KENYA: Universities seek private investment

Kenyan universities are increasingly seeking private investors to build new academic and residential facilities, as surging enrolments pile pressure on the cash- and space-strapped institutions. State-run universities especially are bracing for student expansion as the government moves to have an extra 40,000 students admitted to clear a two-year backlog.

There is now a clear plan in motion to ease the higher education admissions crisis, with the Joint Admissions Board announcing that institutions would admit one in three rather than one in four qualified school-leavers and the government upping funding for the sector.

Last week Masinde Muliro University of Science and Technology, Kenya's newest public university, invited investors to build hostels on its campuses to ease congestion in facilities as student numbers soar.

Deputy Vice-chancellor in charge of finance and administration Professor Sibilikhe Makhanu said the institution was short of accommodation for 7,000 students. "The university plans to enter into long-term agreements with contractors to help build facilities," said Makhanu.

As numbers surge, universities are increasingly embracing new financing models, such as private equity funds, to meet the demand for infrastructure. For the public universities, annual government funding has not matched the need for new facilities, meaning institutions have to tap funds from other sources like private investors to expand their infrastructure.

Last year Kenyatta University, the second biggest university by student numbers, said it was seeking an investor to pump US$11 million into building academic and residential facilities. The investors are required to build and operate the facilities for between eight and 12 years before transferring ownership to the institution. During this period, they are expected to recoup their investment.

Higher education enrolments have been rising by around 40% annually for the past five years, while real subsidies have increased by 4% to 5% over the period. According to government figures, the number of students in public universities was 143,000 last year, up from 101,000 the previous year.

Educationists have warned that absorbing a much larger number of students would backfire if not accompanied by a commensurate rise in funding to enable institutions to expand educational and boarding infrastructure and hire extra tutors.

The government also recently moved to encourage private investment in higher education. From June last year, following amendments to the Income Tax Act, education facilities were added to the list of buildings that qualify for capital deduction, a tax break previously only enjoyed by investors in industrial buildings, hotels, mining, and plant and machinery.

Educationists said the shift could spur building of facilities and boost private investment in education, in what is currently a harsh business environment with high construction costs.

The rise in student numbers and the subsequent expansion of universities in East Africa's biggest economy has also led to mushrooming of mega housing projects around universities, as developers cash in on demand for hostel facilities.

The optimistic outlook for developers is boosted by anticipated rapidly rising demand for student beds in the decade to come. In 2015 the first group of beneficiaries of free primary education will enter university. The social welfare plan, started in 2003, has helped push up enrolments in the school sector by more than 1.5 million, meaning many more students will be knocking at higher education's door in just a few years.

The Joint Admissions Board (JAB) announcement that institutions need to admit one in three rather than one in four qualified school-leavers, came after it resolved to have a double intake of new students and planned to clear an admissions backlog of 40,000 students by 2015.

In the coming academic year universities will admit 32,611 students who sat the Kenya Certificate of Secondary Education in 2009 or 2010, out of 96,000 who qualified. Last year, JAB admitted only 24,000 students. Universities such as Kenyatta have already made arrangements to accommodate students who sat for their examinations last year.

High-achieving publicly funded students have had to wait for at least a year for a university place after leaving school, because of the admissions backlog that has built up over decades and has been driven by growing demand for higher education. Privately-funded students can enrol straight away, and their fees have become crucial to universities' financial survival.

As reported in June, to support the programme the Ministry of Finance upped its direct funding to public universities from Sh21.8 billion (US$259 million) to Sh24.1 billion (US$286.9 million) in the fiscal year beginning last month. Universities are projected to generate at least Sh14 billion from commercial activities, bringing the total budget to Sh38 billion (US$452 million).