Danish fund invests in South African student accommodation platform
In South Africa, 90% of students at universities and vocational training schools need accommodation to access and complete their education. The increasing number of students has led to a shortfall of 500,000 beds, which is especially constraining for students from low-income households. On behalf of the Danish SDG Investment Fund, IFU has invested €13 million in South Africa Student Accommodation Impact Investments (SASAII) that will develop and operate affordable accommodation for up to 15,000 students.
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,” said Lars Krogsgaard, CIO of 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. The IFC, Eskom Pension and Provident Fund and Metropolitan Holdings are also investors.
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 Krogsgaard.
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