platforms of varying scale and the dynamics impacting deal activity, including the importance of quality of management and teaching. 

Fry said: “We have to find the potential in every child – to us, that’s incredibly important when addressing competition. It’s very important that you push for the standards, but also that you maintain them. That will attract students, parents and teachers.”

After a chance to discuss the morning programme over lunch, delegates returned for a keynote presentation from Abdulla Al Karam, chairman and director general of the Knowledge and Human Development Authority (KHDA), the educational quality assurance and regulatory authority of the government of Dubai. He played on the wording of the presentation, Shifting sands: Navigating MENA’s changing education landscape. “The metaphor of sand works very well when people talk about the education landscape in the Gulf Cooperation Council or the UAE. On a screen Al Karam showed the delegates an image of a jar full to the brim with rocks. However, he pointed out, even though the jar looks full of rocks, there’s still enough room between the rocks for plenty of sand. That’s the analogy – though the market may appear full, there’s plenty of space in-between in the market that has not yet been filled. 

He highlighted how much Dubai’s education market has achieved since the KHDA’s first school inspections 12 years ago, when simply setting up shop was seemingly enough to fill seats. “The language has changed,” Al Karam said. “Now, the demand is for something different, something more than just availability.” He ended his presentation by saying: “We can achieve much more – the sands are shifting in Dubai and we will be there with you as it happens.”

Following Al Karam’s presentation, EY-Parthenon’s managing director and head of education, Robert Lytle, took the podium to talk about public-private partnerships. During the presentation, titled Exemplary models of global public-private partnerships, he stressed that at a time when parents are demanding higher-quality provision, governments are looking at ways in which they can cut costs, while boosting quality and equal access to education. 

“The private sector can help,” said Lytle. “A private educator can come and run a school, but at the same time engage the public sector.” By activating the private sector through these partnerships, governments in the region can improve access to quality education for all levels of society without putting up all the costs. Although public-private partnerships are not new to the region, we will see “more and more of these contracts in the education sector,” he said. 

Shortly after the presentation, your correspondent chaired a panel titled Aiming higher: The changing nature of tertiary education in MENA, which drew on insights from Irina Kholkina, group director of strategy at Abu Dhabi University Holdings; Cameron Mirza, head of strategy at the University of Bahrain; and Marko Selakovic, director of institutional development and student recruitment at JP Jain School of Global Management. During a lively discussion, panellists considered the ways domestic universities can ensure graduates are equipped with future-proof skills and the challenges of attracting, and retaining, students in today’s competitive environment. The three panellists agreed that institutions are reactive, rather than proactive, in teaching the right skills and need to evolve and innovate. Mirza said: “The opportunity for higher education to build national human capital and to create a prosperous future depends on its quality, which is far more than a certificate.”

The following panel shifted focus onto the early years space, which brought together operators to discuss how nurseries can scale, various commercial structures, and strategies for growth in the fragmented MENA region. Titled Early doors: Establishing a niche nursery proposition in the Middle East, and chaired by O’Neill, the panel united Fatima Essoufi, head of M&A at La Maison Bleue; Aniruddh Gupta, founder and chief executive of Kido Education; and Subramanian Krishnamoorthy, founder and chief executive at Meccademia Group. 

Essoufi flagged a deepening appetite among private investors for nursery holdings because scale can be achieved relatively quickly, and, with the right local help and knowledge, regulation becomes a lower hurdle. “Every investment comes with its risks and it’s up to the investor to decide if they want to take that risk,” she highlighted. 

Management, curriculum and “going that extra mile” is crucial to stay ahead of competition, Gupta added. “You have to stay ahead of the curve. We have our own curriculum, and that puts us in a space that not many other operators are in. And we focus a lot on customer service, from communication with parents, to making sure the schools look good,” he said. 

Following the discussion, O’Neill stayed on stage to welcome the next panellists, Mohamad Hamade, chief investment officer at Amanat Holdings; Tom Hodgson, managing director at Fajr Capital; Raymi van der Spek, group chief operating officer at Study World Education Holdings; and Ismail Zorob, chief financial officer at Evolvence Knowledge Investments. As it said on the tin, the session titled Investing in value: the role of private equity in MENA education involved discussions about how the role of private equity is evolving. It concluded that the role goes beyond just injecting cash into a business. Hodgson said: “We shouldn’t be ashamed that our main responsibility is to invest responsibly and create value. The question is, can we do that while delivering what’s needed within the education sector? Yes, we can. It’s about finding a way to invest and making it compatible to the education space you are investing in. A business will not make money if it isn’t going to deliver quality at a good price.” This means strong management and corporate governance is essential to grow. 

Following the afternoon networking session, it was time to discuss the K12 market in more detail. Moderated by Cody Clever, general manager of Pansophic Learning Middle East, the panel titled Fitting in: Finding success in MENA’s private school market, united Al Najah Education’s Khan; Michael Lewis, executive chairman of the Riverston Group; Navin Valrani, chief executive of Arcadia Education; and Alan Williamson, chief executive of Taaleem. 

After years of prosperous periods of robust growth in the market, the panel explored the ways in which the sector has changed, whether rapid growth is a thing of the past, and how to thrive in current climate. Being unique and having a niche offering was one of the ways to thrive, the panel agreed. Lewis of Riverston Group, which focuses on serving special educational needs children, said having quality teachers is key, especially in his segment. “You get the right staff, and throw in a little bit of spark, magic can happen,” he said, followed by an applause from the audience. The panel concluded that offering an attractive package to teachers, and placing a focus on career progression, are salient tenets of quality schools. Looking forward, Khan predicted that more niche operators, such as Riverston, will come to market. 

The final panel of the day, Emerging trends and opportunities in MENA, brought together Narimane Hadj-Hamou, founder and chief executive of The Center of Learning Innovation and Customized Knowledge Solutions, and Thea Myhrvold, chief executive and founder of Teach Me Now, to discuss opportunities for ed tech companies across the region. Moderator Mark Whitfield, education director of Britus Education, GFH Financial Group, began by saying that, in his observations, schools have not shifted with technology in the same way as other industries. Myhrvold put forward the view that: “Technology is changing absolutely every industry, including education. Technology caters for and improves accessibility. Ed tech is a very interesting space and still relatively new to MENA. The population rise is ripe for disruption and, from an investor perspective, there’s opportunity. If we look at the technology assets, the opportunities are very ripe.” Hadj-Hamou concluded that learning now happens “beyond the traditional classrooms”, and, because there’s a disconnect between what the universities produce and what employers require, technology will play a pivotal role in plugging skills gaps. 

On that note, after a long day covering all corners of the MENA education sector, EducationInvestor Global’s O’Neill brought the event to a close by summing up the day in just three words: “Insightful, interesting and inspiring.”

Posted on: 08/10/2019

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