iGaming Business - Africa Focus

Preparing to Launch

Susan O'Leary discusses some of the key things operators need to consider before entering the African market.

Online gambling organisations are looking to diversify their business models, now more than ever. Regulated markets like the UK are increasingly more volatile with the Gambling Commission of Great Britain issuing eye-watering fines and a general nervousness within the industry as to where things are going. 

Furthermore, the tried and tested unregulated markets like South-East Asia are also in a state of flux, a factor in Playtech’s recent significant profit warnings. Businesses are under pressure to ensure returns follow an upward trajectory. As such, they are evaluating up and coming markets and some African countries feature on this list.

I’ve been focusing on the African market for the last 18 months. Overall, I’ve been impressed. Given that there are 54 countries in Africa, the levels of experience and interest in the remote gambling sector differ significantly from country to country. 

Having worked and engaged with many local regulators, advisors and operators, I have learned a lot about the market. It is incomparable to any regulated market or any market that the industry is familiar with. However, the knowledge is there. 

For a market that is predominantly unregulated in the online gambling sector, the professional advisors and regulators are very well versed. There is an understanding that blacklisting or prohibiting online gambling is futile. Regulators are keen to bring in regulation that is fit for purpose, user friendly for the consumer and operator alike, is technologically flexible, is built in line with industry best practice yet is tailored to the local market. No mean feat without experience in the field.

Some countries have frameworks in place; the likes of Nigeria, Ghana and Kenya permit land-based and online betting in some capacity while others are on the cusp. These first movers are helping to establish a blueprint for the wider African market, and to understand and overcome the challenges faced by those looking to launch businesses across the continent.

There is a sense that the regulators are prepared to work collaboratively to regulate the sector and increase revenues. In most African countries there is no restriction on foreign investment. As such, there are opportunities for regulated businesses to enter the market.  However, introducing regulation takes time, so what can a business do to enter any of the markets in Africa in the interim?

Of course, there are a number of “essential” factors operators and suppliers need to consider, understand and be comfortable with before entering any pre or newly regulated market, and Africa is no different.

Understand the regulatory landscape

The first and most important consideration is to gain a clear picture of the regulatory landscape, and what laws and frameworks are in place. Ask questions such as which countries are already regulated and what the position is in each province. Then assess which countries are close to regulating or have a clear position on legality. If licences are available, what conditions do they come with and what products can be offered? Every market is different and care needs to be taken for each jurisdiction; a multiple set of laws apply even within jurisdictions in States or Provinces.

In most cases, foreign operators will be welcome, but some countries will be more receptive than others. Having experienced personnel on the ground will be invaluable whether that takes the form of partnering with a local land-based operator, a joint-venture or key-personnel from the region.

Operators and suppliers must also consider the cultural, legal and political environments. Some African countries are turbulent in this regard, with ever-changing leaders, laws and liabilities. In Kenya, for example, the government recently introduced a new law that means operators now pay 35% tax on gambling revenues which has been addressed but there are talks of further changes pending. This change has the potential to turn a profitable online gambling business into a loss making one.

What games to players prefer and how do they access them: 

Businesses need to look at how players engage with online gambling products, and the games they prefer to play. Across Africa, for example, mobile dominates with an average smartphone penetration rate of 43%; in Kenya it is upwards of 90%. Most people now use their smartphones to manage their everyday lives, as well as to wager online. When it comes to types of gambling, sports betting reigns supreme.

The spread of mobile devices has been underpinned by telecoms companies providing low cost products and services to users. As a result, a mobile-driven economy has emerged; companies such as Konga, Jumia, Iroko, hellofoods and flowers.za have all used mobile ecommerce platforms to target the younger population demographic across the continent - on average, 68% of a country’s population is under 27 – which in turn has driven revenues.

At the heart of this smartphone economy is mobile payments; in Africa, a huge percentage of the population banks and transacts via mobile devices, without holding a traditional bank account. For example, MPESA is one of the leading mobile money transfer providers, and accounts for more than 50% of all transactions in Kenya. Visa and Mastercard are also becoming more widely available.

Online operators already live in the region have had to adapt their payment wallets to meet these needs; brands such as SportPesa, Betway, Betin, Mlotto and bet365 are among those offering mobile, USSD and online payments to their customers. Bitcoin and other cryptocurrencies are also becoming increasingly popular in African markets, particularly when it comes to online gambling.

In Africa, a huge percentage of the population banks and transacts via mobile devices, without holding a traditional bank account.

Money matters especially when it comes to repatriating funds: 

Mobile may be the preferred banking method across the region, but operators and suppliers looking to enter Africa must educate themselves as to the financial structures and institutions in place. Are banks local, national or international? What AML and CFT protocols are in place, are they the same as in established markets such as Europe and, most importantly, do they offer sufficient protection?

Operators should also assess the stability of the country’s currency, and the process they must follow in order to repatriate funds. International businesses regularly move funds from accounts held in one country to accounts held in another; this is usually straight forward, but restrictions can be enforced in some jurisdictions. Make yourself aware of these and what impact they may have.

Player preferences will differ vastly from market to market. Prior to regulation in New Jersey, for example, it was thought poker would be more popular than casino but that has not been the case. In Africa, we know sports betting dominates, but pool betting jackpots and virtual sports are also enjoyed by a lot of players. In some states, punters like to wager via their mobile devices, but in others they still prefer to play at land-based bookmakers.

Work with regulators to ensure long-term success: 

The landscape in most African countries is forever changing, which is why we believe operators and suppliers looking to launch in the continent should work with, and obtain a licence from, established regulators prior to entry. This means they can assess the situation safe in the knowledge they are operating to internationally-recognised gold standards, and are doing the right thing.

Regulators can also help prepare businesses ahead of launch. The Alderney Gambling Control Commission (AGCC), has been forging relationships and partnerships with key representatives from governments, regulatory bodies as well as local operators and suppliers. Africa is very much on the brink of the mass adoption of regulated online gambling and by taking a sensible and considered approach, and with the right licences and approvals, operators and suppliers can capitalise on the undoubted potential it has to offer. An AGCC licence can help pave the way.

This article first featured in iGaming Business magazine's Africa Focus within the Sept/Oct 2018 issue.