Private sector investments in the education industry in Egypt are of paramount importance. Over the past decade, we have witnessed a steady increase in the appetite of private equity funds and investors to capitalize from the industry. This enthusiastic appetite and lucrative appeal is owed to ever-increasing enrollments; in 2016/17, the Central Agency for Public Mobilization and Statistics reported that total enrollments at the K-12 level amounted to 20.6 million students. The growth continues — according to PwC’s Middle East Report, at the current growth rate, an estimate of nearly 2.4 million additional seats in grades 1-12 will be needed by 2022/23. According to the report, the private sector provision in the primary, preparatory and secondary stages represents 10%, 7% and 13%, respectively. Enrollment in private schools is growing at a faster rate than public schools.
New limitation on foreign ownership
On 14 November 2019, a new decree was issued that might bring the previously witnessed rapid increase of private sector investments in the education industry to a halt. The decree limits the ownership of foreigners in the capital of private schools, and schools applying an international curriculum in Egypt, to 20%. This new limit is unprecedented in the education industry and has never been set before. This limit may be a deterrent to many and may effectively lure less investors who had been previously interested in the industry.
A point of interest: it remains unclear whether, for example, a two-layer restructure in ownership would be a successful workaround to the 20% capital limit under the new decree. The implementation of the decree is yet to be tested, particularly with regard to the number of ownership layers that would be subject to review by the Ministry of Education.