By Sarah Farquhar
© ChildForum
 

The corporatisation of childcare is a concern in Australia. When the ABC Australia chain collapsed New Zealanders started to question what would happen here if a major provider of early childcare education went into liquidation.

An argument emerged that it would be better for children if services were all community or State owned. But early childcare and education is big business inNew Zealandand so this is very unlikely to happen. 

We saw with Easy Mind (a home-based national chain) going into liquidation early in 2010 that there are always buyers around if the liquidators have time to negotiate a deal. Government funding provides a major source of income and so taking over an existing early childhood service or becoming an early childhood service provider can be an attractive business option.

If you think about it we have a kind of national ownership already in place. Government funds a very high proportion of service costs, regardless of whether a service is an Incorporated Society, a Charitable Trust, owned by a private individual or partnership, or a Company listed on the Stock Exchange. If the government were to pull this funding suddenly, it would almost certainly result in sector collapse. 

The early childhood sector in New Zealand has proven itself to be highly responsive to family needs for childcare and to changes in government policy e.g. for increasing children’s attendance and providing childcare services in poorer areas. The main limitations providers cite on their ability to be as responsive as fast as they would like are around issues of red tape when it comes to such things as resource consents and licensing processes. Another problem providers cite in expanding their service is being able to find suitable staff who meet the teacher registration qualification requirement.

The growth of commercial early childhood operations has aided government goals to improve family access to early childhood education and increase children’s participation. Community organisations over recent years have noticed this and stepped up to become more business minded. So we see different Kindergarten Associations now doing such things as: operating companies, lengthening the hours that children must attend, and branching into operating daycares and family day care.

Most mothers who would be in the workforce if only they had access to childcare now have that access. The home-based sector has expanded quickly to provide especially well for demand for infant and toddler care. Many Free Kindergartens have gone through a period of changing hours to get the higher 20 hour funding rate and so families who can’t get access to a short kindergarten session place are seeing that daycares provide what Free Kindergartens provide so they have a choice of both.

The early childhood market has just about grown as much as it’s going to grow for now. Over the coming year we are likely to see growth stabilise and competition for children between providers increase further. Early childhood service providers with more children and more centres or home-based schemes are likely to do better, while those with fewer children and smaller sized operations are likely to have a harder struggle to survive.

Bigger service providers with bigger advertising budgets, better purchasing power, and their own human resource managers, will find it easier to survive and keep growing provided they have sound business management practices. Smaller operators, especially locally owned community services and single owner-operated services, are likely to face harder times.

What smaller operators may find they have to do is work smarter by establishing and promoting their point of difference and value as specialised ‘boutique’ childcare services. Otherwise smaller operators will find themselves squashed out of the market by the bigger players. The only relief may come  if something like a big increase in the birth rate happens, or if National and Labour make early childhood education a major election issue again and promises are made to inject significantly more funding into the sector – such as to increase 20 Hour ECE funding to 25 Hour ECE funding. 

Who the Big Providers Are

It might surprise you that the biggest providers of early childcare and education are not of any single ownership type.  The big providers represent an eclectic collection of community-charitable organisations (Barnardos), community-public organisations (3 Free Kindergarten associations), private individuals (Kidicorp and Kindercare), overseas owners (ABC), and franchises (PORSE and Lollipops).

There are two other big providers. The NZ Playcentre Federation Inc through their Associations provides parent support and early childhood education for 15,120 children – many more than any one of the big operators listed above. The playcentre management/ownership model reduces risk in that while Playcentre Associations must belong to the Federation in order to operate, associations own their centres as Incorporated Societies. So if one association folded it would impact on the children and families in that association only.

The roll sizes of Te Kohanga Reo centres are not listed by the Ministry of Education in its directory of early childhood service. But we do know that the Te Kohanga National Trust Board has a similar number of centre licences as the Playcentre Associations put together. It may well be that the Te Kohanga National Trust Board provides for more children than the Auckland Kindergarten Association and ABC NZ Ltd.

Should the Size of Operation and Type of Ownership Matter? 

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