Africa is one of the fastest growing markets for gaming and betting in the world. The pandemic saw a surge in online gaming driven by millennials and females who find it easier to participate online. Sports Betting Community (SBC) hosted the largest virtual gathering of industry players in Africa from 6-7 October 2020 and estimates the industry is worth $40bn in South Africa, Nigeria and Kenya combined. Ongolo.com was a fly on the wall during this surprisingly candid and insightful conference.
Despite the positive growth prospects, the gaming and betting industry in Africa still suffers from bad PR. This is largely due to cultural and religious perceptions that frown upon schemes to get rich quick. The Qu’ran (2:219, 5:90) explicitly calls out gambling as “a great sin” and “an abomination of Satan’s work’ while the Bible says: “the love of money is the root of all evil” (1 Timothy 6:10).
It is important to establish whether this is a sector worth pursuing in Africa.
Gaming and betting defined
The gaming and betting industry has tried to address the negative PR by dropping the word ‘gambling’ which has long been associated with money laundering and other criminal activities. Gaming is preferred as the term relates to activities that are for fun and entertainment.
Gambling and gaming are used interchangeably but mean different things:
- Gambling: money is wagered on a specific outcome with the hope of winning more money. It involves risk, reward and chance. Examples include scratch cards, lottery tickets, slot machines, casinos and sports betting. One might argue that raffle tickets also fall within this category
- Gaming: relies on the skill of a player in order to achieve an outcome, which may or may not involve real money. Traditional games include board games such as Monopoly and Scrabble which then evolved to video games. The latest games offer a combination of skill and luck with money wagers, hence the convergence with gambling
Market entry strategies for gaming and betting in Africa
Gaming and betting are widespread across most of Africa and illegal in only six countries: Sudan, Somalia, Libya, Mauritania, Guinea-Bissau and Burundi. Despite the strong religious influence, Morocco and Egypt have casinos however these are marketed to tourists and measures such as identity checks are used to deter locals.
Online gaming is legal in South Africa, Nigeria, Mauritius and Kenya. The regulation on online gaming is silent in countries like Angola, Botswana, Ghana, Namibia and Zambia, which paves the way for products to be offered. Given the limited oversight of online activity by regulators, it is more likely than not, that online gaming activity is rife across the continent.
Most countries enacted gambling regulations in order to curb illegal activity, protect consumers and to generate tax revenue. South Africa had around 2,000 illegal casinos operating in the country in 1995 which prompted the enactment of the National Gambling Act in 1996. As one South African conference participant said:
The job of the regulator is to regulate – they do not necessarily have to like it
Operators looking to enter the continent need to take the following into consideration:
#1 Local regulations and licensing requirements
Some Western operators view Africa as a homogenous market and forget that it is a continent with 54 distinct countries each with their own regulations and licensing requirements. Licenses are required at both national and state or provincial level.
The regulatory environment is as diverse as the continent. Even though South Africa is heavily regulated at the national and provincial level, it is considered by far the most mature market and is comparable to Europe. The rules are clear, strict compliance is expected and the roadmap does not change much.
Like South Africa, Nigerian regulations are fragmented at national and state (27) level. The main difference between the two African giants is that the regulatory environment in Nigeria is fluid and operators live in constant fear that licenses could be revoked at any moment and for any reason. This is unfortunate as Nigeria is deemed to be a far more lucrative market than South Africa.
East Africa also tends to be unpredictable but regulators usually state their intentions ahead of time and are deemed to be more approachable than those in West Africa. Kenya is one of the popular markets for gaming and betting but can be volatile. Changing tax regulations put local players out of business and online gaming requires crypto insurance. In Tanzania, the regulator suspended all advertising for six months until an agreement was reached about watershed hours and a cap on the maximum number of ads on television or radio per hour (two). This suspension knocked consumer and investor confidence.
#2 Local partners
“Doing business in Africa is not for the faint at heart and is like the wild west”
Local partners are key to navigating the unclear waters when doing business in Africa. Partners can support with the following:
- Open doors: doing business in Africa is still dependent on personal relationships and social networks in many countries
- Provide market knowledge: local partners will know what is required to set up businesses and understand local nuances. In some French-speaking markets, football is usually watched in retail betting shops where consumers pay a token amount for viewing. Watching these live games also stimulates sports betting
- Identify set-up requirements: mobile money has created new set-up requirements for operators which can be costly. Markets such as Ghana have payment gateways which mean operators only need to set up once while other markets require operators to integrate with every mobile operator in that market. This makes gaming and betting an expensive venture to start
#3 Product suitability
African customers are quite savvy and will only participate if they think they have a chance to win. Therefore, products have to be based on local needs and not copy and paste from other parts of the world. For example, Tanzanian clients would like to be able to place bets at half time or bundle certain outcomes such as the number of goals and corners expected in a match.
Sports betting is big business across Africa. Football continues to be the dominant sport with 95% of all bets placed on international games. Anglophone Africa tends to bet on the English Premier League while Francophone Africa will bet on France Ligue and other continental European leagues.
Betting on local African football leagues is still small because consumers do not have a high degree of confidence that matches will played. This is a missed opportunity as Multichoice and DStv have invested heavily in building up African football on their SuperSport channel
Opportunity for Africa
The biggest opportunity from gaming and betting is job creation and tax revenue. Las Vegas did not become the entertainment capital of the world by accident. The legalisation of gambling in 1931 was in response to the Great Depression and the collapse of the mining industry in Nevada.
In 2019, casinos grossed over $24.5bn in revenue and paid nearly $900m in taxes. This Vegas-lite model is what Egypt and Morocco have adopted to entertain the millions of tourists they receive every year. When you think about it, many cities in Africa offer little to keep tourists entertained after dark.
Threat to Africa
Like alcohol, cigarettes and sugar, gaming and betting have severe negative consequences. People are falling in debt and gaming addiction can cost them their jobs, families and in extreme cases, their lives.
Given that retail betting still drives 80% of volume and cash is the dominant form of payment, it is difficult to monitor activity and put in place controls to mitigate the negative effects. This could change as online gaming takes off and retail shops start to wind down.
Lastly, some governments in Africa have yet to realise some of the positive outcomes such as increased tax revenue and job creation. The dominance of international players means much of the financial benefits are transferred overseas.
A shift to responsible gaming and betting
There are three things that can be done to improve the sector and support the drive towards responsible gaming and betting:
- Education of users: the gaming and betting industry was originally intended to entertain and not for making money. Operators and regulators are starting to emphasis this message and to also give warnings about the dangers of addiction, which include referrals for specialist treatment
- Improvements in KYC: current requirements are not strict and customers can be allowed to transact by supplying only their full name. South Africa allows for a ‘lite KYC’ at registration but the full KYC is required to withdraw money. Some operators are meeting the KYC requirements by matching phone numbers to mobile money accounts and betting accounts
- Increased vigilance by operators: new regulations in South Africa has forced operators to adopt a risk-based approach to spot troubled customers early. They now actively track and monitor behaviour such as sessions times and duration, frequency of withdraws and deposits and unusual behavioural spikes.
The main takeaway was that the industry needs to come together across national borders and create a model that works for Africa. Local regulators also need to exert more control to achieve desired outcomes rather than just police. This Africa-centric model would have to strike a delicate balance between those who are violently opposed to gaming & betting and those who see this as just another industry capable to generating economic benefits.
© 2020 Muloongo Muchelemba. All Rights Reserved