THE FATE OF SCHOOLS AND WHAT'S TO BE DONE

Last week it was reported that many schools are folding under the weight of Covid-19 and are on the chopping block, with promoters seeking to shed themselves of them.

You have to feel for the owners who for many, through no fault of their own, are in this distressed situation.

On a more global level the collapse of these schools will have far reaching consequences on the sector, which is driven mainly by the private schools.

There was a time when public schools and those set up by religious groups dominated the sector. But underinvestment in the 1970s and 1980s, population growth and this government’s commitment to Universal Primary Education (UPE) meant the demand for education, of whatever sort burst through the roof.

The private sector jumped at the opportunity. As a result, there has been a boom in the education sector in the last few years. One businessman with interests in real estate and finance when he made an entrance into the school business, said it was the easiest money to make.

"Covid-19 and the measures government took to contain it brought the gravy train to a screeching halt. And as it is with any crisis, you will know who was swimming naked when the tide goes out...

Not to kick a man when he is down, but for all of us the old saying that, make hay while the sun shines has never been truer.

A cursory analysis of the most distressed schools shows three rough patterns.

The worst hit are the new schools who had just begun, had not broken even and were in “the valley of death”  -- that stage in any business’ development before the business model has been proven.

The second group are those who while they have been around for a bit still have massive fixed costs, especially rent, which they still owed while the schools were shut down and not earning any income.

The third group and probably the most tragic, to my mind, are those whose schools were established, had even invested in their own premises, had not quite created a brand but worse still they had no buffer fund to tide them over the hard times.

This last case the proprietors were content to eat all surpluses, the schools were indebted up to the eyeballs and when the first bump in the road came they collapsed like a pack of cards.

Not to oversimplify the issue, but many distressed schools find themselves facing a variation of one of these themes.

Moral hazard – reckless behavior by borrowers knowing they will be saved from themselves, aside, the government needs to look into how they bailout the education sector.

Already of course, the market, which waits for no man, has jumped into the fray, with distressed owners putting their enterprises up for sale.

The challenge with the market is that while it is the most effective creator of wealth the world has known, it is the worst distributor of that same wealth. It tends to give more to those who have and take away even the little that the poor have. The challenge of leaving the education sector’s current woes to be resolved by the market is that one, this may very well lead to concentration of the sector in the hands of a few people, who have the funds to buy all these distressed assets. We shouldn’t begrudge people their hard work, but one effect of such a scenario is that they will be able to charge as much as they want for lack of competition.

Which might not be the worst thing though.

"The worst thing is if the school owners find no buyers, which may affect thousands of learners, who may not be easily absorbed in the existing schools. It was reported last year that in Kenya some school owners had turned the premises into poultry farms and the returns were such that they were not contemplating a return to the education sector.

Education is not a service a country can do without. It is an essential service that can very well determine the fate of a nation. As it is, experts are already warning that the makings of greater economic inequality are being sown between those students who have continued learning online and those who cannot for whatever reason, but mostly because their parents are already poor.

The nature of the interventions will of course determine whether the education sector comes out the other side with the minimum of pain or distorts it even further. Any bailout must be to the most deserving school, with the main parameter being schools which have the most impact on the most vulnerable communities.

The nature of bailout can range from taking over the schools altogether, restructuring their debt or even providing a grant.

The point is these are not shops or other private enterprises we can abandon to the vagaries of the market. Something systematic and effective needs to be done. Sooner than later.