What sports are particularly attractive within sports betting across Africa? Is it more on a domestic, international or global scale?
Aiste Garneviciene: Horse racing is very popular as is, of course, football of all kinds, including domestic and international - particularly the big European leagues and major tournaments. Africa loves sport, so there is also a considerable following for cricket and rugby particularly in South and West Africa, where one can still see plenty of influence from British culture. In terms of proportion, I would say this gravitates towards an even split a lot of the time with key fixtures in the calendar tending to drive players towards major events.
Alessandro Fried: It's understood that Africans are passionate football fans, and they follow the many African football players who feature in the most famous European clubs. So it’s unsurprising that betting on football is the most popular and widespread form of sports betting. International competitions along with the English Premier League, Primera, Serie A and UEFA Champions League are also hugely popular. Local sports also attract a high level of engagement, and operators should be in a position to deliver a tailored content portfolio that reflects local preferences to augment the user experience.
Steven Spartinos: Football is the most popular, with horse and greyhound racing being a strong second. In terms of sports betting in general, it really depends on the heritage of the particular country while South Africa sees popular markets in cricket and rugby. The further north, the more this changes to football. European football is by far the most popular, with the Premier League being number one. The Spanish, Italian, French and German leagues also have a significant following. Ensuring that the right markets are offered on the most popular sports per region is vital to operators vying to lead their regions. As with virtuals and igaming as a whole, localization is key. We've also seen growth with Keno and Spin and Win gaining a sizeable following.
Luis de Prat: All the major European football leagues are attractive to bettors in Africa (e.g. England Premier League, Spain La Liga, Italy Serie A, Germany Bundesliga and France Ligue 1), which constitute the majority of turnover, while secondary sports, such as tennis and basketball, and African football leagues such as Egypt and Nigeria are gaining prevalence.
How is technology infrastructure advancing enough to keep up with demand?
Aiste Garneviciene: Africa is a huge continent and when we talk about tech infrastructure, it's important to differentiate the discussion by individual country, as some are significantly more developed than others. Our most significant operational market is South Africa, which is often considered almost separately due to its comparatively advanced development. Internet penetration across Africa ranges from over 50% in the south to as low as 10% in the central region of the continent. But even within South Africa itself, varying levels of challenge exist as there are still certain areas that have issues with internet coverage, while the adoption of modern smartphones varies wildly. Payment methods and the cost of mobile data packages still present significant hurdles. The combination of internet, payments and handset type will dictate the availability of your products in the market and will directly impact your potential success in the region. Looking at the wider continent, the dearth of skilled and experienced personnel is a long-standing difficulty and remains one of the key reasons why Africa still has some way to go, but considering how much it has grown in the last five years, we can certainly say huge progress has been made, making it one of the most attractive growth prospects globally. I see the pandemic as almost a driver for a lot of the adoption we have seen over the past year, as many companies accelerated their digital plans and quickly migrated their operations online as part of their backup and recovery plan.
Alessandro Fried: Africa comes with its own unique technological context. The parameters that characterise the continent – internet penetration, mobile subscriptions and even mobile internet costs – are entirely different to what one is accustomed to in more mature markets. So one can’t envisage an operator or supplier to succeed in Africa by adopting the same approach used in Europe, for instance. Even though the population has almost skipped entirely the desktop stage, and are more intent on using smartphones, the evolutionary stage of the mobile phone ecosystem across Africa means that suppliers need to take a technological step back. While smartphone use is on the rise, feature phones are still very much in use, and thus necessitate a flexible technological approach that reflects the local technological reality. And while outdated hardware is still very much a major hindrance in delivering a betting experience on the same level as that found in more mature markets, slower internet speeds also require the use of low data intensive apps, which reach those areas in Africa that have data and bandwidth limitations. Even though the technological infrastructure is ameliorating across the whole continent, and local populations are getting better devices and more reliable and faster access to the internet, operators still have to roll out lighter products, ensuring functionality on any basic browser.
Steven Spartinos: Where access to mobile data is limited and expensive, virtual suppliers are responding by adapting their technology to offer lighter versions of their products. The same goes for content, with operators requiring tailored portfolios to suit varied player preferences of individual countries and their markets. These two factors demand significant investment in new games and formats, as well as infrastructure. The short-term focus for operators and investors is to increase the uptake of 4G while 5G is slowly being introduced, primarily in Sub-Sahara Africa.
Luis de Prat: Gaming businesses have progressively been adopting the internet as the most efficient medium for operations, and the major developments in mobile technology infrastructure have allowed the gaming industry to keep up with demand.
Can you provide some growth projections of areas that are thriving, and some other areas where progress is being stymied by law or regulations that are difficult to amend?
Aiste Garneviciene: The adoption of smartphones that are capable of running online operators’ games is definitely growing, as is the penetration of robust and appropriate internet networks, both to homes via landlines and mobile. The major stumbling blocks are digital payment gateways, as cash is king. The lack of adequate tech education is another concern, as are employment opportunities in digital businesses and the lack of investment in basic, reliable power supplies to avoid regular outages.
Alessandro Fried: South Africa and Nigeria are undoubtedly the reference markets for Africa, with forecasts by H2 Gambling Capital indicating a strong growth for Nigeria resulting in the local industry more than doubling its 2019 GGR ($319.9m) to $675.1m by 2025. South Africa, on the other hand, while by far the largest gambling market and the only one to truly rival the regulated markets in Europe, in some ways has evolved slower than some of the other African markets. One might as well argue that the restrictive nature of the regulatory framework currently in place - which largely limits online gambling - hinders the country from realising its true potential. Nonetheless, the National Gambling Board projects that the casino sector’s GGR contribution will increase at a compound annual rate of 4.25% from R18.4bn (circa €1.04bn) in 2018 to R22.6bn in 2023 (almost €1.3bn). This is, however, a conservative growth, especially when considering the casino vertical’s popularity and its resulting market share (66.4% in 2017).
Steven Spartinos: Since the start of the pandemic, online operation and play has experienced the most growth, with some operators having doubled their turnover year on year. This surge was seen across global markets, but most notably in Italy, LatAm and Africa. In terms of legislative challenges, it’s a fact we must operate best practices within regulated markets. Regions with strict parameters can affect the progress of a vertical as many limits are put in place. Slower take-up of new games and verticals are the result, but it’s the same for everyone and it’s up to individual companies to mitigate this with shrewd marketing and promotions and ensuring their products and roll-outs are as engaging and impactful as possible.
Luis de Prat: Africa is the land of opportunities. The main difficulties a few years ago, with legal uncertainness and payment processes, are being overcome by technology, and local entrepreneurs that see online as the future of gaming. GGRs in South Africa and Egypt now register growth, and when we had Nigeria, Tanzania and most recently the regulated market of Angola, it's easy to understand that Africa can represent a significant part of revenue for providers and international operators. The challenge is on the suppliers’ side, who need to understand the uniqueness and differences between the markets.
What are some of the regulatory hurdles that still need to be overcome to generate greater retail and iGaming growth?
Aiste Garneviciene: I would say consistency and transparency, as regulation within one country is governed on a state-by-state basis and that complicates things. It makes it inefficient to a cost-effective and timely rollout of retail or even online operations. There’s no reason why a regional regulator cannot set the standard for excellence when it comes to regulation done right. I believe that if Africa – and especially South Africa - can present its framework to the continent as a case study of success, then others have a path to follow in terms of implementation.
Alessandro Fried: While en masse gambling prohibitions are rare, with only five countries explicitly banning gambling activities mainly on religious grounds, generally speaking the continent is still lagging behind other markets when it comes to online betting and gambling regulation. Many countries still rely on outdated regulations that take into consideration only land-based gaming, whereas online gambling is still very much a grey area. However, the number of African countries adopting a regulatory framework is on the rise. A strong regulatory basis essentially provides benefits to all the industry’s stakeholders, providing a safer environment for operators, suppliers and players alike. Such an approach has been undertaken in mainland Europe, transforming the market into the most lucrative from a GGR perspective, and Africa is keen on adopting this approach, with countries adopting laws on a national level. Operators have a key role in this process, and it is really encouraging that local regulatory bodies delve into fruitful discussions with operators to determine the best possible regulatory outcome, that proves to be a safeguard for all parties involved. It is also impressive that rather than just adopting a copy and paste approach from other jurisdictions’ laws and regulations, or take recommendations and apply them as they are, all of the regulators are very keen to take international best practices and then mould, interpret and adapt them so that it works most effectively in and for their respective jurisdictions.
Steven Spartinos: Africa has huge potential. Each country is at a different stage in terms of effective legislation and regulatory frameworks. That's the first major issue; some have a tendency to consider “the African market” as a single entity but there's actually no such thing. The scale of development for igaming ranges from the wholly unregulated to those that are held up as the gold standard and have had a well-managed structure in place for years. The north is characterized by markets where gambling is banned outright, and only a handful are completely regulated for products across the board, and in some, only sports betting is permitted. The latter also benefits from a lower technological barrier to entry so is suited to the developing nature of existing mobile data networks. But a younger population with high adoption of smartphones and a growing disposable income is propelling the industry, with complete prohibition increasingly untenable. Pandemic-related lockdowns have also exacerbated the lack of online markets in some regions, with retail betting closed and operators and bettors clamouring to get online. While widespread market regulation is expected in the coming years, there'll be specific market idiosyncrasies where regulation is carried out on a state-by-state basis too.
Luis de Prat: As new markets regulate, it's important that taxation is addressed in a manner that is compatible with the business models. For retail betting, regulators need to understand the impact on job creation when operations are taxed too heavily. With igaming, it's important to remember that the RTP is higher than in land-based gaming and consequently the margins are smaller and must be taxed accordingly. To encourage an open market with competition between providers, game categories should not be overly specific (e.g. number of decks in blackjack) and the certification process should always take into account the fact that the operators are bearing the risk of the business.
What is the split between online and retail in terms of consumer habits, and are they evolving toward one more than the other?
Aiste Garneviciene: Online is all about dynamic game flow, with frequent draws and instant outcomes, while in retail, the pace is somewhat more regulated. Products in the retail setting need to provide breaks in play to provide players with ample opportunity to socialise, develop game strategies or await specific draws that offer a player’s chosen ‘lucky’ combinations. Of course, as a supplier, we could run draw after draw with no breaks, but players don’t like this as they plan their own strategies and if they can’t follow all the draws in a row, their tactics are redundant and the product is no longer attractive to them. Optimisation between online and retail (five mins down to three mins for example) is something that must be carefully considered as any changes offered may result in player frustration. How much of a ripple effect this can have cannot be underestimated, and suppliers need to exercise caution. The overall, eventual aim for most retail operators, however, is to convert their bettors to online with education on the advantages of it, and promotional drives to achieve this.
Alessandro Fried: Retail is the predominant channel in Africa, especially because of the strong cultural ties that retail shops have in the local communities, where they are viewed also as social hubs. This perception is set to persist in the long term. Many consumers still like to bet in physical cash, and get a physical bet slip, and many consumers do not have access to payment methods that they can use online, like bank accounts or cards. Mobile data is still expensive in Africa too, so betting online is more restrictive than in European markets. A close look at statistics, however, indicates that for 2019 both Europe and Africa featured a similar share when it comes to online versus retail. A recent report by the European Gaming and Betting Association indicates that land-based gaming accounted for around 75% of the total gambling market revenue, while on the other hand, statistics published by H2 Gambling Capital indicate that retail amounted for 76% of the total betting GGR for Africa. Nonetheless while the EGBA indicates that come 2024 the retail’s share will decrease to circa 66%, the situation in Africa will remain substantially unchanged.
Steven Spartinos: In South Africa, the split is roughly 60% retail and 40% online, but further afield, infrastructures vary wildly and so does the split. But around 75/25 is generally where the continent is currently. As mobile networks continue to improve, the balance will swing in the opposite direction. Africa is predominately retail-focused. What bettors are exposed to in shops will determine what they bet on and how? The product position of the games and how they are viewed by the players influence habits. Again, infrastructures influence habits too with simplified game interfaces allowing for a boom in online activity. There's a massive shift to online and we see players getting used to modern betting, due in large part to the pandemic as players were forced to use alternative channels for betting.
Luis de Prat: In less mature and emerging markets, gaming businesses are heavily dominated by retail operations with more stagnant growth, whereas online gaming constitutes a smaller percentage but has a double-digit growth rate.