Alarm bells for private schools in South Africa

 ·8 Feb 2024

The financial pressures created by high-interest rates and a sluggish economy have now filtered through to South African private schools, which are feeling the pinch as some young families come under strain.

This was noted in Curro Holding’s latest trading statement published on 8 February 2024.

The Curro Group manages 182 private schools across the county. The group recorded what it called a “credible operating performance”, generating strong cashflows during the 2023 financial year and being in a healthy financial position.

However, the group highlighted a concerning trend across its schools where enrolment numbers showed that some parents are struggling due to the higher cost of living in South Africa.

Although Curro had 73,159 registered learners in February 2024 – which increased by 1.9% from the 71,809 registered learners in November 2023 – enrolments remained virtually unchanged from the 73,047 learners in February 2023.

The group noted that high schools are growing as expected but the challenging impact of higher interest rates on constrained consumers – especially young families – means that enrolments in the earlier grades are struggling.

The group said young families have been hit hard by the rampant hikes in the cost of living in South Africa, and this has resulted in a reduction in enrolments of learners in the youngest grades of primary schools.

The financial burden on South Africans – including young parents who fit into the income bracket for private school – comes amid other warning signs of distress across middle- to higher-income industries in the country.

According to DebtBusters’ latest Debt Index report, South Africans who earn R35,000 or more per month pay the highest percentage of their income on servicing debt compared to any other income bracket.

These income earners use over two-thirds (71%) of their income towards debt repayments, while their debt-to-income ratio stands at 171% – the highest levels ever recorded.

DebtBusters noted that this is predominantly due to bond and vehicle finance debt as a result of South Africa’s persistently high interest rates – currently at their highest point in 14 years since the fallout from the global financial crisis.

The effects are filtering through to all sectors of the economy. Lew Geffen Sotheby’s International Realty CEO, Yael Geffen, noted that, since November 2021, homeowners with fairly modest R2 million bonds have been slammed with increases of more than R6,000 per month.

The stats on vehicle finances are equally distressing. According to WesBank’s estimates, the actual cost of car ownership in South Africa has increased by 14% since November 2022 alone, while, over the past three years, the cost of car ownership has increased by a staggering 50.6% since 2021 – far outstripping inflation.

Compounding these financial headwinds for private school parents are the above-inflation school fee hikes in South Africa.

2024 fees for boarding schools and day schoolers increased at an average of 7.3% across the 40 most expensive schools in the country, a couple of percentage points above the SARB’s expected inflation rate over the 2023 financial year (5.8%).

This is coupled with the erosion of salaries in the country, where the average take-home pay increased by 1% over the past seven years while inflation increased by 40%.

This means that in real terms, most South Africans had 39% less disposable income in 2023 compared to 2016 due mainly to the impact of high inflation.

Read: Warning over prepaid meter crime wave in South Africa

Show comments
Subscribe to our daily newsletter