The final frontier: Why Africa is the online industry’s largest untapped opportunity

Ever-tightening regulations in mature and crowded European markets – which inevitably leads to spiralling compliance costs and shrinking profits – means the industry finds itself on the prowl for greenfield opportunities in other parts of the world. Latam, for instance, has long been talked up as a region ripe for the picking from an igaming standpoint, while to the north the US has been an almighty bun fight for access and market share since PASPA fell in 2018. And now neighbouring Canada, or more specifically its most populous province, Ontario, has captivated firms on both sides of the Atlantic. However, some are touting ‘the next big thing’ as being Africa, a continent that is home to around 1.4 billion people – the second most after Asia.

Admittedly, countries to the north of Africa such as Egypt, Libya, Tunisia and Algeria are extremely unlikely to ever regulate online gambling, yet Sub-Saharan Africa (population around one billion) is seeing online betting specifically really starting to take off. The likes of Nigeria, Kenya and South Africa have established regulatory frameworks and thriving online gambling sectors, all of which could be compared to Europe in terms of its product sophistication and customer acquisition and retention know-how. And now markets like Mozambique, Tanzania, Uganda, the Democratic Republic of Congo (DRC) and “exploding” Ghana, as one source put it, are just a few of the countries popping up on the radar of online gambling companies.

Besides entrenched local online brands like Bet9ja and BetKing in Nigeria or Betika targeting East Africa, international names already in the mix include Betway, Betsafe, Dafabet, Interwetten and 10bet, to pick out just a handful. However, 888 gave us a glimpse in March of its ambitions on the continent by announcing that the London-listed operator had teamed up with seasoned industry professionals Andrew Lee, Alex Rutherford, Ian Marmion and Helen Scott-Allen to operate the 888 betting and gaming brands in Africa.

888AFRICA, as the JV is known, is spearheaded by CEO Christopher Coyne, previously CMO and chief customer officer at The Stars Group, and will initially launch in four regulated markets this year via an unnamed third-party tech platform. The long-term goal is to be in more than 10 regulated African markets and, as Coyne hopes, “build a podium position” wherever 888 is active.

When discussing potential markets, he singles out South Africa as “very exciting” with its established land-based and digital gambling, the latter of which received a boost due to the Covid-19 pandemic forcing offline options to close. “When you see [South African bookmaker] Hollywoodbets on the front of the shirt of Brentford, a Premier League side, it starts to give you a sense of where Africa is going.”

Coyne adds: “Nigeria, you’re talking about 200 million people, or three times the population of the UK. It would be remiss to look outside of Ghana and Kenya as two interesting markets […] there’s also the DRC, Ivory Coast will move to regulation in due course, and we like Malawi. Malawi is an established market, it’s a small set of players there, we know who they are, and we think we can compete.”

Mother tongue

Anyone with experience of operating in Africa will underline how it isn’t one homogenous market. Instead, it is a diverse and complex part of the world where operators need to tailor products and marketing to different markets, just like in Europe. Language is also a consideration. While English is widely spoken in countries like Nigeria, Ghana, Uganda, Kenya, Zambia, Zimbabwe and South Africa, large swathes of West Africa, as well as the DRC (the continent’s second-largest country by area), are French-speaking nations.

To the south, the official language of Mozambique and Angola is Portuguese. Meanwhile, some markets are regulated, yet plenty of others are not. “No two countries are the same,” says Mark Tipping, an industry consultant who previously co-launched mobile-first sportsbook Eazibet and a retail chain, now known as Go-Bet, in South Africa.

“There are a lot of commonalities between certain countries but don’t expect to helicopter manage from Europe and to drop in a cut-and-paste product across multiple countries and have success.”

There will be an estimated 615 million unique mobile subscribers in Sub-Saharan Africa by 2025, or half the population

“It’s hugely different to Europe,” echoes Martin Nieri, a partner at strategic consultancy The iGaming Collective. “When you go into Africa, you’ve got to leave your European experience at the door a little bit.” Nieri knows what he is talking about after having recently been CEO of GOAT Interactive, the firm behind its core brands of Premier Bet and Premier Vegas, which principally targets French-speaking nations including Mali, Cameroon and Senegal, along with the Portuguese-language countries.

“A really interesting factor is that whereas people in Europe have money but not a lot of time, you flip that on its head in Africa,” he explains. “People find money through casual labour – scratching a living essentially – but they have a lot of time to spend in bars, community centres and betting shops.

“Betting in Europe is, in the main, a fun pastime. In Africa, fun is probably the second or third driver; the first is to make extra money. So, they use the time they have to really understand the odds and betting and know so much about performances of teams and players.”

The down-at-heel betting parlours you encounter in places like Kenya and Uganda can be packed when there is a large round of fixtures. Punters will tend to watch the matches, place bets, play virtual sports games and socialise in these outlets. Retail still dominates, although mobile betting is growing (much of Africa skipped the desktop phase countries like the UK went through before the smartphone era).

“Online is motoring,” Nieri stresses. However, many bettors are still wary of making the switch. “Trust is a huge issue in Africa. People don’t trust anyone or anything because they’ve been let down by governments and institutions.”

That said, the younger generation is more comfortable with betting in the digital realm. And it’s worth noting that 60% of Africa’s population is under the age of 25, meaning it is the world’s youngest continent. Yet one of the main challenges the industry faces is the fact smartphones aren’t commonplace. Data costs are also prohibitively expensive for many people. The sector has a solution, though. “A lot of operators now do reverse billing of data,” Tipping explains. “So, customers don’t pay for their data, and operators will have data-light ‘mobi-sites’ and absorb those costs for the customer.”

Gee whiz

Most of the smartphones in Sub-Saharan Africa only support 3G. Therefore, online bookmakers have to factor this into the equation when designing products. BetLion is a fully online bookmaker operating in Kenya and Zambia which was launched four years ago by industry veteran Victor Chandler after he sold his Gibraltar-based BetVictor business to tycoon and gambler Michael Tabor.

“We’ve tried to create an African product for the African market,” explains BetLion CEO Jason Gibson. What he means by that is an in-house-built front-end optimised for less sophisticated mobile devices. FSB Technology powers the site’s back-end. “So, a low data usage [product] that can be used on a very cheap phone. It’s a very light platform,” the CEO explains on a phone call from the company’s head office in Kenya’s capital, Nairobi.

Customers can also bet via SMS or by USSD (unstructured supplementary service data), a telecoms technology often deployed to bring mobile financial services to low-income consumers. “We try to cater for everyone,” Gibson remarks. “We don’t want the individual using a lower-end phone to find it is a poor experience. We want to make sure that everyone can get the most out of our platform that they are after.” Bottom line, you can keep it simple with navigation and straightforward bet-slips, yet the fact is many people across Africa don’t even have the web on their handsets.

According to the global mobile association, GSMA, around 800 million people in Sub-Saharan Africa, or 72% of the population, are still not connected to mobile internet. The GSMA anticipates that unique mobile subscribers in this part of the world will grow to 615 million by 2025, up from 495 million in 2020. In other words, half the region’s population. Over a quarter (28%) will be on 4G by then and just 3% will be using 5G.

In fact, 4G will only overtake 2G in 2023 to become the second-most dominant technology after 3G. Those who have a smartphone today are likely to have lower-cost Chinese phone makes in their pocket than premium devices from the likes of Apple or Samsung. Smartphone brands Tecno, Infinix and Itel, which are owned by handset manufacturer Transsion based in Shenzhen, China, dominate in much of Africa.

Data released in March from market intelligence outfit IDC revealed that these three brands accounted for 47.9% of smartphone shipments in Q4 2021 into Africa. Transsion also has a stranglehold on Africa’s market for so-called feature phones (internet-enabled handsets but without the full functionality of a smartphone) with a combined unit share of 78% in Q4 2021, followed by Nokia (8.6%). Low-end models, or those sub-$200, accounted for 88.1% of shipments, although the mid-range ($200-$400) market is gradually growing. So, content-heavy sites and apps with sports streaming and live casino won’t suit many markets.

“We are working with the right tech partner or tech partners to deliver a solution that we know is scalable and will work across the majority of customer devices,” Coyne says. “This isn’t a desktop play; this is a mobile play so we need to have a thin, lightweight solution that can deliver an experience that a customer wants to use again and again.”

Another challenge is payments. While South African operators offer a multitude of deposit and withdrawal options as it’s “as broadly developed as the UK”, says Coyne, this isn’t necessarily the case elsewhere. Indeed, 370 million people across Africa are thought to have no bank account. Gibson of BetLion says there are operators in Kenya that allow for deposits using plastic, yet for him it is window dressing. “There is zero point in offering it.” Instead, M-Pesa – a micro-financing service designed for the unbanked whereby people can send and receive money or pay bills electronically through any mobile phone – sits at the top of BetLion’s webpage.

Established in Kenya back in 2007 by Vodafone and Kenyan telecoms company Safaricom, M-Pesa, a portmanteau of the words ‘mobile’ and the Swahili for ‘money’, is Africa’s leading mobile money service. According to Vodafone, more than 50 million customers make in excess of $314bn in transactions a year through the service.

Around half of Kenya’s GDP is transacted via M-Pesa. Its importance to the East African country is underlined by Gibson: “M-Pesa runs the economy in Kenya. It is a mammoth industry.” By that same token, any downtime in the service, although extremely rare, is potentially crippling.

“If Safaricom goes down, I can tell you our whole industry in Kenya will be down at the same time – that’s how powerful and trusted it is. It’s a religion in Kenya,” Gibson suggests.

Similarly, 60 million customers use Orange Money throughout 17 countries – the majority of them in Africa – since its launch in Ivory Coast 14 years ago. “Mobile money is absolutely taking off and becoming quite established in many markets,” Nieri comments. “People are used to paying for a credit that goes onto their phone that pays for many things in their lives. If that [mobile money] isn’t in place, then you struggle to be an online operator.”

Getting a leg up

It’s no exaggeration to say Africa is a football-obsessed continent. The elite European clubs attract a loyal following there, while the Africa Cup of Nations – the main men’s international football competition – can bring whole countries to a standstill. Such is football’s dominance (horseracing is also popular in some markets) when it comes to the preferred sport, it commands centre stage within bookmakers’ offerings even more than with European sportsbooks. Accumulators on football fixtures also account for the lion’s share of bets.

“The concept of bet small, win big, is real for Africa,” insists Coyne. “A 30-leg accumulator would be perfectly normal. Obviously, stakes are much lower, let’s say 20-30 cents.” The typical stake over at BetLion is under a dollar. “The average stake per customer is where you can see the big divide between the UK and here,” Gibson confirms. This is understandable when money is hard to come by, Africa being the world’s poorest continent based on GDP per capita. For example, GDP per capita in land-locked Burundi was just $239 in 2020. “They might bet a dollar on a 12- or 13-fold to try to win $2,000,” Gibson notes when referring to his customers in Kenya and Zambia. Furthermore, he says Kenya’s controversial tax regime isn’t conducive to betting singles for larger sums.

“If I bet $1,000, there is 7.5% tax on the stake and 20% tax on the winnings. If I’m betting on anything under 1.275 (2/7) I lose money even if I win. So, your higher bettors will still have three, four or five games on a bet-slip. It’s not often you find someone who puts one leg on a betslip, it’s just not the norm.”

Christopher Coyne, 888AFRICA

This is one reason why pre-match betting is still by far the preferred choice in Africa; live wagering hasn’t exploded like it did a decade or so ago in Europe. Bet builders have also yet to fully take hold, although you could see this kind of user-generated multiple within a single match on various markets proving to be a hit based on the love for accumulators.

As for the other main vertical, online casino, it is still in its infancy despite land-based gaming in many countries. A large part of this is down to the fact that, as mentioned before, some people don’t have a handset suited to portable play. Also, high-end visuals or live casino products eat into data allowances and rack up costs. “Generally, data costs on your mobile phone are high on those rich, more visual betting products rather than soccer,” Tipping explains on a Teams call from his home in Cape Town, South Africa.

Coyne concurs: “Having heavy, bonus round-rich, progressive slot games just isn’t going to work. We need games that are appealing, attractive and lightweight.” That said, Coyne questions why for those who are able to play live casino, the product hasn’t been tailored properly. “The live dealer product in Africa today is still using Eastern European or Philippines solutions. Why are we not using African studios and authentic African dealers?”

Keen to create another revenue stream besides betting, BetLion rolled out online casino last July, albeit just slots for now. Table games are on the way. Having these slots titles means money is being recycled rather than withdrawn, Gibson explains. “Previously when we had a bad week on sportsbook margin, the withdrawals on Monday would be through the roof,” he says.

“It was chaos with people taking the money out. Now with our casino we are seeing a lot of that money staying in the system. Unlike the more developed markets, it’s so easy to withdraw money here; you push withdraw on the system, you type in your PIN and it’s in your wallet. It’s as seamless as that.”

The African dream

All those we have spoken to agree that you are going to see more European names expand into this part of the world, either organically or through M&A. For instance, Entain has formed a subsidiary, Impala Digital, after acquiring an unnamed tech platform for an initial fee of $40m in a bid to fast track its entry into Africa.

While Entain CEO Jette Nygaard-Andersen acknowledged last year during an earnings call that Africa is mobile-driven and “based on 2G and 3G”, she told investors and analysts it was a market that the operator was “interested in”. In one of its slides for Entain’s Capital Markets Day last August, the regulated African opportunity was pegged at $11.5bn in the long term, up from $2.1bn in 2020. “I could see Entain coming into Africa with bwin,” says Coyne.

Home to more than 200 million, Nigeria boasts Africa’s largest population and an established online betting market

Given Flutter CEO Peter Jackson’s fondness for buying things, including Tombola and Sisal in the past six months, it’s not beyond the realms of possibility that the FTSE 100 operator snaps up a local operator in a regulated market or markets in Africa. Betfred, which has a solid position in South Africa through the recent acquisition of online and retail operator Betting World, could also look to grow its footprint. For now, though, Betway probably remains top dog among the European contingent.

The ‘Africa and Middle East’ segment accounted for almost a third of the Super Group-owned online bookmaker’s 2021 revenue. In fact, the €212m in revenue generated made it Betway’s largest geography. “Betway is the best example of a worldwide brand very established in Africa,” says Tipping. “[Also] betPawa is multi-country from a European base […] but there aren’t very many pan-Africa success stories at the moment.”

While much of the industry’s attention has been on North America and Latam, and it still will be with Brazil in the process of regulating online gambling, Africa is that uncut gem, if you like, with tremendous untapped potential as the world’s fastest growing continent. “It’s the one continent that the industry is still extremely excited about,” Gibson states.

On that point, Coyne says that there are about 20 African markets today that you could deem to be “an opportunity” for the sector. However, he expects this number to swell to 30 in three to five years from now. “There are already a number of markets looking to regulate, so we know this is coming.” Population and economic growth, combined with the adoption of more advanced mobile technologies and cheaper data costs, means Sub-Saharan Africa has plenty of headroom for growth. “Africa is like the UK, in my experience, when I started in 2008,” Coyne adds.

Tipping says that despite Africa being “broadly behind a region like South America in terms of advancement of technology”, the gap is closing. “All the graphs are going the right way in Africa: digital money penetration, smartphone penetration, data costs and population growth. The countries are so mobile-first, there’s a real opportunity to create new products that are Africa-centric.”

Indeed, he believes that a foothold now or in the coming years in several key territories is “still a very good place to be”. Moreover, it is the population growth that stands out for Nieri. “By the end of this century, the population of Nigeria is going to be larger than Europe [today].”

He concludes: “Is it the final frontier? There are always interesting frontiers to be conquered but certainly population, technology as well as socio-economic changes will mean it’s a big frontier to crack, for sure.”