MENA’s education sector: A steep learning curve

Posted on November 24, 2011

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Investment in education is an investment in the future.

GCC Education

The education sector in the Arabian Gulf poses a tremendous investment opportunity.

The population of the Middle East is one of the youngest in the world. At the same time, it is also expanding rapidly. Put these two facets together and you get one of the most unique investment opportunities in the world — education. This opportunity has been brought sharply into the limelight by the Arab Spring, with the youth of the region demanding the right to better lifestyles through education and employment. Unfortunately, information on the education sector in the Middle East and North Africa is patchy at best. Which is why Zawya decided to gather as much of it as possible in one place, in order to give potential investors a wide and deep perspective on the education business.

Some of our findings were eye-popping. According to Alpen Capital, investment volume in the private education sector in the Gulf Cooperation Council (GCC) countries is expected to reach USD 3.5 billion in 2012, while the investment volume in the tertiary education sector is expected to reach USD 1.2 billion.  According to Al Masah Capital, public expenditure on education in the MENA region has risen exponentially and today stands at 18.6% of all government spending compared to the world average of 14.2%. Given regional demographics and the twin necessities of job creation and the parallel creation of a trained and educated workforce, this disparity in regional vs. global spending is expected to grow much larger, making this region’s education sector one of the most lucrative in the world. The size of the actual market in the region is also expanding and could be anywhere in the vicinity of USD 75.3 billion, according to Al Masah.

Adult literacy in the region is still at the 80% mark compared to an average of 97% in the developed world. The average number of years spent by an individual on education in the MENA region is 9.3 years compared to 12 years in the UK and the US. According to Al Masah, private equity firms have invested a total of USD 275.1 million through 13 educational tie-ups and initiatives in the MENA education sector since 2005. Compare that to the billions of dollars invested in more visible sectors such as construction, oil and gas, and financial services, and the opportunity acquires a starker and more meaningful form.

There are multiple reasons why investment in education is a strong and viable means of deploying resources. For one thing, the education sector is virtually recession-proof, at least at the primary levels. It has strong backing and incentives from governments in the region, as well as from global entities such as the World Bank. Good education and skills are crucial to improving a person’s economic and social prospects. Investment in education is not just about spending (and making) money. It’s about investing in the future.

— Yazad Darasha

More intelligence on the MENA education sector:

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