Africa Rising – betting’s new online frontier
Article by Christina Thakor-Rankin
For some time now, the betting and gambling sector has been busy trying to identify where the next new online market will be.
The spectre of the US regulation continues to lurk in the background, albeit somewhat subdued following the stall in momentum after the euphoria of Nevada and New Jersey and the recent shift in focus from online gaming to Daily Fantasy Sports. Japan and Asia Pacific continues to have ‘watching brief’ stamped over it, as do Australia and India where the most likely drivers towards regulation, or continued prohibition (depending on which side of the fence one sits on) are likely to be social responsibility and integrity respectively. Europe continues to move towards regulation, but at an increasingly higher cost of entry in terms of licence requirements and taxation.
For those operators with ambitions of growth beyond their own back yards, the traditional parts of the world where betting and gambling has a natural indigenous local consumer, the options appear to be dwindling.
This goes some way perhaps to explaining the growing interest in those parts of the world, which historically, have been seen as ‘back-waters’ or bit players when it comes to betting and gambling. The other factor driving this shift in focus is technology, and to some extent local economic growth.
Latin America appears to have replaced the US as the new regulatory hope in that part of the world. Some of this may be sheer optimism and hope. For instance, Brazil remains a talking point. As a betting person however what are the actual odds of a conservative country that failed to regulate in the wake of a World Cup, and which has realistically left it a bit too late for the Olympics, continuing to focus on gambling regulation given its current domestic political challenges? Far more interesting is its smaller neighbour Colombia, which on the back of an established land-based gambling sector and biting recession, has started a consultation on regulated online gambling which appears to be sensible, pragmatic, and eminently achievable. Elsewhere in the region, there are periodic murmurings and musings but nothing of any real substance. In fact, if one were to let imagination run wild, an interesting proposition might be Puerto Rico or even Cuba. Discussions about the former as a possible 51st US state, and whether UIGEA applies to it, together with the new thaw in relations with Cuba, might in time, allow the US to utilise either as a possible legal ‘off-shore’ solution to its online gambling conundrum.
In the absence of any tangible moves in the US, LatAm as its closest neighbour will continue to be a source of interest and speculation, but perhaps not much more. So where could an online operator with ambitions of growth turn?
Historically, the great African hope has been South Africa – with its mature land based betting and gambling sector and regular stop-start discussions about online regulation. Despite various valiant attempts, a combination of things: politics, public opinion, taxation, state v national, and technology have contrived to hinder progress and the consensus now seems to be that nothing is likely to happen any time soon.
Consequently, for those who see South Africa as the litmus test for African regulation and opportunity, the continent has dropped off the radar. More fool them, as those who were fortunate enough to be able to attend the recent East Africa betting and gambling conference in Kenya last month will tell you.
Attended by some of the world’s ‘new kids on the regulatory block’ such as Nigeria, Liberia and Uganda, and Kenya, and operators keen to explore the continent’s potential, the conference was something of a revelation. In fact, the sensation was not dissimilar to arriving in a new location late at night, waking in the morning, looking out of the window and seeing a whole new world of opportunity laid out in glorious technicolour.
Presentations from regulators indicate an approach to the sector that is pragmatic, welcoming and takes account of the various challenges faced by the sector, from public opinion, to crime and social responsibility. Crucially there is a profound understanding and acknowledgement (arguably absent in other parts of the world) that in the world of online, prohibition simply does not work – so deal with it.
Whilst Kenya already has online betting, the event saw regulators from both Nigeria and Uganda openly discuss their plans to launch their respective online regulations in the coming months – not years. Nigeria already has some experience in this area, but for Uganda this is a first, going as it will from nothing to something, with the regulator asking for the assistance of operators in building their knowledge and understanding, and expressing a desire to learn from the sector.
Lack of control of the internet, is not the only driven towards regulation – timing is everything, and regulation in Africa 10 or even 5 years ago would have been a little pointless. The two non-negotiable pre-requisites to online gambling success are consumer appetite and accessibility.
The current insatiable consumer appetite for sports betting (an estimate of $11.3m in bets a day in Nigeria from last year already seems too low) appears to owe thanks to two things. The popularity of the English Premier League, due in part to its plethora of superstars from the African continent, now made accessible by the arrival of DSTV – Africa’s version of Sky or Fox. Just as the launch of Sky Sports in the UK saw a revolution in the world of football betting in the UK, so the case with DSTV in Africa – suddenly every match is available to watch. In a country where every viewer is a pundit and an analyst – betting is now a very serious business.
Consumer appetite alone is not sufficient however. Consumers need a means of transacting online, and in a world where cash is king and basics such as electric power, let alone infrastructure and desktops are not always easy to come by, the challenges are significant. For so long the less developed world has had to play catch-up until recently. The internet has opened up a new window of opportunity to entrepreneurs and technologists seeking to not emulate but innovate. Cue the world’s first real stab at mobile payments – M-Pesa, and betting applications that utilise text and messaging rather than relying on internet connectivity.
And it’s not just sports-betting that’s big. Both regulators and operators reported a growing interest in virtual sports betting – already phenomenally popular in those months when football takes a break – some are even suggesting that the revenue generated by virtual sports, available around the clock, could easily far out-strip the revenues from the traditional betting market in time. The natural barrier to this success is internet connectivity – but for how much longer.
Already efforts are underway to better utilise traditional mobile connectivity and communications, and it is surely only a matter of time before some bright spark develops a game which can operate, albeit most likely with some form of cash-in and cash-out mechanism, in an ‘offline’ mode.
Other jurisdictions in Africa either already in the process of implementing, or starting to look at regulation include amongst others the Seychelles, Ghana, Tanzania, Botswana. Africa is on the move, and moving fast.
A word of caution however for those operators hoping that expeditious regulation or inexperienced regulators could lead to a framework which is anything less than robust or of a lesser standard than that of more mature jurisdictions. What is evident is that Africa’s regulators are fully cognisant of the issues relating to problem gambling, crime and integrity, and fully intend to adopt and adapt best international regulatory practice – operators should not come to Africa hoping to be able to secure revenue by cutting corners.
That said and some of the more tangential elements such as social responsibility, the optimum level of taxation, understanding the impact of integrity and crime may take a little more work to get right – as they always do in a new environment, but this will come in time.
Africa is moving forwards at a rate of knots. The early movers are already reaping the benefits, but this is just the start of the journey. As Africa continues to flourish economically (Kenya and Nigeria last year, Ivory Coast, Tanzania and Senegal this year, according to the IMFs list of world’s fastest growing economies), one can expect further innovation and adoption of technology, and a population with increasing leisure time and disposable income.
Combine this with pragmatic regulators seeking to safeguard revenues and consumers in an environment that supports growth and sustainability and there is only one possible conclusion – for anyone seeking the next betting and gambling market – Africa is the new frontier.