The industry’s attention has been captivated by regulatory progress in the USA, but there are huge opportunities on the table in Africa. Here is what you need to know…
While most of the global gaming community has been focused on the undeniably exciting developments in the United States over the past few months, other opportunities have flown under the radar.
There has been much talk of emerging markets in igaming for several years now, although this chatter has tended to focus on Latin America and southeast Asia.
Yet one region which is finally beginning to attract some serious attention – not to mention investment – is Africa.
Igaming is not a new phenomenon in this part of the world. Several markets, particularly Kenya and Nigeria, have fairly developed igaming sectors, with international and local operators competing to grab a share of a fast-growing market.
The global jamboree that is the international igaming conference circuit is also adding an increasing number of stops in Africa, perhaps most eye-catchingly an inaugural ICE Africa conference in Johannesburg in October.
Meanwhile a series of innovative payment processing methods have emerged which open up igaming to millions of people across the continent.
The infrastructure is undoubtedly being put into place to capitalise on Africa’s igaming potential.
With margins increasingly squeezed in the mature markets of Europe, competition growing more intense in Asia, and the United States regulating in a manner that enforces a high barrier of entry, Africa is suddenly on the radar of many igaming operators and suppliers.
Before considering an entry into Africa’s igaming sector, it is important to evaluate the current situation and the short-to-medium term outlook.
According to H2 Gambling Capital, Africa’s total igaming gross win stood at €350 million in 2017. This is a fairly modest figure; the UK alone took an igaming gross win of roughly £4.5 billion in 2017 – some 15 times that of the entirety of Africa.
However, what is attracting the attention of gaming operators and providers is the clear potential for rapid growth.
While igaming markets in western Europe are beginning to mature, Africa provides an interesting prospect for those looking for new, high growth jurisdictions to enter.
H2 Gambling Capital predicts Africa’s igaming revenues will have climbed to €523.9 million by 2023 – an impressive 50 percent hike on the 2017 number.
As African markets continue to regulate, and indeed learn to do a better job of enforcing existing legislation, a greater share of that revenue will enter the white market; H2 Gambling Capital predicts 2019 will be the first year the white market accounts for more than half of Africa’s igaming revenues, and that share was just 31.8 percent as recently as 2011.
In terms of jurisdictions, Nigeria, Kenya and Tanzania currently stand out from the pack. All three have current legislation in place that permits at least some form of online gaming, and all three are already enjoying the benefits.
Many other African markets are watching closely with interest, weighing up the introduction of their own regulatory frameworks.
One of these is South Africa – a market with clear potential, although one which has unfortunately been bogged down by a slow and troublesome regulatory process.
Elsewhere several smaller markets are making moves; Mozambique, Uganda, Senegal and Botswana all offer varying degrees of opportunity to brave operators willing to make an early move.
A unique market
Those markets which have regulated across Africa, and indeed those which are considering the process, offer up a set of unique challenges to igaming operators.
They tend to differ substantially in nature not only from the mature markets of western Europe, but also to the grey markets of southeast Asia and the emerging markets of Latin America.
Perhaps the most immediately obvious trait of African igaming markets is the dominance of the mobile channel.
Currently mobile accounts for roughly 30 percent of total igaming gross win in Africa, a figure set to rise above 40 percent over the next five years.
Unlike many other markets which still have a strong desktop igaming tradition that was established before mobile devices became the preferred method of gaming for many, the vast majority of igaming growth in Africa will come via smartphones and tablets.
This needs to inform the strategies of those entering the market. With a large slice of your potential customer base unlikely to have fixed-line broadband, delivering a product that engages customers using sometimes dated mobile devices with limited bandwidth is critical. Expect to see many operators opting for a stripped-down product.
The mobile element of African igaming is particularly relevant when it comes to payments.
In Kenya, for instance, the sector is almost totally dominated by mobile payment system M-Pesa, which has more than 17 million registered accounts in the country and a further 7 million in Tanzania.
Those operators who have already grabbed market share in Kenya have done so by quickly adapting to this reality and building products which enable users to easily deposit and withdraw using the M-Pesa system.
Given that smartphone penetration in Kenya now tops 90 percent (the number for the continent as a whole is 43 percent but growing quickly) it is clear that incorporating a sound mobile payment strategy is key.
Cryptocurrencies are another area of interest for igaming operators eyeing Africa. Globally around 1.7 billion people remained unbanked, with 66 percent of sub-Saharan Africans still without a traditional bank account.
This opens up a vast avenue of opportunity for igaming via digital currencies. Africa’s growing middle class means that many of those who are still unbanked nonetheless have a mobile device and disposal income for the first time.
Creative igaming products utilising cryptocurrencies such as Bitcoin is one way our industry can help these people plug into the digital economy and access gaming. The rewards are clear.
Payments is not the only area where it is important to build a deep understanding of the market and supplement it with local knowledge.
The product mix in Africa differs to that of western Europe and indeed many other regions. Sports betting is the predominant product, although that is liable to change as the market develops.
Products to keep an eye on are virtual sports, which is already gaining significant traction, and pools and lottery betting.
Virtual sports are extremely interesting as they are proving that there is an appetite in Africa for RNG-based products in a region without a strong casino heritage.
Indeed, casino is fairly untested in Africa thus far, but expect it to develop as a vertical of importance over time – particularly if operators and suppliers from Asia make a move.
With Africa clearly offering strong igaming growth potential, the question then becomes how best to approach the market.
The first thing to note is that Africa should not be treated as a single homogenous market. While there are similarities between certain markets (Kenya and Tanzania come to mind), the continent as a whole is extremely diverse.
Much of Africa remains a no-go area for igaming; the sector is outright banned across most of the north of the continent for religious reasons.
Uneven economic development also means certain jurisdictions, regardless of regulatory progress, are unlikely to hold much appeal to international operators.
Currently the best bet seems to be to focus on the more developed markets with frameworks already in place – Nigeria, Kenya and Tanzania particularly.
To succeed here, local knowledge is important across almost every element of your operation. For instance, don’t even think about launching an igaming brand in Kenya without a M-Pesa payments integration plan. Hiring in an expert on the system – which is already used by most operators active in Kenya – is likely the cheapest and most efficient way to proceed.
Indeed, project-based consulting is the most cost-effective way to enter African markets.
While these markets are displaying strong growth potential, they are not yet of a large enough size for most operators or suppliers to invest heavily locally, or open up regional offices of any note.
However, at the same time, without a local approach to the market, international operators will struggle to make headway. As is now the case for the expansion of igaming globally, as the sector becomes more international, it becomes ever more important to think about creating an offering that resonates locally.
The solution is to hire experts with experience in these markets and rely on them to put an Africa strategy in place while also upskilling the rest of your team.
For instance, bringing in an expert on a project-by-project basis could help supercharge your marketing efforts in an African jurisdiction.
The expert could develop a marketing strategy for the territory, give your existing marketing team training on how best to reach customers in that market, and even make other recommendations on how to adapt your product to ensure it better appeals to players.
If required, the expert could then be brought back a few months down the line to see how your company is progressing, and make further suggestions.
When executed correctly, a single project-based consultancy can leave your operation well equipped to handle a brand new challenge.
Using a platform like findmyexpert.com is the easiest way to find the local expertise required to succeed in Africa.
It cannot be stressed enough that those entering Africa for the first time must ensure a local approach is implemented at every step of their operation.
There is a small but growing pool of local talent emerging since the entry of a handful of major operators into markets such as Kenya, but this must be supplemented by training up young, local staff.
For those who require an on-the-ground presence, airdropping in experienced team members from European headquarters is a simpler and cheaper process than what we have witnessed in the US, where visas remain frustratingly difficult to attain.
But from both a costing and local knowledge perspective, it makes more sense to keep the international appointments to a minimum and staff up locally wherever possible, supplementing with project-based consultants where required.
A local team will ensure your operation adapts to the requirements of your market. Do not assume that products, marketing strategies and payment systems that have succeeded in Europe or Asia will work in Africa. This is a unique region with its own take on igaming.
Operators and suppliers entering Africa for the first time must also work with regulators to ensure sensible frameworks are deployed.
In the meantime, resist the temptation to take shortcuts, and instead implement best practice across every area of your operation, from AML and KYC to product development; growing a sustainable African igaming sector will benefit everyone.
Future of igaming?
The igaming sector has always been one in search of the next big thing. There is plenty of sense in this. We must keep evolving and innovating if we want to continue to grow.
In Africa, there is a genuine opportunity for igaming stakeholders to build a thriving and sustainable sector from the ground up.
The region is rapidly changing, and accounting for these changes while drawing on experience from elsewhere is the only way to go.
So let the rest of the gaming industry focus on US sports betting; Africa offers a very different type of challenge, but at the same time almost limitless potential.
With a sharp focus on sports betting and the mobile channel, and a willingness to work with experts and local talent alike, it is possible to succeed in a series of high growth markets which lack the competitive edge of the US or Europe.
Building upon this promise is a genuinely once-in-a-generation opportunity.