The gaming industry is booming and new frontiers are opening up all the time. One of the latest is offshore investment in Africa. Africa has a lot to offer the gaming industry, with a growing population of young people who are increasingly connected to the internet. There are also a number of incentives for gaming companies to set up operations in Africa, including lower costs and an abundance of natural resources.
Africa is a dynamic gaming space; however a lot of investors have gotten their fingers burnt by having little knowledge of the continent. It’s laughable when l hear stuff like, Africa is a country. I cannot but laugh loud at such ignorance but to be frank, little is known about the continent. Most information pushed out there by foreign media portrays Africa in bad light, which puts off a lot of would be investors. They are not to be blamed totally though, our political leaders have also not helped in that regard. They have largely contributed to the backwardness and underdevelopment prevalent in Africa. Online gambling companies are looking to diversify their business models, now more than ever. Sub-Saharan Africa seems to be the darling when gambling executives are thinking of an offshore investment. The reasons are not far-fetched.
Foreign gaming companies are looking to diversify their business into Africa, writes John Bamidele, however the need to understand the multi-faceted diversity in the continent
Africa is a dynamic gaming space, however a lot of investors have gotten their fingers burnt by having little knowledge of the continent and how to invest in it. Though most of them see Africa as a cash cow, the continent is regarded as a high risk when looking at offshore investment. Foreign gaming companies are looking to diversify their business interests now more than before with Africa on their mind.
The continent is beginning to see some improvements in the area of online regulation. The three biggest markets in Sub-Saharan Africa, South Africa, Nigeria and Kenya are unique in the area of regulation and dynamic in operation.
1. Knowing and Understanding the Regulatory Requirements
The first and most important thing is to fully understand the regulatory requirements of the particular country you are investing in or the region depending on your mission. You should have a good understanding of how to obtain a licence and what laws and frameworks are in place, licences that are available and conditions they come with are other important issues that must be known to the investors.
2. Good and Clear Understanding of the Tax Regime
Gambling was once relegated to the back burner in Africa because of the stigma attached to it and secondly because of religion. All these have changed because a lot of African countries have legalised it and it has improved their revenue. Any investor that wants to invest in Africa, must fully understand the tax regime in your preferred country. Multiple taxation is one of the factors plaguing the gaming sector in Nigeria. A good understanding of the tax regime allows the investor to know the percentage to pay, so as not to be on the wrong side of the law and to know how it will affect his bottom line.
3. Football is King in Africa
Before investing in Africa, you need to understand which of the betting verticals players prefer to play. Depending on where you are going to operate, be it Southern, East, West or North Africa, players engage differently but Football is king here. Sport betting is strong in all betting legalised jurisdictions in Africa and it’s the fastest growing in the gambling industry. Africa is a football frenzy continent where national teams and footballers are passionately followed. Therefore, any operator wishing to invest in Africa must make football its number one priority.
4. Product Offering and Accessibility
Any betting product in Africa that is not youth centric and not accessible via smartphone will find it difficult to fly. Millennial should be the focal point of your product because they mostly engage in betting. A continent whose youth population is between 18 and 25 and has the fastest growing youth population in the world presents a good platform for demographic product offering.
Across Africa, mobile dominates with most of the locals possessing smartphones made available through a payment scheme that allows for payment to be made on instalment basis. A continent in which nearly half a billion people use smartphones according to the latest GSMA reports simply point in one direction when thinking of a product in Africa; mobile.
5. Volatility of the Political Environment
Operators wishing to have an offshore investment in sub-Saharan Africa must clearly understand the political environment of such jurisdiction. Military coups were a regular occurrence in Africa in the decades after independence and there is concern they are starting to become more frequent.
Between 2020 and now, Chad, Mali, Guinea and Sudan have experienced coups, while there was coup failure in Niger and Sudan. Though a lot of countries in Africa are now democratic, however, many still go through turbulence during general elections and change of democratic power.
6. Repatriation of Funds and Strength of Local Currency
Restrictions in many African countries can make it difficult for investors to move cash to where it’s needed. For foreign investors operating in Africa, the issue of trapped cash looms large. Companies may generate a healthy amount of cash in a particular market, but if that market has restrictions or local exchange controls in place, it may be difficult to repatriate funds to another location. In some cases, these constraints can leave companies with hundreds of millions of dollars trapped.
Some countries have stringent foreign exchange regulations in place while other countries have been known to restrict companies from purchasing US Dollars. Multiple exchange rates and weak currency is prevalent in Africa because of external borrowing. One of the conditions of non-governmental foreign institutions when approached by third world countries especially in Africa is the devaluation of its local currency vis-à-vis notable foreign currencies like Dollar, Pounds and Euro. A weak currency connotes a weak economy.
7. Ease of Doing Business and Infrastructural Development
Ease of doing business refers to how simple it is to set up and conduct businesses in a particular country. Some countries deliberately make it very difficult for foreign businesses to open and even thrive. This is done at times to protect local businesses and also keep money in the country. That doesn’t mean you shouldn’t look at expanding to a new country.
Sub-Saharan Africa remains one of the weak-performing regions on the ease of doing business; however a lot of them are carrying out reforms. Mauritius, Rwanda and Morocco are the leading countries in Africa when it comes to ease of doing business. In Nigeria, the present administration has implemented some far reaching reforms in line with the Ease-of-Doing-business initiative.
8. Country-to-Country Analysis of Sub-Saharan Africa is Necessary
It’s laughable to still refer to Africa as a country. To be successful as a business man in the continent, an individual assessment of each country is vital because it allows for proper planning. Africa has a diverse language, culture, political and business environment.
Understanding each country allows you to design products that fit into that environment; coming with a one-fit-all product is a prescription for failure. Good understanding of the business climate of your preferred country is very key.
9. Obtain the necessary licence and work with regulators
Obtaining the necessary licence needed for your operation in Africa is very cogent. The landscape in most sub-Saharan Africa is quite dynamic and constantly changing. Operators and suppliers wanting to invest in Africa’s gambling industry must obtain a licence from established regulators before starting their operations.
Operating an offshore gambling brand is not advisable as this will put such an operator in bad light. It should be stressed that having an experienced personnel on ground is a no-brainer whether that takes the form of partnership or a joint venture.
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