Investment opportunities remain in the Gulf education sector despite the impact of the coronavirus pandemic, according to advisory firm Alpen Capital.
Despite intensifying competition, shortage of skilled staff and increasing cost pressures amid a slowdown in economy, the pandemic has opened “interesting opportunities for private players, particularly in the areas of EdTech and blended learning models,” said Sameena Ahmad, managing director, Alpen Capital.
Its GCC Education Industry 2021 report said student enrolments in the region crossed 12.2 million in 2019 owing to governments’ support, favourable demographics and influx of private school operators.
While the gross enrolment rate for the primary and secondary segments remained above 100 percent, growth was driven by rise in enrolments in the pre-primary and tertiary segments. Total enrolments in private schools reached 2.4 million in 2019, growing at higher pace than the public school enrolments.
Going forward, Alpen said a transition to online learning has been relatively smooth for most private institutions and governments are also ensuring that the public establishments adapt equally, adding that the pandemic has compelled educational providers to realign their business models while ramping up investments in digitally aided education platforms to drive future growth and improve operational efficiencies.
GCC countries have also stressed the need to upgrade existing infrastructure to better prepare for any potential outbreaks in the future. Using technology, optimising operations and cost-savings will be crucial in aiding sustainability and growth in the medium to long-term, Alpen noted.
Ahmad said: “Covid-19 has caused significant disruption to the GCC education industry but governments and operators have been swift in their response in terms of policies, initiatives, teaching methods and business models to ensure continuity of education.
“The pandemic has placed integration and utilisation of technology within the education system at the forefront and the sector will continue to innovate and evolve. We believe that factors such as an increase in school age population, high disposable incomes, influx of private schools and continued support from the GCC governments will aid to build a robust education system and continue to drive enrolments.
Sameena Ahmad, managing director, Alpen Capital.
“Despite intensifying competition, shortage of skilled staff and increasing cost pressures amid a slowdown in economy, the pandemic has opened interesting opportunities for private players, particularly in the areas of EdTech and blended learning models.”
Krishna Dhanak, executive director, Alpen Capital, added: “The education sector remains a central focus for GCC nations as the need for evolution from an oil-reliant economy to a diversified one has necessitated an education system that matches international standards. The unprecedented efforts taken by the industry stakeholders and governments during Covid-19 has led to a prioritization of long-term growth strategies at a macro level.”
He added: “The GCC education sector continues to be fragmented with several size and types of operators catering to a wide population with varied preferences. Consequently, the industry witnessed healthy M&A activity over the last two years, with several nations strongly advocating privatization and others opening up the sector for foreign ownership.
“As the education landscape continues to mature in the region, we believe that the recent developments in its geopolitical relations, supplemented by a post pandemic economic recovery and government initiatives and policy changes, will result in new investment avenues for investors across the sector.”
Globally, Covid-19 has disrupted the education system as nearly 1.6 billion students in more than 190 countries were affected by school closures.
Alpen Capital said it anticipates five investment focus areas for the sector going forward including EdTech and digital learning, blended learning and personalised models, privatisation amid spending constraints from governments.
Krishna Dhanak, executive director, Alpen Capital.
GCC governments as well as private players are also heavily investing to provide quality tertiary education, to retain talent within the region and make the sector self-sufficient.
Alpen said the GCC education sector remains a fragmented market with several size and type of operators catering to a wide population with varied preferences. Demand-supply imbalance, enforced implementation of technology and fee reductions have impacted profitability and revenues of operators. Hence, M&A in the sector will help create better synergies, improve cost margins and increase management efficiency.
Alpen said growth drivers for the sector will include the post-pandemic economic recovery across the Gulf, a growing youth population, high per capita incomes and an influx of international schools leading to curriculum expansion.
However Alpen added that this influx and the oversupply of local education providers has elevated competition among private operators.
Fee reductions, establishing digital and virtual learning platforms, implementing blended learning structures and acquiring new technological expertise have resulted in lower revenues, which has put the operators under pressure, it said, adding that an inherent shortage of skilled teachers and preference for tertiary education in overseas destinations are also hampering the growth of the sector.
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