The passion and confidence that characterised Curro’s AGM presentation by CEO Chris van der Merwe would make the most cynical investor forget, momentarily, that the shares of this private education venture are trading at a dizzy trailing earnings multiple of around 130 times.
Curro clearly has room for growth, as I pointed out in my article in Business Day earlier this week. The business is buzzing, and even the revised profit/ expansion parameters now look to have been markedly under-estimated. But what was more impressive was that even though Curro is tapping one of the few sweet spots in the moribund local economy, there is still a great determination to find further growth opportunities.
Here I speak specifically of the company’s willingness to engage government on finding solutions to solving a growing education crisis in SA. Let’s not be naive, there needs to be at the outset a political will to implement plans, especially potential solutions bandied about by the private sector. Still, for what it’s worth, I think Curro has come up with some smart suggestions that could have mutual benefits for the company, government and (most importantly) learners.
Van der Merwe is postulating that government provide vouchers of R1,500/month (the value currently spent on each child by the state) to learners.
The rub is that vouchers can be extended to a private school of choice, allowing parents to pay in the difference (R200 or R400/month).
Admittedly this would play beautifully into Curro’s affordable school model (Curro school fees are R3,600/month, but Curro Academies are pitched at R1,700/month).
But it also means state schools are relieved of overcrowding; Van der Merwe estimates the current teacher: pupil ratio could drop as low as 1:32.
There is also the potential to positively influence curriculum standards and results.
Van der Merwe also believes government would do well to flog state land to independent school operators. He reckons if 200 such erven were sold — “at a reasonable price” — the state would bank proceeds of R3.2bn, save R24bn on campus construction and save R70bn on running costs (assuming R25m/year over 14 years). Van der Merwe also argues for converting state buildings in city and town centres into schools that are operated by or leased to independent school operators. Obviously, schools managed and funded by private school operators will relieve state schools from overcrowding.
The most contentious suggestion by Van der Merwe is around halting the deterioration of curriculum standards and the physical condition of state schools, which has caused parents to move children to schools that are often far away from their homes. He thinks government should consider selling or leasing existing state schools to independent operators, who will then invest capital and manage the schools.
This, I contend, is tantamount to suggesting the super-efficient (and highly profitable) private hospitals take over the running of dilapidated public hospitals. I can’t imagine too enthusiastic a response from either government or private hospitals.
Of course, parents might feel very strongly about having smoothly functioning schools closer to learners’ homes (saving on transport costs and creating more studying time) as well as an opportunity to enhance the quality of schooling.