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EXCERPTS
Those who have been interested in the past to read my periodic commentaries on early childhood will be aware that I am a strong opponent of for-profit entities in the provision of childcare services.
This is primarily due to the conflict between the interests of a child and those of private owners and/or shareholders.
Many observers from within the early childhood sector have observed with increasing concern the unrestrained growth of ABC Learning Centres, aided and abetted by friendly government funding policies that promoted "free market forces" and the apparently insatiable willingness of financiers to fund the growth.
Now we read that the empire is unravelling, the share price has plummeted with questions being raised about the company's future viability and ownership.
Although I have no sympathy for the directors of the company and some sympathy for shareholders, I do feel for the parents, children and staff of ABC as they enter into a period of uncertainty, through no fault of their own, and as the company endeavours to reinvent itself in the Australian community.
As ABC has close to 50 per cent of the childcare market in Queensland, the turmoil the company is experiencing has significant ramifications beyond the immediate impact of reducing its shareholders' wealth.
Firstly, the Queensland Government recently announced plans to outsource the construction of new public schools to the private sector.
My association, C&K, already has been approached by a potential consortium to consider becoming involved by establishing childcare services as part of the group's overall project submission. I can only assume the same invitation has been made to other potential operators as well.
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Secondly, the ABC name is now significantly tarnished from an investment point of view, thus creating a dilemma for any current and future directors or private-equity owners as they attempt to resurrect its share price.
The sole purpose of public companies is to make money for shareholders but, in a price-sensitive market like child care, the only way to increase profits is to cut costs.
Given the company already has tight supply-chain systems in place, the most likely cost reduction opportunities come in staff costs and consumables, both with a direct negative impact on the children in care.
Thirdly, both state and federal governments intend to introduce universal preschool education programs for all four-year-olds.
A key component of this strategy will most likely include the offer to fund and/or place university-qualified early childhood teachers in childcare services, as is the situation in all C&K kindergartens.
As the largest player in Queensland, clearly ABC has a vested interest in how this initiative unfolds.
But I am more than a little uncomfortable with how such a scenario may develop, especially as 40 per cent of the company's income is already derived from the public purse through childcare benefits, and if it unfolds that ownership of the company does indeed transfer overseas.
I find it just a little ironic that a key player in determining the future of ABC is Temasek, the Singapore Government-owned investment fund. Here is a state-owned fund charged with looking after the interest of Singaporean citizens investing in an Australian commercial operation that has a large number of future Australians in its care.
As with every challenge, the parlous state of ABC does create opportunities, and not just for investors.
The Federal Government could take the opportunity and review on a national level the complete early childhood education and care environment.
It could consider not just the preschool component but the full recommendations of the recent Organisation for Economic Co-operation and Development report that placed Australia at or near the bottom of the scale when comparing early childhood in other Western countries. It could level the playing field and redress the previous government's inequitable funding policies that operated at the expense of community-based services.
It could introduce national standards for early childhood that ensure all states had quality programs and it could ensure consistent curriculums delivered by well-paid, qualified staff.
And if it wanted to be really brave, it could encourage Australia's own future fund to buy ABC, place it in community-managed hands and reap the demonstrated social dividends that will flow, are guaranteed and are not subject to the vagaries of sharemarkets.
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- reprinted from The Courier Mail