Lighthouse Education dims its light as construction costs surge: Education investment platform Lighthouse Education is shutting down before it could properly start to deploy any funds, just three years after the close of its first fundraising round, Asharq Business reports, citing two anonymous sources it says are familiar with the matter. The float of the EGP spurred on the decision: The decision was prompted by the high cost of building schools following the float of the EGP, with the decision to close the fund presented as a way to avoid making losses.A dollarized market is also partly to blame: The majority of investments in the education sector are conducted in USD, which put the fund in a bind following the float of the EGP and interest rate hikes, one of the sources said.Lighthouse? The investment fund was launched in July 2021 by Misr Ins. Holding Company, the Sovereign Fund of Egypt, Banque Misr, and the Suez Canal Bank as well as Al Orman schools founder Hossam El Kabbany and financial advisor Ironwood Investments to channel investment into private K-12 schools. Despite not lacking ambition, Lighthouse never ended up investing its money where it wanted: After reaching a first close of EGP 560 mn a few months after the fund was founded, the company announced plans to acquire majority stakes in at least two K12 private schools before the end of 2021, but we never got wind of any agreement coming to fruition. More recently, the company had plans in 2023 to acquire stakes in two primary schools before the start of the 2023-2024 academic year, but again we didn’t hear much more after the initial announcement. Instead of education-focussed investments, shareholders recently allocated 25% of platform’s total funds to treasury bills, one of the sources said.The decision is still in the balance: The fund will hold a general assembly on 24 September to approve the liquidation.ICYMI: We took a deep dive into how private and international schools are navigating elevated costs following the EGP float in a Blackboard earlier this year and reexamined some of the headwinds facing the sector, including stringent building requirements and land scarcity, in July.

MANUFACTURING- #1- Sumitomo Electric broke ground on the first phase of its new pigtails cable factory in Tenth Ramadan City, the Trade and Industry Ministry said Thursday. Sumitomo plans to invest USD 100-150 mn in the project initially, Sumitomo Egypt Managing Director Ahmed Magdy previously told Enterprise. The factory is expected to produce cables for 1 mn cars per year and provide 3.5k new jobs, according to the statement. The factory is expected to be the company’s largest in the world.#2- Pyramids Tires will open two new production lines at its USD 350 mn tire factory by Decemberthis year, the company’s chairman reportedly told Al Mal. The lines will produce 600k tires for light transport and 15k ties for pivot irrigation each year.EDUCATION-Lighthouse Education plans acquisitions after reaching first close: Education investment platform Lighthouse plans to acquire stake in two primary schools before the start of the next academic year, CEO Mahmoud Khalifa was quoted as telling Al Borsa. The state-backed fund reached a first close of more than EGP 550 mn in 2021 and is aiming to reach its second close before the end of 2024 and increase its capital to EGP 1 bn, he said.Refresher: Lighthouse Education was established in 2021 with financial backing from a number of state-owned financial institutions including Misr Ins. Holding, the Sovereign Fund of Egypt, Banque Misr and United Bank. The fund was launched to channel investment into private K-12 schools.TOURISM-Egypt back on the tourist map: Some 4.5 mn tourists visited Egypt in the first four months of 2023, with April itself accounting for 1.35 mn of the inflow, Tourism Minister Ahmed Issa told Al Shorouk. The figures are just below the 4.9 mn touriststhat came to Egypt in the first six months of 2022 as the sector began to rebound after the Covid pandemic lockdowns. The ministry is targeting 15 mn arrivals this year and 19 mn in 2024, Issa added, as the government looks to reach their goal of attracting as many as 30 mn tourists to the country by 2028. PHARMA-Rameda Pharma has acquired 11 cardiometabolic products from an unnamed local pharma manufacturer, it said in a statement (pdf) Thursday. The move will allow Rameda to tap into five therapeutic areas that have a combined market value of EGP 2.2 bn and have experienced a three-year compound annual growth rate (CAGR) of 37%, compared to 11% growth in the overall pharma market. Rameda plans to complement its new cardiometabolic portfolio “with up to seven new product launches in this area before the end of FY 2023,” said CEO Amr Morsy.LOGISTICS- Global marine ship-fueling firm Peninsula receives bunkering services license: Oil Minister Tarek El Molla has awarded the second license to international ship-fueling firm Peninsula to provide services at Egyptian ports in the Mediterranean, according to an Oil Ministry statement. This is the second company to be granted a license after Minerva Bunkering, which began operating in Egypt last week.AGRICULTURE-FAO, Japan, and Netherlands to help us up our agriculture game: The UN’s Food and Agriculture Organization (FAO) is set to collaborate with the Irrigation Ministry on the implementation of three agricultural projects that will be funded by Japan and the Netherlands following agreements inked last week, according to a ministry statement. The projects aim to modernize our irrigation technologies, enhance water productivity, and support small farmers in Upper Egypt, the statement reads, without disclosing timelines or the value of the agreements.EDUCATION- Egyptian universities + SDGs: Thirty-seven Egyptian universities have been included in the Times Higher Education Impact Rankings 2023, which assesses some 1.6k institutions worldwide against the UN’s Sustainable Development Goals, the Higher Education Ministry said yesterday. Greater provision of technical support, education regarding international publishing, scientific promotion committees and information made available through the Egyptian Knowledge Bank, have supported Egypt’s rankings, said Higher Education Minister Ayman Ashour.The rundown: Aswan University (101-200) took the overall top spot for Egyptian universities for the third consecutive year, followed by Ain Shams University (201-300) at #2 and Cairo University (301-400) at #3. Four institutions — New Valley University, Sohag University, British University in Cairo and Sphinx University — were included in the rankings for the first time.

As inflation drives up overall costs and tightens budgets, a trend of transferring children to less expensive private schools has gathered steam, Eduhive CEO Karim Mostafa said recently. Lower-middle income schools are seeing an estimated two-three times the enrollment rate of high-income schools, education investment platform Lighthouse Education Deputy Chairman Mohamed El Sherif noted in February.So are high-income or upper-middle income schools seeing enrollment rates drop? So far, no, say sources. Demand for private education is so high that existing school enrollment rates remain high too. For high-end schools, it’s business as usual. Middle-income schools could see a change in the composition of their applicants, but not reduced enrollment. But a slowdown is possible for new schools entering the market, facing inflation and the devaluation.A large segment of Egyptian society will always prioritize education spending: Though we’re currently seeing considerable cost cutting, “education is sacred to the Egyptian family,” says Mostafa. Squeezed families will cut down other spending habits to allocate money to education whenever they can, he adds.Wealthier families may weather the storm of inflation: Parents whose children attend international schools with annual tuition fees above EGP 140k are likely to have more disposable income to withstand inflation and devaluation, Elsewedy Capital Holding CEO Haytham Sabry tells Enterprise.For those attending the most expensive schools, it “won’t even cause a dent,” El Alsson Executive Director Karim Rogers tells Enterprise. People whose children attend the likes of CAC, BISC, Malvern or NCBIS pay annual fees of around USD 20-25k or EGP 300k. If they can afford this, they’re unlikely to have to look for lower-priced options due to inflation, Rogers says.Schools above the EGP 150k price point don’t seem to be facing enrollment problems: “I haven’t heard from schools with tuition fees over EGP 150k that they’re finding it hard to fill their seats,” says AIS Director Kapono Ciotti.AIS reports stronger-than-usual enrollment levels: “We haven’t seen the economy play a negative role — even with inflation,” says Ciotti. AIS retained almost 97% of its students from 2021 — above normal levels of around 95%, he notes. “I’d say our re-enrollment is stronger than ever. Our new enrollments are very strong too.”El Alsson has seen parents stretched, but no drop in enrollment rates: El Alsson, which has fees of EGP 140-190k, has “a handful” of parents struggling due to recent price hikes, says Rogers. “But I haven’t seen anyone leave saying they’re moving to something cheaper.” So far, enrollment numbers this year have been within the expected range, says Rogers. “I think people are stretched. But if they’ve chosen us, they’re committed. And they probably want to continue here.”Schools in Eduhive’s portfolio have seen a slight enrollment slowdown, but not enough to constitute a drop, says Mostafa. Projected numbers for this admissions season are steady, but the enrollment process is slower than in 2015, before rampant inflation. “I used to fill 100 vacancies by January or February, but now it might take until April. You still fill up, but it just takes longer.”Middle-income schools — including those with EGP 60-100k fees — will more likely see enrollment changes, as parents target lower price points, say Rogers and Sabry. “The middle class is the most hit segment of society, so here you’ll definitely see parents downgrading schools to get lower fees,” Sabry says.But they’ll see a change in composition — not a lessening of overall demand: Enrollment rates will stay strong because Egypt’s demand for private school education is just so high, sources agree. As some parents move to less expensive schools, others will take their place, says Sabry. “I don’t think this downgrading will affect admissions. It just affects the composition of the parents.”The Gulf English School (GES) shows these changes at work: The Gulf English School, which Rogers calls a “totally Egyptian school with an international perspective,” has the same owner as Modern English School (MES). It filled with 600 students immediately after opening, says a source speaking off the record, noting that some parents left MES and went straight to GES. “GES is full, because its fees are EGP 60-80k, and it has good facilities, teachers, curricula and management. It’s really good value for money, so it’s oversubscribed,” notes Rogers.But even if enrollment in existing schools isn’t hit, significant challenges remain, sources note.Sweeping demand for private education could allow low-quality players easy market access, Rogers and Mostafa fear. “There’s a definite market for B- to C-class schools. It’s very profitable,” notes Rogers. Costs can be kept low if you don’t hire expat teachers or seek international equipment or resources. “But some schools seem to target anybody with a bag of money,” he adds.New schools that haven’t yet proven themselves in the market could face lower enrollment rates, says Sabry. Established schools generally have long waiting lists, but new operators will need to heavily invest in school construction, while trying to attract students as costs are exceptionally high, he adds. The situation could slow market entry for new schools, including international franchises, Ciotti agrees.And high-end schools could see inflation and the devaluation hit their margins hard, because they pay expat teachers in FX: “High end schools will see their margins affected. It’s enrollment that’s not affected,” says Sabry. They might have to decrease the number or quality of their expat teachers, to pay less, he speculates. While Rogers hasn't yet felt the crunch when it comes to paying expat salaries, the EGP slide puts him in a more difficult position than he’d anticipated when budgeting. “We have a buffer, but it’s usually USD 1 or USD 1.5 over the value of the EGP — which when we set it was around USD 15,” he notes. The USD is currently trading hands at EGP 18.30.Will these trends continue for the rest of 2022 and into 2023? Yes, and they’ll become more acute, says Sabry. But it’s hard to predict by how much. “Just as in 2014 and 2015, the markets were in turmoil, but you didn’t know where the bottom was.” Your top education stories for the week: Deadline for Egyptian-Japanese school applications extended: The deadline for 2022-2023 applications to Egyptian-Japanese schools has been extended to 9 April, the Education Ministry announced. Egyptian students returning from Ukraine: Almost 1.3k Egyptian university students who fled Ukraine are applying to continue their studies at universities in Egypt, the Emigration Ministry said in a statement.USAID hosts careers fair: USAID Egypt’s University Center for Career Development hosted its third virtual careers fair on 28 March to connect students with large multinationals.

Inflation is hitting Egypt’s private schools, and those with high CAPEX expenses are feeling the greatest squeeze: Private schools have been hit by price increases in recent months, as Egypt’s inflation accelerates amid high shipping and construction costs, and high domestic selling prices. With urban inflation now running at near two and a half year highs, spending is being impacted across the board, with rising capex costs putting particular pressure on companies in the sector, say several operators. Today, we look at how the impact of inflation varies among Egypt’s private schools, and what they’re doing to mitigate it.Several private schools have seen rising inflation drive up overall costs, operators tell Enterprise. El Alsson’s OPEX spending is an estimated 12-15% higher now than it was in April 2021 — the last time its annual budget was set, says Executive Director Karim Rogers. Education management company Eduhive’s total costs increased by a minimum of 25% in the last year, estimates CEO Karim Mostafa: “Everything’s inflated: the price of electricity, utilities, purchases, cleaning materials and sanitizers — even teacher housing and plane tickets.”Families are feeling the pinch, too: A trend of transferring children to less expensive schools, seen in the last five years, has recently been increasing, says Mostafa. “People paying EGP 100k per year are now looking for schools in the EGP 60-70k range. This is a sign everybody’s getting hit.” This trend is impacting enrollment at private schools, where schools in the lower-middle income bracket are seeing enrollment at an estimated two-three times the rate of high-income schools, education investment platform Lighthouse Education Deputy Chairman Mohamed El Sherif says. Education costs rose 13.9% y-o-y in January, with primary education rising 19.5% and secondary education rising 5.3%, Capmas data (pdf) shows.But it’s schools with hefty CAPEX costs — especially land purchases — that seem to be hit hardest: Inflation has substantially impacted land prices and construction costs, with greenfield projects becoming particularly expensive, El Sherif tells Enterprise. “It costs a lot to buy land and build a school that’s up to standard.” Land pricing was already expensive, as we noted last year. Now, prices are being increased by brokers, says El Sherif. Land has essentially become unaffordable, notes Mostafa. And construction costs have been rising rapidly, with noticeable price differences in iron, steel and concrete since summer 2021, says Rogers.Ultimately, this means investment in greenfield projects will slow, El Sherif predicts. “We’re currently seeing many new players who bought land with the intention of building schools. But prices have gone up, so they’ve decided it’s more profitable for them to sell the land than build schools. This tells you that something’s not right.” Growth is effectively limited to investors with sector experience, he adds.The impact won’t be felt immediately: It’s difficult to predict how much investment will slow by, as it’s down to individual project economics — which can be impacted by many variables, says El Sherif. But it usually takes around two years from land acquisition to a school becoming operational, which is when the impact will be felt, he adds.Schools without significant CAPEX investment are more sanguine: Schutz always takes inflation into account when setting its annual budget, but isn’t feeling the general sense of alarm about inflation that seems to be prevalent in the country, says Assistant Head of School Massimo Laterza. “Still, we’re not currently engaged in any major capital developments. We’re not in the middle of projects with any debt, or affected by the rapidly increasing prices of steel or cement,” says Laterza.OPEX losses don’t appear to be all that impacted: OPEX cost increases can be an “annoyance,” but El Alsson hasn’t taken any major financial hits, Rogers notes.But inflation could be compounding FX losses for int’l schools: All international schools spend about 70-75% of their budgets in FX — to pay expat teachers — while collecting all their revenue in EGP, notes Mostafa. This makes them highly vulnerable to any exchange rate fluctuations, so inflationary cost increases become even more challenging, he argues.And other fees aren’t helping: Meanwhile, new expenses — like the obligatory 1-3% of annual revenue that schools now need to pay to the government’s Support Education fund — aren’t factored into school budgets or buffers when they are introduced in the middle of the yearly business cycle, months after the budgets have been set, says Rogers.The Education Ministry’s 7% cap on tuition fee increases further compounds the problem, because it doesn’t take inflation into account “as part of the formula,” says Mostafa. Tuition fees are the only source of revenue for education operators, he notes.What steps are schools taking to mitigate the fallout from high inflation? Cost-cutting is one obvious move: Schools are cutting costs where they can, to limit financial pressures, say sources. International schools won’t cut their salary structures, which are carefully calibrated according to market research, say Mostafa and Rogers. But they might look at trimming benefits packages, Mostafa says: “Sometimes you have to cap the housing or transportation allowance, as these things add up.”Some school operators hope the Education Ministry might review the cap on tuition fee increases, one leader tells Enterprise off the record. “We’re holding meetings, submitting requests and having open conversations. I think the ministry is receptive to our ideas, and I’m optimistic this issue can be resolved.” It looks like the cap may be revised within a year or two — possibly pushed up to 10%, or even scrapped completely, the source adds.But some are hoping inflation is “transitory,” which could also be a reason for overall optimism, says Laterza. Even as inflation accelerates, the Central Bank of Egypt expects price stability in the medium term, it said following its last monetary policy committee meeting.And inflation’s full impact may only be seen when operators set their budgets in the coming months. El Alsson usually plans its budget in March, and so far, the buffer set last year has absorbed the worst of the cost increases, says Rogers. “But I can’t predict what will happen in the next couple of weeks or months. I’m stable, but my guard is up for the unpredictable.” Schutz typically starts its budgeting process in April or May, says Laterza. That’s when it will gauge internal expenses to determine how cost increases could impact next year’s budget. Your top education stories for the week: Aldar could target retail + education acquisitions in Egypt: Aldar Properties will spend at least AED 5 bn (c. USD 1.4 bn) on acquiring retail and education assets in Egypt, the UAE and Saudi Arabia, CFO Greg Fewer said.EGX-listed Taaleem’s Nahda University in Beni Suef will launch (pdf) new arts and architecture faculties by September, after receiving presidential approval.Amendments to the Education Act struck down in parliament: The House of Representatives struck down proposed amendments to the Education Act, deeming proposals to ban parents of truant children from accessing public services “unconstitutional.”

Lighthouse to buy two schools this year: State-backed education investment platform Lighthouse Education is looking to put the entirety of its first close of EGP 560 mn towards acquiring two schools in Cairo this year, Deputy Chairman Mohamed El Sherif confirmed to Enterprise, following a report from Al Mal. The transactions are still being negotiated, he said, without disclosing which schools are involved in the talks.This lines up with what El Sherif told us last year about the platform aiming to acquire majority stakes in at least two of four shortlisted K12 private schools before the end of 2021. The platform is hoped to eventually raise commitments of EGP 1.75 bn.Lighthouse reached its first close in November, beating its EGP 500 mn target. State-owned organizations committed EGP 375 mn, while Saudi’s Al Rajhi Investment Holding Company (Rajhi-Invest) contributed EGP 75 mn.Lighthouse was launched in July to channel investment into K12 private schools. The platform plans to invest in 10-12 schools, focusing initially on Cairo and Giza before turning its attention to other areas of the country such as Alexandria, Beni Suef, Assiut, Port Said, Gharbia, and Qalyubia. The platform is aiming to reach its second close before the end of 2022 and hopes to eventually increase its capital to EGP 1.75 bn.

Happy almost-Thursday, ladies and gentlemen. It’s another busy afternoon as we rush towards the end of the workweek, so let’s get right into it. THE BIG STORIES TODAYLighthouse to buy two schools this year: State-backed education investment platform Lighthouse Education is looking to put the entirety of its first close of EGP 560 mn towards acquiring two schools in Cairo this year, CEO Mohamed El Sherif told Al Mal. The transactions are currently still in the negotiation stage, he said.Suez Canal Authority set up EGP 2 bn investment fund: More M&As could be on the horizon courtesy of the Suez Canal Authority (SCA), which will establish a EGP 2 bn fund in March to finance its economic activities, SCA head Osama Rabie told Bloomberg Asharq. The fund was signed off on by the cabinet last week.On the macro front, Egypt’s balance of payments recorded an overall surplus of USD 311.4 mn in 1Q2021-22, according to a statement from the central bank (pdf) released moments before dispatch. This comes despite a rise in the current account deficit to USD 4.0 bn, up from USD 2.8 bn in 1Q2020-21 on the back of the increase in the non-oil trade deficit by 26.1% y-o-y to USD 11.0 bn, the statement reads.^^We’ll have more on these stories and others in tomorrow’s EnterpriseAM.** CATCH UP QUICK on the top stories from today’s EnterpriseAM: FinMin’s Kouchouk on mitigating the Fed, our first sovereign sukuk + how we got back onto the JPMorgan bond index: We spoke to Vice Minister of Finance Ahmed Kouchouk in an exclusive interview on Egypt rejoining JPMorgan’s emerging-market bond index, what the government plans to do to mitigate the impact of a high global interest rate environment, and the timing of some key debt issuances we have planned this year.The government is looking to list “as many state companies as possible” on the EGX in 2022, PM Moustafa Madbouly said yesterday during a follow-up meeting on the state privatization program.Solar plants are facing more new charges: Solar plants producing more than 500 KW of power will be required to pay fees to the Electricity Ministry to help defray the costs of connecting to the national grid — a move that industry players say represents a threat to Egypt’s nascent solar sector. HAPPENING NOW- OPEC+ reportedly just signed off on raising production by 400k barrels per day in March, after a very brief meeting just before we dispatched this afternoon’s edition, Bloomberg reports, citing sources it says have direct knowledge with the matter. The decision comes despite its strategy so far failing to meet the recovery in demand as several member countries struggle to up their output. THE BIG STORY ABROAD- The global business press is taking a breather from Ukraine to focus on record inflation figures from the eurozone, where price growth registered 5.1% in January, according to the EU’s statistical office (pdf). The major culprit for accelerating inflation is energy prices, which rose 28.6% last month as the bloc’s energy supply comes under increasing pressure.The uptick in inflation is adding more pressure on the European Central Bank (ECB) to shift its monetary policy strategy by moving towards rate hikes earlier than planned when it holds a policy meeting tomorrow. January’s readings could nudge the ECB to join the US Federal Reserve in abandoning the narrative that inflation is “transitory,” with analysts polled by Reuters suggesting that price growth figures continuing to exceed ECB expectations means it will begin tightening its monetary policy in 1Q2023. The Financial Times and CNBC also have the story. The Central Bank of Egypt will also hold its first policy meeting of 2022 tomorrow. All analysts surveyed in our regular interest rate poll expect the CBE to keep rates on hold, as they anticipate our rates continuing to attract portfolio inflows even amid tightening and global inflationary pressures. Get Enterprise daily The roundup of news and trends that move your markets and shape corporate agendas delivered straight to your inbox. Subscribe here ALSO TOMORROW-PMI also out tomorrow: January PMI figures for Egypt, Saudi Arabia, and the UAE are also due out tomorrow morning. The figures will be available here when they’re released at around 6:15am CLT. Egypt’s non-oil business activity has remained in contraction territory for each of the past 13 months, although last month’s reading showed an improvement from the month prior as inflationary pressures began to soften, while an uptick in tourism activity and a sharp rise in exports helped support new business.Tomorrow is the deadline to submit applications for the US Embassy’s Cultural Property Agreement Implementation initiative that would help Egypt protect cultural property from looting, theft, and illicit trafficking. The guidelines state that concept notes should be sent in by this Thursday, 3 February, while shortlisted applicants will need to submit full applications by 4 May. Each project will receive USD 50-100k, with around USD 500k earmarked for the entire program.🗓 CIRCLE YOUR CALENDAR-Key news triggers to keep your eye on in the first days of this new month: Foreign reserves figures for January should be out from the Central Bank of Egypt within the next few days.Inflation: Inflation figures for January will be released next Thursday, 10 February. A call to logistics and cargo transport firms for rail freight privatization: Egyptian National Railways is inviting private sector players to a forum at its headquarters on Tuesday, 22 February, to gauge interest in its plans to delegate the management and operations of freight transport to the private sector. You can register for the forum by sending the organizers an email.From our friends at the US embassy: Women can now apply to join Fortune Global Women's Mentoring Program which will take place from 8-28 May 2022. The program aims to bring emerging women leaders from around the world to the US to meet and learn from the Fortune Most Powerful Women community, which includes executive women mentors from companies such as Accenture, Johnson & Johnson, and Aetna. The deadline to apply for the program is 8 February. You can begin your application by signing up here.Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.☀️ TOMORROW’S WEATHER- The mercury will rise to 19°C during the day tomorrow before falling to 9°C at night, our favorite weather app tells us.PSA- We’re in for a few days of wind + rain: Wind will pick up across Greater Cairo, Upper Egypt and the North Coast tomorrow and Friday, bringing light to moderate rainfall to parts of the country, the national weather service forecasts.

Education: What’s to come in 2022? After a year that saw private education take off, the private sector is set to keep playing a major role in meeting continued strong demand for high-quality education. K-12 school and university construction and geographical expansion are among the key sector trends we should expect to see in 2022, particularly as it pertains to middle income families, whom the private sector has made a secondary priority to high income families, education leaders tell Enterprise. That said, operators will face the challenges of high inflation and cost crunches, insiders say.The existing trend that’s not going anywhere: Demand for quality education — and the need for the private sector to fill market gaps. Strong demand for education will very clearly continue into 2022, driven by population, demographics, and the huge gap in the market, Lighthouse Education CEO Mohamed Elsherif tells Enterprise. With the government under pressure to spend in multiple areas, the size of the market gap to be filled by the private sector won’t just remain large, but will probably increase in 2022, he adds.But what’s shifting is the target market, which will likely be primarily in the middle-income segment, Elsherif says. “The focus in 2022 will be on establishing affordable international schools, rather than high-end ones,” agrees Elsewedy Capital Holding CEO Haytham Sabry. As inflation is widely expected to continue accelerating this year, families’ disposable income will be under pressure. This pressure is already making itself seen, with notably higher enrollment levels at newly-opened schools with annual tuition fees of around EGP 80k, compared with those in the EGP 150-180k range, he adds. “The first kind might get 600 students in a year, while the second kind might get 150-200.”The high inflation environment expected in 2022 is weighing on operators: The costs of constructing and operating schools will grow as a result of inflation gathering pace, says Elsherif. “For school operators and owners, there will be a tug-of-war in 2022 between trying to manage income margins and costs on the school purchase side, and families trying to fight inflation pressures and limit the costs of education,” he says. “This will be a big issue next year.”“Building schools will be more expensive because material costs are much higher and land costs will be significant. The economics will be harder to manage, and this could impact the timeline, leading to a slower ramp up of investment in the schools.”Still, we can expect large international schools to eye more expansion throughout Greater Cairo — and even beyond. “I think a lot of K-12 operators will expand from East Cairo to the West, like we did with BCCIS, and like EEP is doing,” says Eduhive CEO Karim Mostafa. “And operators in the West will move East.” Cairo-based operators are even starting to look beyond the capital, he notes. “I think we’ll start seeing a lot of interest in Alexandria, the Delta and even Upper Egypt.”Universities, too, will see organic expansion, aligned with the establishment of new urban communities, BUE President Mohamed Loutfi tells Enterprise. This is natural because the role of a university is to serve its society — as an academic establishment, a research hub, and an institution to prepare students for employment and global citizenship, he adds.And large-scale public-private platforms are expected to keep gathering momentum: The large-scale public-private investment platforms that proved so popular in 2021 will continue growing, several sector experts anticipate. We’ll see more partnerships under this model — if not in 2022, then in the coming years, says Mostafa. And the existing platforms will continue their organic growth and consolidation in 2022, with each platform opening new schools in new areas, says Sabry.Meanwhile, a greater number of private universities entering Egypt’s higher education sphere will drive competition, says Loutfi. Competition among universities to attract the best students will be greater, and the universities themselves will have to focus more on providing education that’s well aligned with market needs, he adds.What other trends could be brewing? IPOs, M&A, and more education management companies. Edtech is one key area expected to be ripe for consolidation in the coming years, Klivvr CEO Mohamed Aboulnaga recently told Enterprise. And in the coming years, we’ll see a real increase in M&As and IPOs, believes Mostafa. “There are education operators who are building up to IPO in three or four years.” Increasingly, school owners and operators are also showing interest in launching their own education management companies, he adds. “This makes it easier for some schools and operators to expand using different brands.”The big picture: Investors see reasons for optimism, but sound a note of caution: The market gap, new cities under construction and tech developments that augment content delivery all represent strong education prospects, says Elsherif. Education is a very resilient sector, notes Mostafa. Both believe investor interest will remain high. But amid the substantial risk posed by inflation, investors are also very cautious, says Elsherif. And any sudden regulatory changes would heighten their concerns, he adds. “As investors, we always want to be able to plan.” Your top education stories for the week: Progress on PPP schools program: A total of 24 language schools have been set up under the first phase of the government’s PPP schools program and the second phase of 57 schools is currently in the bidding stage, PPP framework unit head Atter Hannoura told Hapi Journal.Three edtech startups received unspecified equity investments from education-focused VC EdVentures and the Academy of Scientific Research and Technology (ASRT).The nationwide teacher shortage isn’t a short-term thing: Prime Minister Moustafa Madbouly wants ministers to draw up a five-year plan to solve the national teacher shortage, cabinet said in a statement, without providing further details.

2021 in review Part 1 — The year private sector education truly emerged: In many ways, 2021 was the private sector’s year for education in Egypt. The year kicked off with the Education Ministry scrapping the 20% cap on foreign ownership of schools — a problem that had raised serious concerns among school operators and investors, who feared the decision would deter investors and slow expansion plans in education, one of Egypt’s most promising sectors.This set the tone for the rest of the year: Since then, we’ve seen a true partnership emerge between large private K-12 and university operators and the government, whereby the former invests in conjunction with the policy initiatives set out by the latter. New private schools and universities opened up, and even governorate expansion started gathering steam. The private sector worked effectively with the government to boost technical education. Public-private partnerships in large-scale education investment vehicles drew substantial investment. And nothing really says emergence more than an IPO, as higher education platform Taaleem broke our IPO drought in 2021.The biggest theme of the year has to be the development of a truly successful PPP model in education, starting with technical colleges. Setting up new technical colleges — apprenticeship programs merging academics and technical training that offer two-year + two-year degree programs — was a stated investment priority for the Higher Education Ministry in FY2021-2022, with plans underway to launch six new government technical colleges after three were recently established in New Cairo, Quesna and Beni Suef.The private sector upped its support for technical colleges in 2021, with CIRA announcing plans to launch Egypt’s first private technical college in September 2023, using curricula provided by international partners. Elsewedy, Samsung and Bavaria had previously funded labs at public tech colleges, and Korea Tech University had awarded University Beni Suef University of Technology a grant of USD 5.8 mn. Many players expect private sector interest in establishing new technical colleges — or building the capacity of tech departments in existing private universities — to continue growing, they told Enterprise.But it wasn't until large-scale investment platforms drew significant investments did public-private collaboration reach new heights. 2021 saw large-scale public-private investment platforms take off in a huge way. CIRA and Al Ahly Capital Holding announced the launch of their new EGP 2 bn company to invest in middle-income education providers. It joins the CIRA-Elsewedy Capital Holding venture, for which the New Urban Communities Authority is allocating land to build the New Damietta university. State-backed Lighthouse Education platform recently reached a first close of EGP 560 mn, beating its initial fundraising target. And the EFG Hermes Education Fund — set up as a 50/50 JV between EFG and GEMS Education — received a EGP 250 mn commitment from the Sovereign Fund of Egypt.Why was this a PPP education model that beat out what came previously? For one, long-term investment in an education platform beats one-off projects and schools as operators can attract stronger talent and spend more on education development, JV heads tell us. It also allows for investment at scale, which gives operators a diverse and innovative lineup of projects. Financial risks and capex spending is being shared by both public and private entities. And crucially, PPP platforms also afford the investor better options for a successful exit.This hasn’t kept private sector operators from expanding on their own, with plans to open new K-12 schools moving forward. A new branch of the British Columbia Canadian International School (BCCIS) and the first Egyptian branch of Germany’s Saxony International School (SIS) both opened in September, says Karim Mostafa, CEO of CIRA subsidiary Eduhive, which manages them. Kent College Egypt, set to open its doors in 2H2022, has already started its admissions process, Chairman Shady Eshra confirms. Egypt Education Platform — formerly GEMS Egypt — added multiple schools to its international stream, including most recently a new branch of Hayah International Academy in West Cairo.…Along with universities: 2021 saw the establishment of the European Universities in Egypt (EUE), the latest international branch campus to successfully set up shop in Egypt. EUE hosts the UK’s University of London and University of Central Lancashire, according to its website. Meanwhile, CIRA and Elsewedy Capital Holding announced in August their plans to build and run an EGP 2.5 bn private university in New Damietta, set to open to students in the 2023-2024 academic year.And throughout the year, there’s been a buzz of interest from overseas investors: The decision to remove the 20% cap on foreign ownership limits sparked immediate and palpable investor interest, according to sources. One major global investor eyeing Egypt’s education sector is Actis, controlling shareholder of the largest private higher education business in Africa: Honoris United Universities. Honoris is prioritizing an Egyptian entry, Actis partner and Middle East & North Africa chief Sherif El Kholy told us in March.And what better way to celebrate the emerging powerhouse of private sector education than with a successful IPO: Higher education outfit Taaleem’s April IPO — Egypt’s first since December 2019 — saw its shares rise some 6% on the first day of trading. The offering saw 46.55% of the company’s shares placed with institutional investors in a private placement and another 2.45% stake sold to retail investors. The retail portion closed more than 29x oversubscribed, while the offering to institutional orders was 2.34x oversubscribed.All in all, a strong case was made in 2021 for the value of private sector investment in education — for investors, institutions, and the sector overall.In Part 2 of our Blackboard Year-in-Review: We look at how the covid-19 pandemic has accelerated the education system’s adoption of new technology, and new learning models with an eye towards meeting the labor market’s needs. Your top education stories for the week: UNESCO and Huawei will establish a distance learning center set to help 950k Egyptian K-12 educators link up school and home learning, under a three-year joint project to boost digital transformation in education in Egypt, Ghana and Ethiopia.The government wants to upskill the labor market to tackle the issue of jobs at risk due to automation, Planning Minister Hala El Said said at the Global Forum for Higher Education and Scientific Research.Parents could soon face financial penalties if their children miss a week of school without sufficient reason under amendments to the Education Act greenlit by the Madbouly Cabinet last week.

State-backed education investment platform Lighthouse Education has reached a first close of EGP 560 mn, beating its initial fundraising target, Deputy Chairman Mohamed El Sherif tells Enterprise. Backed by the Sovereign Fund of Egypt, the fund will channel investment into K12 private schools and originally targeted a EGP 500 mn first close.Lighthouse has this Saudi investment company to thank: Al Rajhi Investment Holding Company (Rajhi-Invest) has become the latest limited partner in the fund with a EGP 75 mn commitment, Lighthouse announced in a statement (pdf) late last week. This is the company’s first investment in Egypt, said CEO Mohammed El Samman in the statement. The fund’s current portfolio spans industrial building materials, food and beverage, banking, real estate, and tourism, and is part of a large family-owned conglomerate that includes Al Rajhi Bank and Rajhi Steel.Who are the other partners? The bulk of the capital has been provided by state-owned organizations. Misr Ins. Holding has made the biggest commitment, contributing EGP 125 mn, while the Sovereign Fund of Egypt and Banque Misr provided EGP 100 mn each. United Bank of Egypt has committed EGP 50 mn and fund managers Hossam El Kabbany, the founder of Al Orman schools, and privately-owned financial advisor Ironwood Investments have put up EGP 20 mn. The identities of the investors who provided the remaining EGP 90 mn are unknown.The fund could start announcing acquisitions within months, El Sherif said in the statement. The platform aims to acquire majority stakes in at least two of four shortlisted K12 private schools before the end of 2021, and was conducting early due diligence over the summer, El Sherif told us at the time. All of the near-term acquisitions are located in Greater Cairo, he added, with greenfield projects expected to follow at a later stage.Lighthouse was launched in July to channel investment into K12 private schools. The platform plans to invest in 10-12 schools, focusing initially on Cairo and Giza before turning its attention to other areas of the country such as Alexandria, Beni Suef, Assiut, Port Said, Gharbia, and Qalyubia. The platform is aiming to reach its second close before the end of 2022 and hopes to eventually increase its capital to EGP 1.75 bn.EDITOR’S NOTE- We previously reported that Suez Canal Bank was among the founding members of Lighthouse Education. We’ve since been informed that this is not the case.

Education investment fund Lighthouse Education is only weeks away from its first close of EGP 500 mn, Lighthouse Managing Director Mohamed El Sherif tells Enterprise.United Bank joins the fray: El Sherif was speaking to us a day after the United Bank of Egypt announced (pdf) that it would contribute EGP 50 mn to the fund, joining founding partners the Sovereign Fund of Egypt (SFE), Misr Ins. Holding Company, Banque Misr, and the Suez Canal Bank.United’s contribution brings the platform’s total commitments that we know of to EGP 425 mn, but El Sherif tells us that other private sector investors are on board, taking it closer to the EGP 500 mn target. He declined to disclose the identities of the investors. MIH and its subsidiaries contributed EGP 125 mn to its initial paid-in capital, the SFE and Banque Misr EGP 100 mn each, and Suez Canal Bank EGP 50 mn, MIH Chairman Basel El Hini told us in July, soon after the fund was announced.About Lighthouse: Announced in July, Lighthouse Education was set up as a joint-stock company designed to channel investment into K12 private schools. It will start off by investing in 10-12 schools, focusing initially on Cairo and Giza before turning its attention to other areas of the country such as Alexandria, Beni Suef, Assiut, Port Said, Gharbia, and Qalyubia. It hopes to eventually increase its capital to EGP 1.75 bn.The platform is aiming to reach its second close before the end of 2022, according to the statement. Under the new partnership agreement, the platform will be managed under the supervision of Al Orman schools founder Hossam El Kabbany along with and privately-owned financial advisor Ironwood Investments, and Banque Misr’s investment arm Misr Capital.Advisors: Beltone Financial Holding was the financial advisor while Matouk Bassiouny law firm was the legal advisor to Lighthouse. The Sovereign Fund of Egypt tapped Renaissance Capital as its financial advisor and Baker Mckenzie as its legal advisor, and Al Kamel Law Firm was Banque Misr and Misr Capital’s legal advisor.

The Sovereign Fund of Egypt (SFE) will soon launch a new sub-fund to invest in the education industry, CEO Ayman Soliman told Youm7. The fund plans to finance the construction of hundreds of schools across the country targeted at middle-class families, he said, stopping short of giving a target value for the fund. The SFE made its first commitment in the sector in March, committing EGP 250 mn to the EFG Hermes Education Fund. It also agreed last month to invest in a new education investment platform dubbed Lighthouse Education, which plans to channel EGP 1.75 bn into 10-12 private K-12 education schools. There’s more where that came from: Soliman said the fund will soon announce four new partnerships in the education field that will help build the schools, as well as new universities. This will be the SFE’s fifth sub-fund: The SFE already has four sub-funds covering healthcare, financial services, tourism and real estate, and infrastructure.

What does Lighthouse Education have in store for Egypt’s education sector? Egypt's biggest state-owned institutions, along with the Sovereign Fund of Egypt (SFE), are throwing their weight behind what could eventually be one of the largest education sector investment vehicles in the country. Dubbed Lighthouse Education — the newly set-up platform brings together Misr Ins. Holding Company (MIH), the SFE, Banque Misr, and the Suez Canal Bank, who contributed a combined EGP 375 mn to paid-in capital and are planning more. The four heavyweights are joined by renowned Al Orman schools founder Hossam El Kabbany and privately-owned financial advisor Ironwood Investments on the management side.Private education in Egypt remains underserved as demand is growing at a quicker pace than supply. In recent reports by Collier International and the World Bank, it was estimated that as many as 2.1 mn classrooms would be needed by 2030 to plug the supply gap, especially with private sector K-12 student growth almost doubling in the last five years. In 2016, the government had outlined a plan to build as many as 1000 quasi-private schools this decade under public-private partnerships, but the project either lost steam or has been moving slowly since.Lighthouse aims to help fill this gap in the market: Aiming to raise EGP 500 mn in its first close, the fund eventually wants to reach EGP 1.75 bn. SFE chief executive Ayman Soliman said last week that Lighthouse plans to invest in 10-12 private schools, focusing initially on Cairo and Giza before turning its attention to other areas of the country such as Alexandria, Beni Suef, Assiut, Port Said, Gharbia, and Qalyubia.We sat down with MIH Chairman Basel El Hini, whose group of companies made the largest contribution to the platform’s initial paid-in capital, and Ironwood Managing Director Mohamed El Sherif, whose firm is in charge of the day-to-day alongside industry veteran El Kabbany. The two principals walked us through the ins and outs of the plan, explained the structure of the platform, and discussed how it is laying the groundwork for more initiatives to plug the gap in the market for private education.Lighthouse Education was set up as a joint-stock company. MIH and its subsidiaries contributed EGP 125 mn to its initial paid-in capital, the SFE and Banque Misr EGP 100 mn each, and Suez Canal Bank EGP 50 mn, El Hini tells us. Management is a separate company led by El Kabbany and Ironwood, but has also made a minority contribution to the investment arm, while other unnamed investors also took part.More investors could join later down the road, but this won’t necessarily be soon, as the current structure will likely be sealed once the platform reaches a target capital of EGP 500 mn or more, with the intent of launching its first investment round as soon as possible, El Hini says.Fund to reach close in five weeks? Lighthouse is expecting to hit its initial target paid-in capital of at least EGP 500 mn in as little as five weeks, after which it will begin working on acquisitions, El Sherif tells us. The platform aims to acquire majority stakes in at least two of the four shortlisted K12 private schools before the end of 2021, and is currently conducting early due diligence, he says, adding that all of the near-term acquisitions are located in Greater Cairo.Greenfield projects will likely be concentrated at later stages, with the majority of Lighthouse’s early investments expected to be acquisitions, El Sherif says. The platform is currently targeting schools containing an average of 70 classrooms, and are both language and international private schools whose tuition fees range from EGP 20-90k, he says.And universities could be in the pipeline in the long-term: El Hini told us in May that the fund could expand to universities after three years.Part of a bigger education play? MIH — which through its subsidiaries has the largest institutional investment portfolio in Egypt with a size of EGP 65 bn — is currently the largest investor in the platform, but will not play a large role in management given its lack of experience in the education sector, El Hini tells us. The group's initial investment came from all its portfolio companies, with both Misr Ins. and Misr Life Ins. joining MIH in making contributions as part of its push into education, El Hini tells us. The company is planning to stay on board for the long-haul, and will also be on the lookout for other partnerships in models similar to Lighthouse in both education and healthcare, which were identified as priority sectors, El Hini says.MIH and its state-owned partners see Lighthouse as an avenue for private sector involvement in education. The platform could eventually be entirely led by the private sector as the partners plan to make an exit down the road when the time is right, El Hini said. As things stand, private participation is already strong, with both Ironwood and El Kabbany, both of whom are from the private sector, are spearheading the platform. Private investors that contributed to the paid-in capital, and the venture will be open to, and will even encourage private investment in subsequent rounds, he added.Your top education stories for the week: Thanaweya Amma: Thanaweya Amma exams started on 10 July and will continue through to 2 August, Education Minister Tarek Shawki announced.French university coming back: A new EUR 12 mn campus for the French university in Egypt will be re-established after cabinet approved an agreement signed between the government and the French Development Agency in June.Microsoft tech training: The Communications Ministry signed two MoUs with Microsoft to develop young people’s digital skills.Fintech for education: State-owned Banque Misr and fintech startup Klickit joined forces to launch the Education Payment Hub, a service that offers digital end-to-end payment management and collection services to the education sector in Egypt, the bank said in a statement (pdf).Educating on fintech: Network International will work with the Arab Academy for Science, Technology and Maritime Transport to provide technical training to students and fresh grads specialized in fintech, according to a statement (pdf).

The Sovereign Fund of Egypt has plenty of appetite for pharma, with CEO Ayman Soliman telling Hapi Journal the company is in talks with potential partners to invest in domestic pharma manufacturing targeting both the domestic and export markets. Data from the government’s Unified Procurement Authority will, in part, guide its choices on what products have the best local prospects. The story doesn’t say how much the SFE will look to invest in manufacturing, nor does it specify whether it’s looking at greenfield or brownfield targets.And it’s now official: The SFE will partner with Abu Dhabi sovereign wealth fund ADQ in the acquisition of 100% of domestic manufacturing powerhouse Amoun. Soliman confirmed that new investments in manufacturing will take place alongside the fund’s acquisition of a stake in Amoun Pharma, a transaction being led by ADQ. The SFE had reportedly joined ADQ in the bid for Amoun back in February, but the story was never confirmed. A subsidiary of ADQ confirmed at the end of June that it’s still aiming to buy Amoun via a mandatory tender offer that could be worth as much as EGP 10.3 bn. Amoun is presently a unit of Canada’s Bausch Health.Healthcare real estate and logistics are also getting some love. The fund is looking to invest in real estate projects that could be repurposed as hospitals, in partnership with health operators. It is also in the process of establishing a logistics company to invest in supply warehouses and build logistics hubs for the private sector and e-commerce companies. Partnerships in the sector will be finalized in the coming six months, Soliman added.BACKGROUND: Healthcare is a top priority for the fund, which has made several moves into the sector since the onset of the pandemic. Other than a USD 300 mn joint venture with Concord International Investments in May, the SFE was reportedly eyeing a stake in state pharma company Chemical Industries Development. Healthcare is one of four previously announced sub-funds the SFE is carving out, alongside financial services, tourism and real estate, and infrastructure.The news comes just one week after the SFE said it would invest in Lighthouse Education, a new platform with partners including Misr Ins. Holding Company (MIH), Banque Misr, and the Suez Canal Bank. The Lighthouse transaction is part of an EGP 1.75 bn push into K-12 education announced earlier this month; partners include Egyptian banks, among other investors. We’ll have more on Lighthouse’s plans in tomorrow’s Blackboard in EnterpriseAM.