Skip to content

Focus on education in South Africa

Quality education comes at a hefty cost in South Africa

Despite receiving 13% of the national budget (R298 billion in 2022/23[1]), South Africa’s primary and secondary education system is characterised by crumbling infrastructure, overcrowded classrooms, and poor education outcomes – all of which perpetuate inequality and fail many of the country’s children. The public-school-sector is unprepared to equip students with technological, critical, and problem-solving skills required for the fourth industrial revolution. Although the private school system performs well, it comes at an exorbitant cost – unaffordable to many. Therefore, our country is in dire need of private school networks that can bridge the gap between quality and cost.


In this article, we look at the local basic education market, the economics of running a school followed by an analysis of Curro Holdings – a player that we believe is well positioned to bridge that gap.

Click to enlarge

Primary and secondary school provision is dominated by government

In 2022, there were 12.6 million learners in public schools who attended 22 589 schools and were served by 405 626 educators. For private schools, there were 735 085 learners in 2 282 schools with 45 367 educators. Public schools have a 1:32 educator-to learner ratio while private schools have a 1:16 ratio.


Trend analysis over the last decade reveals that private schools are showing growth rates for learners, schools, and educators at approx. 4% CAGR[2]. In public schools, investment is failing to keep up with learner growth. Public/government schools have achieved learner growth rates of only 0.6% while schools have declined 1% and rate of teachers growth has increased a mere 0.3% on a CAGR basis. Private schools currently have 5.5% of the market which is expected to grow due to the crumbling public school system. The World Bank estimates that the global private school penetration sits at approx. 19% and we see South Africa moving towards this average over the long term.


Education outcomes are very divergent between private and public schools. In 2022, the NSC national pass rate was 80.1% (2019 81.3%) whereas the IEB national pass rate was 98.4% (2019 98.8%). Only 38.4% of public school matriculants attained a Bachelor pass compared to 89.3% of those attending private schools. Both Curro and AdvTech, the two largest private school providers in South Africa, had pass rates of 99%.

Curro Holdings and AdvTech Group have a learnership population of 70 724 and 39 290 respectively (as at 31 Dec 2022). They service two distinct segments of the market with some overlap at the top end. AdvTech has been a private education services provider for over a century. It is widely regarded as a stalwart in the education space and known for its high-end independent schools such as Crawford International and Abbotts College. Curro is a relatively new entrant that offers a range of school models targeting mid-to-upper income families.

The economics of building and operating a school

Starting a school from the ground up iscap ital intensive and a considerable amount of investment is required upfront before there is any revenue. After the initial capital spend, it effectively costs the same to run a classroom with one child in it, as it does 25. Additional classes are then added, if possible, which are initially unprofitable until they can attract more learners and this repeats until maturity. Roughly 60-70% of a school’s expenses are fixed costs relating mainly to teacher salaries. High fixed cost businesses like schools have high operating leverage. The downside of this is that shortto medium-term risks are elevated due to high upfront investments. The upside is that there is typically exponential margin expansion once a school breaks-even and each additional learner then generates excess profits. New schools generally make substantial losses in the first few years by nature as the the large fixed costs are not met by the initial revenue generated by the first cohort of students. A new school can take 10-12 years to mature and reach capacity utilisation[3]of 85%, thereby, generating large shareholder returns (approx. 8 years to reach cost of capital).

Balancing social need with investor returns

Curro case study

Curro is South Africa’s largest private schooling operator with over 70k learners and approx.10% of that market. Its first school was opened out of a local church hall in Durbanville, Cape Town, in 1998. Seeing the potential growth opportunity, the founders secured a long-term capital partner in PSG Group. Curro went on to list on the JSE in 2011 with 4 200 learners.

Curro has 5 main school models ranging from more affordable technology-enabled digi-ed schools to their high-end independent “Select” schools. Digi-ed schools are where learners receive their education on computers that they access on campus under the supervision of a teacher. “Select” schools are high-end schools Curro acquired but maintained their pre-existing branding and heritage. Meridian and Academy schools are similar in nature being mid-fee, offering quality education without the extra bells and whistles that come with enrolling at a Traditional Curro. Examples would be slightly larger classes, fewer academic options, and less ancillary facilities.


Approximately half of Curro’s total enrolled learners attend their Traditional schools with their school footprint (181 schools) mostly concentrated in Gauteng and the Western Cape.

Click to enlarge

Currently trading at around R7.60 (Apr 23), Curro’s share price has disappointed since listing at R4.00, even though it rallied prematurely to an all-time high of R57.79 in 2015 as the market modelled a perfect execution scenario and easily funded rights issues. Weak results predicated by a struggling economy, emigration, overcapacity, soaring debt, operational issues, exacerbated by Covid-19 led to the school operator pushing through a R1.5 billion rights issue in 2020 (the sixth one since listing). This led to many investors capitulating.


A schools’ development path seldom comes in a straight-line and is often a multiyear trial-and-error exercise. Current management are acutely aware of their predecessors’ mistakes during the expansion phase, which is now largely complete. Curro had historically focused on building new schools rather than filling them, which backfired spectacularly when enrolment growth slowed, and they had all this oversupply.

Curro is now prioritising filling their current school stable and reinvesting selectively into performing schools, which will result in higher utilisation and profitability. Curro’s business model is planned around a “Jcurve” which shows the progression of schools over time. For a school operator, Curro is still a young business having listed on the JSE 11 years ago with 4 200 learners which have grown at 29% CAGR since. Approx. 70% of its schools’ portfolio is under 10 years old (15 schools having had their first grade 10 class in 2022[4]). Capacity utilisation is currently at 65% after aggressively expanding over the last decade, growing the school base from 24 to 181. For context, Curro has cumulatively invested over R12 billion in their schools, yet their current market cap is approx. R4.5 billion.


A Curro school opened in 2012 is currently returning 36% EBITDA margins, 18% ROE with a capacity utilisation of 76%. These are the kinds of returns we can expect once the entire portfolio has matured.


Looking at the Group’s full year 2022 results, the company earned a 22% EBITDA margin, 5% ROE and 65% utilisation. Given how schools are designed and Curro’s age, it is no surprise that the current returns are low, nor can we expect peak returns at this stage. 2022 brought additional uncertainty due to the March news that majority shareholder PSG Group which owned 64% of Curro was unbundling the stake to shareholders. This massive liquidity event which occurred in early September, weighed heavily on the stock. It has overshadowed all the work management has done to rehabilitate the business over the last two years. So far in 2023, investor confidence remains depressed after the Group reported disappointing results.

Education solutions are important element of solving broader societal needs

Curro is a long capital cycle business that has fallen out of favour with investors. The portfolio is well positioned with a wide footprint. The Curro brand is one associated with academic excellence at a reasonable price and should capture more market share overtime. It is also experiencing strong intakes at the key entry grade eight, which will have powerful rollover effects over time. We expect strong earnings growth going forward as the company transitions away from expansion, utilisation increases, and debt is reduced.

We believe the business model of privately managed, for-profit schooling addresses a fundamental gap in the South African education landscape and meets essential and basic social needs. The impact of both a thriving and accessible private education sector is critical to relieve the burden on government schools. The reality is that many South African households do not even have the means to keep their children in a government school. After years with little to no household income growth, expanding unemployment, runaway electricity tariffs, households are and will continue to be stretched.

Our view is that from a stewardship perspective a focus on multi-facetted education solutions that can also deliver financial return to investors is an important element of solving the broader societal needs. We believe that a thriving Curro will be better for South African society as a whole as well as investors. Therefore our approach is to pro-actively remain engaged with management to closely monitor the performance of their overall school portfolio.

[1] The second largest line item in the budget outside of debt-service payments which are R302 billion
[2] Compound Annual Growth Rate
[3] Enrolled learners as a percentage of the maximum capacity the constructed school can accommodate
[4] Grade 10 is a high upfront investment phase for a new school