Why Policymakers Should Pay Attention to Africa’s Emerging eSports Industry
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Why Policymakers Should Pay Attention to Africa’s Emerging eSports Industry
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By Syeda Saniya Fatima, Analyst, Botho Emerging Markets Group
April 26, 2022
In the past decade, eSports were simply video games played as a hobby. Today, eSports represent a US $1.08 billion market that increased by 50% in the last year alone. This rapid growth presents an opportunity for African policymakers to leverage the industry’s potential as a source of foreign investment attraction and nurture the industry’s many stakeholders, including players, game developers, and publishers.
The professional and competitive video gaming industry has multiple financial dimensions: advertisers sponsor players to compete in eSports competitions; event organizers host global tournaments, video game developers, and graphic designers create immersive eSports experiences; and FinTech players facilitate monetary exchange on a global scale. In 2021, the global eSports market revenue from sponsorships and advertising alone was US $641 million, with media rights contributing another US $192 million. Global brands, such as Red Bull, invest heavily in this high-growth industry, as it offers a significant level of visibility for their brands. Policymakers around the world, such as the UAE, are recognizing eSports as a creative industry, developing regulatory bodies and investing in talent to capitalize on the exponential growth. However, is the industry promising enough for African policymakers to take it seriously?
Why Policymakers Must Intervene
According to a 2021 study commissioned by Newzoo, Africa has the fastest-growing video game market in the world, with the number of gamers in sub-Saharan Africa rising to 186 million in 2021 from 77 million in 2015. With the pandemic increasing the uptake for community-based entertainment outlets like eSports coupled with the increased availability of the internet and mobile devices fueling its gamers, the world’s youngest continent is primed for an eSports boom. African countries with higher internet availability, mobile penetration, and thriving tech industries also boast a higher number of gamers. South Africa leads the continent with 24 million gamers, accounting for 40% of its population, followed by Ghana (27%) and Nigeria (23%). Nigerian gamers alone spend $100 million on gaming each year, demonstrating the industry's economic potential.
Africa's private sector players are attuned to the industry's economic potential, which has resulted in numerous community-led initiatives across the continent. One such initiative, the Pan Africa Gaming Group (PAGG), has brought together ten game development studios from across the continent, including Rwanda, Senegal, Tanzania, Cameroon, and Ethiopia, to consolidate the region's fragmented industry. PAGG will allow for the expansion of content distribution and monetization by allowing for locally relevant payment options and the development of next-generation game developers through training and incubation. Such community-led organizations have already begun to attract larger investments, with GBarena, an Egyptian eSports community, raising six-figure funding. Additional efforts to foster training and incubation are already underway in Kenya via the Nairobi Game Development Center, suggesting both private-sector interest and investor fervor in the continent’s gaming industry.
Despite private sector efforts, there are numerous barriers to the industry's growth. Slow broadband speeds, the high cost of data, and the relatively expensive cost of consoles and games stand as significant impediments to eSports’ growth on the continent, particularly outside South Africa. The speed between a player's computer or mobile device and the game server can be critical in tight matches, limiting African gamers' ability to compete on a level playing field with international rivals. ESports companies are attempting to overcome these obstacles by purchasing servers in Africa and establishing eSports cafes. However, unless policymakers pay attention to the industry, these efforts will remain fragmented and concentrated in the country’s more advanced economies like South Africa and Kenya.
Aside from more obvious initiatives, such as building digital infrastructure, African policymakers can do a great deal to nurture and promote the growing eSports industry. Standardizing the regulatory framework, for example, will increase investor confidence. Meanwhile, offering game development grants and promoting eSports as a creative industry will attract both young entrepreneurs and talented professionals. In addition, creating and providing eSports “zones” with high-speed internet access and necessary technology for developers and gamers will provide short- to medium-term solutions for industry players, as countries continue to invest in and build their digital infrastructure. These measures will go a long way in boosting the credentials of the industry for both eSports players and commercial investors.
Foreign Investments in African eSports
Foreign investment in the continent's eSport industry has already begun. Carry1st, an African mobile games publisher, raised US $20 million in funding from Google and rapper Nas, among others. The market opportunity has also enticed international players, such as Nodwin Gaming, an Indian licensor and creator of eSports properties, to invest heavily in Nigeria, Kenya, and South Africa. Beyond identifying Africa as a video game consumer market, African eSports real potential has been demonstrated by investments into the region from marquee sponsors who are betting their big bucks on African players. In December 2020, South African eSports athlete, Thabo "Yvng Savage" Moloi, made history by becoming the first African player to be sponsored by Red Bull, indicating the global rise of African eSports players.
The industry also has the potential to attract Gulf investments. Both Qatari and Saudi sovereign wealth funds have expressed an interest in investing in eSports. Saudi Arabia, for example, has made significant investments in the eSports industry as part of its diversification strategy, with the Public Investment Fund investing over US $3.3 billion globally. The UAE, one of Africa's largest investing countries, has also expressed interest in investing in eSports. The UAE-based Galaxy Racer, a fast-growing eSports company and a portfolio company of Sheikh Ahmed Dalmook Maktoum’s Private Office, recently expanded into Pakistan.
The growth and opportunities in the eSports industry make a compelling case for African policymakers to take notice. It provides an exciting industry for the continent's gamers, technology professionals, sponsors, and investors. Those who are prescient enough to recognize the immense potential of this emerging industry are likely to reap dividends and gain from increasing foreign investor attention as well as garner youth support.
Syeda Saniya Fatima is an Analyst at Botho Emerging Markets Group