Big trouble for private schools in South Africa

Parents in South Africa are under intense financial pressure and are struggling to pay school fees – as a result, private schools are struggling to fill seats in classrooms as parents move over to more affordable public schools.

South African households are struggling amid rising interest rates, heightened inflation and stagnant household incomes, and these pressures are having a severe knock-on effect on fee-paying private and public schools in the country.

South African households started 2023 on the back foot, battered by constant load shedding, declining salaries, climbing debt, rising food prices and looming electricity price hikes in April that threaten to exacerbate the cost of living in the country.

These financial hardships have had a knock-on effect on fee-paying private and public schools, as collecting school fees has become the number one challenge facing schools, according to the latest School Survey conducted by TPN Credit Bureau.

According to the head of marketing at TPN Credit Bureau, Waldo Marcus, school fees are the most important source of income for 95% of private and 85% of public schools, and the number of school fee accounts in good standing is steadily declining.

The survey showed that at the end of 2022, only 62.57% of school fee accounts were in good standing compared to 63.75% at the end of 2021.

Marcus said that of concern is the fact that 25% of parents did not make any payment towards school fees in 2022.

He added that schools have been struggling since the start of the Covid-19 pandemic, and 2020 was the worst year on record for school fee collections.

“During the third quarter of 2020 – at the height of the lockdown – only 50% of parents had paid their children’s school fees in full. By the end of the year, just 56% of parents were in good standing,” he said.

“Traditionally, parents who have not paid school fees pay towards the end of the year when bonuses are paid to ensure admission into the new year. However, this late payment places additional strain on schools’ cashflow and their ability to meet their financial obligations timeously,” said Marcus.

Survey respondents reported that primary school fees at private schools range between R31,000 and R40,000 per annum, while public schools average around  R14,000 per year.

Private high school fees range between R71,000 for grade 8, reaching R91,000 per annum for grade 12 learners, while public schools average around R25,000 per year.

Marcus said that the higher fees being charged at private schools are proving unaffordable for many South African parents as households review priorities in 2023.

Private schools are struggling to fill classes 

As a result of the rising costs of living, the survey revealed that private schools struggle to fill classes with enough learners.

More than 40% of private schools reported having fewer learners this year than last year, while only 29% of schools said they had more learners than the previous year, said Marcus.

On the other hand, the demand for spaces at public schools is growing.

Nearly 50% of public school respondents said they had accepted more students in 2023 than in 2022, while 39% said their intake this year is similar. Only 14% of public schools are expected to enrol fewer learners this year.

More interestingly, Marcus noted that emigration appears to be having a significant impact on private schools, with 31% of private schools indicating that they have seen more students leave because of emigration than in previous years.

Parents and South African households aren’t coping 

Recent data from credit scoring company TransUnion shows South Africans are cutting back on discretionary spending to deal with soaring inflation and growing economic pressure.

According to TransUnion, consumers are reducing spending on ‘extras’ such as dining out, travel and entertainment to make room for more ‘important’ payments in their monthly budget.

However, despite these attempts to cope, 38% of consumers say they are still unable to pay their bills and loans in full while rising food prices and looming electricity price hikes in April threaten to exacerbate the cost of living in the country.

To make matters worse, according to the latest BankservAfrica Take-home Pay Index (BTPI), the real average salary recorded in 2022 declined by 6.9% – showing that South Africans have become poorer over the last year.

The latest 25 basis point increase by the Reserve Banks Monetary Policy Committee (MPC), while not unexpected, will invariably add further strain, especially when households are already overindebted.

The CEO of Debt Rescue, Neil Roets, warned that these accumulating financial headwinds have meant that South Africans are “hanging on by a thin thread, and there is no more room to maneuver”.

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