Student enrolment at universities and vocational training schools in South Africa has more than doubled in the last 25 years. But as around 90 per cent of students need accommodation there is a shortfall of around 500,000 beds, which especially is constraining access and a safe life for students from low-income households.
To address this challenge, IFU has invested EUR 13m in SASAII being a real estate investment platform that will develop and operate affordable accommodation for up to 15,000 students within the next five years. 75 per cent of the new beds will be earmarked for students from low-income families.
The business is based on a public-private partnership, where SASAII with financing from private investors build and operate student accommodation. The rent for eligible students from low-income families is paid directly to SASAII by the National Student Financial Aid Scheme (NSFAS) based on public set tariffs. This provides a secure revenue stream for investors and gives comfort for the students that get accommodation free of charge.
“Education is key for building human capital, reducing income inequalities and promoting social mobility. By investing in SASAII we are contributing to giving more young people, primarily from low-income households, a better opportunity to access and complete a tertiary education.”
Lars Krogsgaard, CIO, IFU
The investment in SASAII is made on behalf of the Danish SDG Investment Fund, which is backed by the Danish state, large Danish pension funds and private investors. IFC of the World Bank, Eskom Pension and Provident Fund and Metropolitan Holdings are also investors.
To reduce the carbon footprint, the new student accommodation will be certified according to EDGE, which is an IFC innovation that makes it easy to design and certify resource efficient and zero carbon buildings. This includes green and sustainable features that can reduce the use of resources like water, electricity, cooling, ventilation, etc.
“In all our investments we commit to supporting the green transition and improving the livelihood of people. And I am very pleased that in SASAII these ambitions go hand in hand, as we, by reducing the use of resources, for example, can develop and operate student accommodation that is more affordable,” said Lars Krogsgaard.
IFU paves the way
The South African authorities are encouraging private investors to enter the market for student accommodation. But according to a recent report many developers are finding it difficult to obtain private finance due to the perception that investments in this sector is considered relatively risky. Here, Development Finance Institutions can play a catalytic role by investing in the market and making it more mature for private investors to follow.
“Hopefully, our investment in SASAII will be a showcase to assure private investors that investments in student accommodation in South Africa can provide high impact as well as an acceptable return,” said Lars Krogsgaard.