Auditors’ body seeks backing for Sh1.6bn KCA university deal

Accountants are set to decide whether or not to accept Sh1.6 billion private equity funding for the Kenya College of Accountancy (KCA) University.

The 14,000-member Institute of Certified Public Accountants of Kenya (ICPAK) is seeking member’s backing for the $17.5 million arrangement with Emerging Capital Partners (ECP). Voting on the issue is set to take place during a special general meeting on March 11.

ECP has since September 2009 invested in Wananchi Group and Nairobi Java House and should the proposed investment in KCA University go through, it will be its first investment in the local education sector.

ICPAK and Maarifa Education, ECP’s investment vehicle in education, are expected to form a company called KCA Education since the university’s status does not allow it to have shareholders.

“KCA’s status as a non-profit or chartered university precludes Maarifa from making a traditional equity investment. Therefore, a service company structure has been developed, whereby KCAU forms a strategic partnership with a for-profit legal entity that undertakes to provide the university with core services (through which some of the investment funding will be channelled),” says a notice to members.

ICPAK will own a 25 per cent stake in the new company while ECP, through Maarifa Education will own the remaining 75 per cent stake in exchange for Sh352 million. The funds will go to the university to fix its cash flow problems.

KCA University will then transfer all non-degree courses to KCA Education as equity contribution.

ECP will pump an additional Sh868 million in KCA Education for setting up additional campuses in the country and increase the number of courses. KCA University currently has five campuses.

A Sh284 million loan will be offered to the university. The 15-year loan attracts interest rate of 12 per cent annually with a two-year grace period.

Sh91 million in seed money will go towards a foundation to provide scholarships for students taking up courses at the university.

KCA has been looking for a strategic partner since 2011 and begun floating the idea of ECP in late 2014.

“The search for the right partner has been rigorous and I can say without any hesitation that our proposed strategic partnership is good for our students, good for faculty and good for Kenya in developing KCA University into a world-class university,” said KCA University vice Chancellor Noah Midamba in a statement.

In an earlier interview ICPAK chief executive Patrick Ngumi told the Business Daily the umbrella body settled on the private equity investor due to its track record of rapidly expanding local businesses.

Bank loans were also ruled out due to high interest rates.

ECP has also invested in two universities in Uganda and Zambia and says over the next 30 years its target is to have one million students in Africa attend tertiary institutions it has backed.

ECP investment will be backed by KCA University’s annual student enrolment of 15,000 students per year which is greater than the 6,000-student its Zambian and Ugandan-backed institutions currently admit.

The other private equity firms that have invested in the education sector include Fanisi Capital which bought Hillcrest Group of Schools in 2011.