The African Continental Free Trade Area came into being in 2018. Its intention was, in part, to eventually create a single market for goods and services across the continent and to promote the movement of capital and natural persons. It stands as the biggest area of free trade in the world measured by how many countries have joined. It currently connects over a billion people across 54 countries and has a combined gross domestic product valued at more than US$3 trillion.
Just like its European Union counterpart, AfCFTA can implement procedures to resolve many of the duty-free challenges currently checking intra-African trade. But there are many other potentially very powerful advantages that AfCFTA can bring to the table. Bigger consolidated markets will very likely start attracting new investors, and along with new finance comes new technologies and the kind of education that will boost production.
Why Land-Based Retail Remains King
Brick-and-mortar businesses still dominate the African gaming market because they control so much of the industry. Insufficient infrastructure can be blamed for the current inability of sub-Saharan Africa to go fully digital. iGaming revenue on the continent is valued at just over US$18 billion dollars, representing half the continent’s annual income. But the iGaming sector, unlike its land-based counterpart, has not seen any significant loss despite the novel coronavirus COVID-19 pandemic.
The Digital Revolution
The positive investment outlook in Africa is further incentivised by the surge in the economic growth of the different countries that make up sub-Saharan Africa. The United Nations Conference on Trade and Development recently divulged that almost US$50 billion Foreign Direct Investment flowed into this area in 2018. This number represents an 11% increase on the year before and Egypt ranks as the leading investment country destination in Africa and East Africa as the main speculation destination regionally.
The GSM Association, the industry organisation representing mobile network operators’ interests globally, recently revealed an additional factor that will ease the growth of Africa’s iGaming industry. Despite COVID-19, these operators plan to put US$53 billion into the continent’s existing infrastructure between now and 2025.
An increase in availability and the concurrent wider adoption of smartphones is possible thanks to a financial model which allows lower-income earners to pay instalments on new handsets. 45% of the over 1 billion people making up the continent are now connected thanks to their smartphones and this figure is expected to rise by roughly 500 000 by 2021. This makes the migration to iGaming that much more inevitable.
The consumption of mobile data will rise to 7.1 GB per person by 2025, says the report, and internet penetration will be driven by the growing adoption of connected devices and the increasing reliability of high-speed internet services.
It All Comes Down to Demographics
The most recent iGB Africa Report on iGaming uses information obtained via The Economist to posit that the African population is growing at more than twice the speed of Asia and Latin America. It’s predicted that Nigeria will overtake the USA and become the third most densely populated area in the world with 400+ million residents soon. And as the GDP is growing by 5% to 6% across sub-Saharan Africa despite want and destitution, so there is certainly an emerging middle class making itself known.
The iGB Africa Report also revealed that many more African countries are now starting to consider online gambling as a serious alternative to retail and Lottery gaming. This leap has largely been made possible by the rapid changes the mobile payment and telecommunication sectors’ regulatory frameworks are experiencing. As many as a dozen regulated markets are up and running.
BtoBet founder Alessandro Fried has made his opinion on online gaming in Africa clear, stating time and time again that this area will keep on experiencing the massive growth it is currently enjoying. He said that more users are getting connected and this will work towards shifting the dominance of land-based retail outlets to internet-based ones. Fried added that locals are embracing mobile payment gateways too, another reason for operators and service providers to take a serious look at expanding into local industries.
The Problem of Political Instability
The issue of governmental turmoil is a major concern for foreign investors. Africa is viewed largely as a volatile environment and this was commented on by Dave McDowell. The Founder and Chief Executive Officer of FSB Technology has gone on the record as saying that economics in Africa will enjoy tremendous gain over the next 10 years if politics and pandemics are kept under control.
The continent has been plagued by much political insecurity, devastating civil wars, endemic corruption, and terrible leadership over the last 20 years. These factors have all played their part in slowing the rate of infrastructural development. McDowell added that the improvement of infrastructure, international financing, an expanding middle class, and better mobile banking options all indicate that Africa is on the tipping point. Economic growth will finally be able to overcome corruption and political chaos.
The research company H2 Gambling Capital has revealed that the gross gaming revenue for Africa will rise at above the global rate between 2020 and 2025. While it will account for just 1% this year, the global compound annual growth rate will stand at 2.1% by 2025 while Africa’s will increase to 5.4% over the same period. South Africa’s dominance of the gambling industry in sub-Saharan Africa is obvious, contributing as it does 48% of the total, followed by Nigeria and then Kenya.
Africa’s Particular Needs
It is vital that investors view sub-Saharan Africa on a country-by-country basis and avoid seeing it as a single, coherent environment. There are 54 distinct countries occupying this land and each one has its own list of divergent traditions which will affect players’ betting and habits. This is a sentiment expressed by Digitain Senior Sales Manager Hmayak Arakelyan. Opera Gaming Senior Director Murray Spark echoed this view, stating that foreign investors who launch a one-size-fits-all product here are making a grave error.
Before introducing any gambling product onto the continent, extensive research should be conducted about the specific needs of whatever particular area is being targeted. Operators should know what kind of betting behaviour is typical of residents of that region, which kind of products are in demand there, what the best practice is around advertising, and how to most effectively communicate with prospective consumers. Brands need to get to grips with regions’ distinctive histories, their economic and political climates, and the business ethics they’re known for.
The Issue of Regulation
The lack of cohesive regulation is a problem in Africa for would-be financiers considering or even planning offshore investments. The regulatory framework for the region as a whole can best be described as blundering and feeble, but there have been some significant improvements in this area over the past three years.
The iGB Africa iGaming Report offers an in-depth look at the continent’s regulatory landscape as a whole. It states that 11 countries have instituted laws around online gambling according to VIXIO Gambling Compliance information. Complete bans are rare, with only five countries explicitly forbidding online gambling in Sub-Saharan Africa, and existing rules govern land-based gambling at either the regional or national levels in most.
For operators to succeed within current regulatory frameworks they need to get their hands dirty, says Fried. He states that brands play a vital role in the process and should be encouraging relevant local regulatory bodies to enter into discussions to determine what the ideal outcome for everyone involved looks like.
The Gaming Regulators Africa Forum has 13 of the continent’s biggest jurisdictions at the forefront of establishing regulatory best practice in this area. Among its many goals is the aim to broadly increase the efficiency of gambling laws by adopting minimum standards for its member states. The iGB Africa iGaming Report says that almost all African regulators are committed to accepting the basics of international best practice and then figuring out how to adapt it most effectually to their respective jurisdictions.