Schools and the Recession

While the COVID19 Lockdown Recession has affected the global economy, it has hit South Africa particularly hard as we were in recession even before the Lockdown. One of the greatest challenges facing South Africa is unemployment where pre-lockdown unemployment was already at over 30%  in the first quarter of this year. With the implementation of the Lockdown in the second quarter, this rate is expected to increase much further.

As a result of this, quality schooling, another one of South Africa’s great challenges is also under threat with closures and recession-affected parents being unable to pay school fees. The report in The Mercury on 16 July 2020 investigating the plight of two Durban schools, shows that the effect of these threats are being felt by both private and fee-paying public schools alike.

A report in the Daily Maverick on 22 July 2020 points to a public school in Cape Town where some staff have had to take salary cuts. This illustrates that while the rest of the public sector employees have been insulated against the unemployment ravaging South Africa, fee-paying public schools with a portion of their staff financed directly by school fees are still exposed.

During SchoolAdvisor’s webinar on 22 July 2020, Bentley Credit Control ran an anonymous survey of the attending schools by asking some crucial questions to gain better insight into the extent of the financial hardships currently being experienced by schools. Of the roughly 300 attendees, 37 schools kindly took the time to complete the survey, the results of which appear below. 75% of the respondents were public schools, while the other 25% were private.

How Many Parents are Unemployed?

The first question posed was what percentage of parents at your school have disclosed to you that they are unemployed?

From these answers, it would appear that even in the second quarter, that the attendee schools unemployment rates are lower than the 30% average South African first-quarter (pre-Lockdown) unemployment rate.  One has to bear in mind that the schools surveyed either came from Quintile 5 Publc Schools, roughly the top 20% of economic areas in South Africa, or were private schools.

What percentage of parents have advised you that they have had their remuneration reduced?

By what percentage has your school fee collection for 2020 dropped?

Curro Holding, a JSE listed company and private school provider, reported a 20% decrease in fee collection for the period between March and April 2020.

These figures fit in with the feedback Bentley Credit Control has received from its school clients which indicated that their fee collection rates were, on average, down by between 20% to 40%  this year.

Has your School retrenched any staff or reduced salaries in 2020?

The concerning statistic here is that at least one-third of schools were considering retrenchments and salary cuts.

Conclusion

The statistics paint a perturbing picture of the financial effect of the Lockdown recession on both public and private schools. Schools for their part need to act proactively to meet these challenges.To do this, steps that may be taken include:

  • An improved internal collection process, with the best tools, optimum staff and support
  • Looking to outsource the internal collections where the above can not be achieved
  • Balancing the ring-fencing of “COVID19 effected debtors”, providing them with  payment terms to aid their recovery while taking a much more assertive approach in handing over the balance of those debtors unaffected by the lockdown
  • Fully understanding your legal position in terms of the right to collect school fees

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