The number of tertiary students globally has more than doubled since 2000. South African private enrolment rates stand at 15% and growing. This is well below the global average of about 35%.
The inability of public tertiary institutions to meet this heightened demand has meant that private institutions have had to move in. AdvTech and Stadio, which was separately listed out of Curro in 2017, fulfil just this purpose.
Increased accessibility, changing demographics, poor economic prospects and high rates of societal inequality have led to increased demand. Graduates outearn and are employed at higher rates than non-graduates with Unesco finding that in 76 countries, 20% of the richest 25-29-year-olds had completed at least four years of tertiary education compared with less than 1% of the poorest.
Over the medium term the government will spend R111.2bn while it projects in the medium-term strategic framework (MTSF) that enrolments at universities and technical vocational education and training (TVET) colleges will be for 1.7-million students in the 2019/2020 budget.
There were 28,280 students enrolled at Stadio in semester 1, and 42,829 at AdvTech at the interim reporting period. Profitability metrics tend to be better for tertiary offerings as seen in the profits of Avtech’s schools versus its tertiary division where profit margins are 15% and 22% respectively.
Stadio has an impressive strategy to reach students via various touch points in what is to eventually be a single-branded Stadio Multiversity, through: consolidation of its contact offering into a large campus in Centurion in 2021 with plans afoot to establish others in the Western Cape and KwaZulu-Natal, thus giving students the campus feel of a “traditional” tertiary facility; online distance learning which caters to tech savvy students who require flexibility and conventional distance learning.
AdvTech has seen much success with its satellite campus strategy as a complement to its larger campuses. There are still many opportunities within the fragmented private higher education market for acquisitions.
Public universities and private institutions are subject to the same oversight, regulation and accreditation criteria. Both companies place emphasis on growing the course base. Increasingly, there is growing recognition for online education.
The government’s stretched capacity presents an opportunity for students, and parents alike, who seek the benefits of a tertiary education within an accepted framework.
Long4Life
Long4Life has recently been under pressure of late. The counter is down over 11% since the beginning of 2019. The young lifestyle-centric investment company, listed in 2017, focuses on three segments: beverages; personal care and wellness; and sport and recreation.
With cash at 30% of market cap and an ungeared balance sheet means that it has worthy capacity for acquisitions. I thought it would be interesting to try to see whether the growth industries for the future that have been touted by publications such as Entrepreneur Mag could be exploited by its management. These include tiny houses, healthy fast food, delivery services, virtual reality (and accessories), ethical business consulting, website rentals, high-quality or raw pet food, ed-tech, activity bars and subscription boxes.
There’s a loose fit for Long4Life in at least three of these categories: healthy fast food, virtual reality, and pet food, which would be a full circle back to Bidvest’s predecessor.
The environment is challenging but the focus on defensive industries and turnaround ventures should assist in growing Long4Life to the R10bn market cap company that it aspires to be in the shortest possible amount of time.
The executive team is accomplished with a long track record of building up businesses through a decentralised and appropriately rewarded management structure.
• Molelekoa is a portfolio manager at Umthombo Wealth. Her views do not necessarily reflect those of Umthombo Wealth
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.