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Education in Africa: spend more and do so more efficiently by Hanan Morsy

This article was produced by the Financial Times 7th February 2020.

This year, Africa will account for almost all of the $21bn annual gap in education finance in low-income countries. Closing that gap will mean mobilising more resources and spending them more efficiently. On both points, Africa has some way to go. This is a key finding of the African Development Bank’s report, African Economic Outlook 2020. The continent is among the highest spenders on education in the developing world, at an average of 5 per cent of national GDP, putting many countries on track to meet Unesco’s target of providing universal primary education by 2030. And yet, Africa remains the world’s least efficient region at utilising education spending. Two positive trends in Africa underlie the complexity. First, the continent has a large and growing youth population. Africa’s median age in 2020 is 19.7 years; Asia’s, by comparison, is 32. Second, African governments have a strong commitment to education, which accounts for an average 16 per cent of their budget allocations. However, the continent’s comparatively small economies and rapidly growing young populations mean that average spending per student is the lowest of any region in the world. On average, African governments spend only $533 per primary-school student a year — a quarter and a fifth, respectively, of spending in Latin American and Asian countries. Spending per secondary-school student is only $925 — less than half of what is spent in Latin America and about a fifth of the average in Asia. The good news is that, according to the African Economic Outlook’s projections, simply by improving the efficiency of spending — a measure of a government’s ability to spend without waste, currently estimated at 58 per cent at primary school level — Africa could reach almost universal primary enrolment, raising it from the current 79 per cent to 98 per cent, with no increase in spending. How can African governments spend more effectively? First, countries need to keep education in consideration when allocating resources in other areas. For example, evidence suggests that an investment plan targeting education and physical infrastructure would have greater long-term growth benefits than investing in either sector alone, thanks to strong complementarity. Second, while education can be considered a public good, the private sector also can contribute to its provision and financing. Through public-private partnerships, businesses can expand school choice by offering voucher schemes, loans and scholarships. Governments should offer guidance by identifying priority sectors and by encouraging private sector participation in vocational education and training. In their regulatory role, governments can also enforce adherence to standards, policies and rules, while also instilling a favourable environment. Third, African countries can leverage innovative finance options to fill education-financing gaps. These include channelling international private capital into education through social or development-impact bonds or “pay-for-success” financing, where returns are conditional on the achievement of a specified education outcome. The International Financing Facility Education and the African Education Fund are two initiatives that aim to attract new funding. Fourth, by promoting education-linked conditional cash transfers, particularly to girls and poor families, and by developing student-loan markets, African countries can mobilise additional resources and ease the pressure on government budgets. Much inefficiency in education spending results from poor targeting or misuse of funds. In Zambia, for instance, there was a 32 per cent disparity in 2014 between the amount of grant funding disbursed by the ministry of education and the amount received by schools. Ugandan schools received on average only 13 per cent of allocated public funds due to embezzlement by local officials. Better education expenditure audits and reviews offer one solution. Performance-based financing mechanisms offer the promise to improve the efficiency of spending and the quality of education services provided. They allow governments to condition education-financing payments on the achievement of verifiable targets, such as the number of trained teachers or primary-school enrolment rates. They can take various forms, such as pay for performance, performance-based contracting or cash on delivery By aligning resources with outcomes, results-based financing can incentivise ministries, local authorities, schools and teachers, to the benefit of students and their families. Such schemes have been used recently in countries including Cameroon, Democratic Republic of Congo, Mozambique and Tanzania. Finally, African countries need to increase the effectiveness of foreign aid for education by fine-tuning its targeting. Today, such aid is essentially project-based and focuses primarily on education quantity in the form of new classrooms, additional teachers and school materials. The efficacy of education aid can be improved by shifting it towards systemic support and by focusing more on education quality and student learning. This will require system-wide reforms as well as dialogue between all actors and stakeholders in the education sector.

Hanan Morsy is director of the macroeconomic policy, forecasting and research department at the African Development Bank. beyondbrics is a forum on emerging markets for contributors from the worlds of business, finance, politics, academia and the third sector. All views expressed are those of the author(s) and should not be taken as reflecting the views of the Financial Times.