IFC investment to support private higher education push into Africa

A US$150 million equity investment by the World Bank’s International Finance Corporation (IFC) into US-based for-profit education company Laureate Education will help spearhead a push into Africa, in line with World Bank aims to develop post-secondary education and skills training on the continent.

The IFC, which funds private companies rather than governments, announced its stake in Laureate – billed as its largest ever investment in education – late last month.

The IFC will invest US$100 million in Laureate “to support the growth of Laureate’s global network of institutions”, with an additional US$50 million coming from the IFC’s African, Latin American and Caribbean Fund.

Laureate will be expanding in Africa, said Damian Olive, the IFC's principal investment officer. “IFC has been in Africa for a long time so hopefully we can help them expand their services there.”

The focus will be on countries where there is “a large gap between education supply versus demand”, he added.

The World Bank, in its latest World Development Report, has focused on jobs and the importance of skills for employment, and backs the expansion of private provision to increase skills levels. “We are focused on education for employment,” said Olive.

Although Laureate’s CEO Douglas Becker, for commercial reasons, would not specify the countries of interest in Africa, he said: “We are very serious about our interest in Africa and we are immediately engaging in a joint planning exercise with IFC relative to Africa.”

Africa strategy

In the Middle East and North Africa, Laureate owns a multidisciplinary university in Morocco – Université Internationale de Casablanca – and institutions in Saudi Arabia and Jordan. But it has no presence in Sub-Saharan Africa.

The IFC investment will “allow us to accelerate our development in the region,” Becker told University World News on 5 February.

The IFC partnership would give Laureate credibility on a continent that can be suspicious about the commercialisation of higher education, and help steer it through the minefield of government regulations in the sector, he said.

The World Bank institution offers Laureate “contacts and experience in Africa”, said Becker. “IFC is very deeply experienced in working in Africa and they will be very helpful to us as we build our Africa strategy and implement it.

“We wouldn’t have the networks and contacts that we have in other markets, and that we would need in order to be successful in Africa. And we would want to make sure we had very high levels of government sponsorship in the countries where we operate.”

“Higher education is typically a very regulated field. And if you don’t enjoy the trust and support and engagement of local government you’re not going to be successful.”

The IFC’s stake

According to Becker, the IFC also benefits from the investment. “They have seen that their approach of lending to very sophisticated local operators has not allowed them to do as much in higher education in Africa as they would like. I think that they would see that Laureate’s resources and experience would be a very important missing ingredient in Africa.”

Becker said the IFC’s stake is less than 5%, declining to disclose the exact proportion. It does not entitle the World Bank institution to a seat on the Laureate board.

“We would not be telling them how to run [their business],” the IFC’s Olive said, adding that how the money would be used would be decided by Laureate and would partly be used for building infrastructure. However, the IFC would benefit from any increase in value in the company.

Becker said that although it is a for-profit company, Laureate reinvests all of its profits “in the university system that we are building all around the world”.

Further expansion in Latin America

The bulk of Laureate’s 65 higher education institutions around the world, providing vocational, skills and adult education, are in Latin America – half of Laureate's revenues come from Mexico, Chile and Brazil, according to Standard & Poor’s credit rating agency in a note published last year.

Further expansion in Latin America is also planned as part of the IFC partnership.

Last July the IFC announced it would provide a US$40 million loan to Laureate to help build two new campuses of the Laureate-owned Peruvian University of Applied Science – Universidad Peruana de Sciencias Aplicadas. And another IFC loan, to expand a college in Panama, is expected to be approved this year.

Becker maintained that the company would still have access to capital even without the IFC. “We generate a surplus, which we reinvest, and we have very strong investors that could easily put up the money for expansion.

“So for us this was very much a strategic decision to partner with an institution that we felt had common objectives and a common philosophy.”

“IFC itself has a very good track record. It has been around for decades so they are in the business of vetting to make sure something is going to make an impact on poverty, inclusion and the development of emerging markets, and on social mobility.

“They are not willing to invest unless those factors are present.”