IN-DEPTH 1 June 2016
A complex market full of opportunity
Understanding the unique nature of betting in Africa is the key to successful market entry and survival, says Bettorlogic CEO Andrew Dagnall
By Andrew Dagnall
Of all the emerging betting territories, Africa is one of the most interesting, and for those looking to move into this market, one of the most challenging. Local operators have seen tremendous growth over the past few years, and what has happened elsewhere is now occurring in Africa, as Bet Tech’s CEO Anli Kotze has witnessed.
“We are starting to see consolidation in some parts of Africa which I thought wouldn’t happen for another three to five years,” Kotze explains.
“Not only are operators popping up in many countries across the African continent, but we’re seeing companies in other industries looking into sports betting as a new revenue stream, especially as the negative tag that was once attached to betting is fading.”
It’s important to realise that when it comes to Africa, one size doesn’t fit all; a mistake that several overseas operators have made when trying to leverage their model on an African bettor. Africa is 54 individually unique countries and each has its own set of issues. Internet penetration currently stands at 21% of the population; payment processes are a barrier to entry for bettors; data and broadband costs are high; political volatility and corruption is present in some markets; frequent tax changes are common; property security is a real issue for retail outlets; critical skills are in short supply; operators are at the mercy of currency volatility and stringent controls on foreign exchange are in force. If getting through that list of potential pitfalls doesn’t give an operator a headache, then wading through the multiple regulatory burdens allied alongside slow legislative
procedures certainly shall.
But even with all those obstacles to navigate, it’s easy to see why Africa is an enticing proposition for operators. It’s the second largest continent on the globe, with a population of 1.1 billion people. It has a middle class that’s almost as big as the entire population of Russia and Brazil, with an economy expected to grow by 7.7% annually between 2014 and 2019.
But what motivates the gamblers of Africa? Are betting patterns and incentives the same as you see in Europe and the US? Outside of South Africa, players are motivated to stake low but win big. Nairabet’s CEO Akin Alinabi says: “A typical African bettor is actually looking for a lottery mega win. Unlike the UK market where people place relatively safe bets, here people go for the long shot, including 30 or 40 game accumulators. They are looking to use very little money to win millions and millions.” Multiples like these are great earners for sportsbooks, but they carry an inherent risk for the African operator.
The majority of West and East African operators operate with little or no risk management. With the majority of their customers pursuing that elusive jackpot, operators are vulnerable to a tsunami of wrong results. That’s what happened on Boxing Day 2014, when all the short priced Premier League teams’ won and there were no draws in any games. European operators can ride such a storm but the African punter likes cash and wants it immediately; operators then struggle to survive trying to meet their obligations.
As Editec’s Business Development Director, Simon Burrell explains, regulatory issues also provide little support. “Many of the gaming authorities are in their infancy, they are still formulating policies and slowly getting to grips with compliance. There is still a balance to be found in terms of the number of licenses issued and the tax levels. Markets with many operators and lax licensing risk undermining player confidence and protection. Over the last year a number of operators have gone out of business after high payouts, and without tighter regulation this will only serve to undermine confidence and potential growth.”
Operators going out of business undermine consumer confidence in the product, and that’s also why retail is a key ingredient in Africa. Not only are the shops a social hub for bettors, but a physical presence promotes trust which is why some overseas operators have failed in the past by concentrating solely on online and mobile.
Education is another important element for the growth of the market. Football is the primary betting market, with the English Premier League and Spanish La Liga being the dominant events. But it’s important that the African bettor becomes better educated in other sports and markets because not only will that enhance their experience and interest, but it’s much easier for operators to have a balanced book with a greater spread of activity.
Whilst the margin being made by many African operators is the envy of many, there are key obstacles to be overcome for growth to be sustained. As Anli Kotze explains: “It’s vital that operators understand the cultures and dynamics in the market and are prepared to adapt and change. Licensed operators must be protected from unlicensed competition, and payment gateways must be improved to cater for funding via mobile and cash.”
There is a great appetite to bet in Africa, but as the infrastructure improves and as the bettor becomes more informed so the quality of product offered must improve. To do that local operators need to look outside of Africa. Equally, those on the outside wishing to move into this market need local knowledge for market insight
and presence and to avoid the headaches.