One of sub-Saharan Africa’s most famous sons, Nelson Mandela, accurately characterized education as “the most powerful weapon ... you can use to change the world.”

Education can bring about positive change in countless ways. It drives economic growth and development, and delivers economic returns to individuals (and these returns are higher in Africa than anywhere else). Each added year at school reduces an adolescent boy’s risk of involvement in armed conflict by 20 percent, and better-educated women have fewer and healthier children with lower rates of maternal mortality. While it is more challenging to measure many of education’s other benefits—including its role in enabling individuals to achieve their full potential—those afforded an education generally accept it as irrefutably valuable.

However, a recent UNESCO report identified a worrying trend: Despite a significant global push for new investment and the inclusion of a number of education targets in the Sustainable Development Goals, aid to global education has stagnated since 2010. And while sub-Saharan Africa is home to more than half the world’s out-of-school children, it receives only about a quarter of global education aid. Sub-Saharan Africa’s improvement in primary education has exceeded that of any region since the original Millennium Development Goals were established, but daunting challenges remain.

The region’s education systems continue to face three basic issues: access, quality, and relevance. One billion children in sub-Saharan Africa will need education in the coming three decades, but with up to 40 percent of children not meeting basic literacy and numeracy targets, sub-Saharan Africa is the worst-performing region globally for learning outcomes. Furthermore, by 2025, Africa will surpass the rest of the world combined in the number of people joining the labor force (ages 15-64). Yet even now, sub-Saharan Africa’s education systems cannot accommodate labor force needs.

The funding gap is not likely to go away anytime soon. While it would be ideal if richer countries increased education aid, the anticipated shortfall to reach agreed global targets is a staggering $39 billion per annum. Countries in sub-Saharan Africa already spend an average of 18.4 percent of their budgets on education—a higher proportion than in other regions—so it is unlikely that significant additional public funds will become available.

What, then, can fill the gap?

Complementary contributions from the private sector—both for-profit and nonprofit—are one part of the solution. The private sector already contributes significantly to education in sub-Saharan Africa, educating an estimated 21 percent of pupils, with this figure set to rise to 25 percent by 2021. Reaching this target will require some $16 billion to $18 billion in private education investment over the next five years. The majority of investment will be out of reach for traditional venture capital and private equity investors, because it will be in less formalized or consolidated sectors, or will require more risk-tolerant capital. There are, however, opportunities for impact investors, philanthropists, and entrepreneurs to drive innovation and generate impact.

These opportunities lie within both the traditional core delivery of education (such as education delivered to students from early years to higher education, typically in a classroom setting), and the ancillary services that support and complement core delivery, such as teacher training and tutoring. Some examples of these segments and leading innovations include:

  • Low-cost K-12 ($8 billion to $8.2 billion in investment required): This segment has both social and economic potential for investors. For example, in South Africa, LEAP Science & Maths Schools provide free education to 1,500 qualifying students across six schools. Omega Schools enroll about 20,000 students across 38 schools in Ghana and Liberia with a “pay-as-you-learn” model, which meets the cash flow needs of low-income families. And the nonprofit Promoting Equality in African Schools is a low-cost school network in Uganda and Zambia that raises funds to build schools, then uses a mix of government subsidies (provided through a public-private partnership), lunch fees, and boarding fees to run 30 secondary schools.
  • Higher education: Nearly 30 percent of African higher education enrollments are in the private sector. Contact higher education’s ($2 billion to 2.2 billion) demand-driven high-growth, high-margin, and revenue potential make this in-person education segment attractive for commercial and strategic investors, as well as impact investors. Education providers are leveraging this opportunity; for example, the African Leadership University aims to graduate three million leaders across 25 campuses by 2060. Distance higher education ($0.5 billion to 0.7 billion) presents opportunities to expand access through online offerings. For example, the Management College of South Africa is the region’s largest distance education provider and enrolls more than 10,000 students, focusing on the mid-priced segment.
  • Technical and vocational education and training ($0.5 billion–$0.7 billion): This kind of training can play an important role in addressing high youth unemployment and the skills gap in sub-Saharan Africa. And as a nascent sector, it is more suitable for impact investors, who seek longer-term return on investment. Innovative models that target education for employment, such as demand-driven models like Andela (which supplants a traditional degree with on-the-job training in the tech sector in Kenya, Nigeria, and Uganda) hold promise for the sector.
  • Teacher training ($0.3 billion–$0.4 billion): Sub-Saharan Africa needs to recruit and train 4.6 million new teachers, while addressing serious quality concerns about existing ones. Programs like Partners for Possibility are helping strengthen leadership and management capacity by uniting under-resourced school principals with seasoned business leaders.
  • Education technology ($1 billion–$1.2 billion): Private models change the landscape for distribution and student engagement, and they are evolving. In principle, technology can reduce the need for capital investment in core and ancillary services, and widen access at a lower cost. However, to develop new platforms, populate them with content, and build infrastructure requires investment. Education technology (EdTech) models are fundamentally innovation-driven, and, as such, they hold potential for more risk-seeking capital from early-stage investors and impact investors. Innovative distance-learning programs like MGCubed are leveraging technology (in their case, solar-powered equipment) to enable math and English learning in rural communities in Ghana. Kepler in Rwanda is a new university model that leverages massive open online courses to offer American-accredited degrees for a fraction of their typical cost. Initiatives such as Eneza Education, a subscription-based, short message service platform that offers learning resources based on the national curriculum, are reaching more than one million students across Kenya, Ghana, and Tanzania.
  • Student and institutional finance: Private sector finance can make education affordable for more students. Organizations like Brighter Investment in Ghana are emerging to make financing available by using intelligent acquisition methods and tracking performance to lower default rates.

To be sure, it is important to recognize that engaging with the private sector brings limitations and consequences, including risks of variable quality and inequities in provision, competition with governments for resources, and certain kinds of financial risk not present in the public sector.

That being said, beyond the consideration of the benefits and costs of private education, the reality is that the sector is large and growing. Enrollment in private education in the region 
is forecast to be in the range of 63 million to 69 million students by 2021. The main drivers for this growth are an increase in the relevant population cohort and a policy push to increase enrollments to meet the Sustainable Development Goals.

Private providers will continue to play a vital role in the delivery of education in sub-Saharan Africa. The potential for investment and the potential for impact have rarely been greater.