Africa will be a compelling and profitable market in two years
About the expert:
Ilya is a senior partner of the 4H agency, which advises gambling companies and government agencies around the world. At the age of 15, he entered the law faculty of Moscow State University, from which he successfully graduated. Today he moderates international professional discussions and longs for the live events.
There are politicians who ask “why are you going to send five million people to hell?”, and other features of the African market and its regulation.
Recently, Africa has been attracting a lot of attention from betting and gambling companies. I recently moderated a discussion panel at the SBC summit dedicated to gambling on the African continent. The number of participants was several times bigger than similar events in the CIS. Usually, about 30-40 people watch online broadcasts of such discussions, and I know almost all of them, but this time there were 80!
In my opinion, there are several reasons for this interest. I will try to explain them in more details below.
The first and most obvious reason is that market volumes in Africa can be gigantic due to a large number of inhabitants and a significantly different situation in terms of regulation. European markets have already reached a stage of maturity, if something in the legislation changes, then this concerns only certain aspects of regulation. Conceptual and large-scale changes in legislation occur quite rarely, while there is an active movement in the markets of the CIS and Africa.
The second reason that makes the possibility of running a gambling business in Africa attractive is that the existing regulation allows you to work without any difficulties in terms of daily operations and compliance with current requirements. The process of obtaining a license can hardly be described as easy due to obvious local characteristics, but you can operate quite easily once you have it. Again, there are no product requirements in African countries, that also makes the job much easier, compared to more developed jurisdictions.
So, there is a good reason to believe that the African market is expecting a huge escalation after their legislation is updated, a process which has already begun.
For example, a tender has recently been officially announced in Gauteng, which is one of the provinces of South Africa. The participants of the tender are to conduct a legislative review and to train local gambling regulators on how to implement a new law. It is necessary to point out that according to the terms of the tender, foreign companies cannot take part in it. We have repeatedly contacted representatives of the commission with a proposal for our participation, but they don’t really understand how this can be implemented, given the fact that we have no presence in South Africa (yet).
Features of legislation
For obvious reasons, as a person from the CIS, I got used to the situation after the earliest laws were adopted in the 90s. When I began to study more about Africa, I learned that there are quite a few acts with roots from 50-60s, including those dedicated to gambling. This leaves an imprint on their content: the legislation was created for land-based business and did not imply the regulation of online gambling. For example, in Kenya, the main act regulating gambling is still the same law passed in 1966.
At the same time, it is difficult to update outdated legislation. In 2008 South Africa developed and adopted a bill that was supposed to introduce fully-fledged regulation on online gambling. Despite the fact that this bill has gone through all the stages of the legislative process, after 12 years it has not come into force. The President of South Africa did not follow the procedure for formal approval of this bill (assent).
Despite the outdated legislation, there are legal online operators in many African countries that are recognized by the regulators. They operate on the basis of a legal interpretation, best expressed by the fact that in the relevant legislation there is a definition of a "gambling establishment" as "a place where gambling takes place". This description can be widely interpreted as if online gambling was included, too.
In addition to all the difficulties associated with imperfect legislation, attention is also drawn to the activity of local regulators, which creates additional risks for companies interested in expanding their product to Africa.
Let's look at Uganda as an example. There is no “online regulation” mentioned in the country's gambling legislation, but the local regulator's website has an editable document (doc) called "Requirements for Obtaining Online Licenses." This means that the regulator is aware of the existence of online gambling and sets the appropriate rules. At the same time from the point of view of its legal force, the status of this document is not clear at all, since it doesn’t even have a name (it is not an "order" or "decree"). Local lawyers also confirmed that this document does not create any legal consequences.
Thus, it turns out that any company interested in entering the Ugandan market faces a choice: either to proceed knowing that these requirements are optional and do not comply with them - thereby immediately creating tensions with the regulator, or submit relevant documents and information in addition to the documents required by the law.
Finally, an example from Kenya can be used to illustrate the general attitude towards gambling in Africa. Recently, I came across an excerpt from a meeting of the parliament of this country. It was about the modification of legislation regarding online gambling: deputies expressed arguments for and against the legalization of online activities. One of the deputies revealed in detail the key aspects of such a process: increasing tax revenues of the state, introducing mechanisms aimed at protecting players ("responsible gaming"), and others. The speech caused a wave of approval in the conference room, but the next deputy slightly reduced the degree of optimism. He began his speech with the thesis that “great Russia banned the gambling business in 1999” and continued with two stories. The essence of his stories was down to the fact that the local players committed suicide because of the money they lost. After him, a deputy who represents the Muslim regions of Kenya spoke and asked everyone if they wanted to "send five million people to hell" by legalizing online gambling.
Thus, to put it mildly, the political and social context in which local gambling markets exist is difficult.
Nevertheless, there are positive aspects: African regulators understand that there is a problem, and this is good. The tender in Gauteng was already mentioned above, and in addition, some regulators are posting official messages on their website announcing that the process of analyzing the current legislation for compliance with the latest practices is being launched. They ask everyone to send suggestions and comments to a specialized mailbox. Unfortunately, it’s hard to imagine the same approach of a regulator, for example, in Russia or CIS?
Despite the difficulties and nuances in the legislation and the process of regulating the gambling business in Africa, one significantly positive point can be highlighted - the extremely low cost of licenses and related services.
When analyzing the requirements for license applicants in Nigeria, I found it difficult to believe that neither the act nor their prices have changed since 2010. A colossal number of events has taken place during this period of time: a change in GDP, fluctuations in the economic situation, changes in the political landscape, etc., but the price of the license remained the same. We even checked with local lawyers and the regulator, and they confirmed to us that the price hasn’t changed.
Let's take an example of a license for sports betting in Kenya outside of a sports facility (there are three types of bookmaker licenses in Kenya: at a sports facility, outside of it and a combined license that allows you to operate in both). The application fee is 100 euros. The cost of the license itself is 2,000 euros. The so-called Investigation fee (the cost that the regulator charges for confirming that the director of the company meets all the requirements): for a local director is 400 euros, for a foreign director is 4000 euros. And the annual license fee is 400 euros. There is also a security deposit, which is no more than 300 euros.
Moreover, taxes account for 15% of the operator's monthly GGR across all segments and player winnings are taxed at a 20% rate. This is a fairly indicative example, although in other countries it can be a bit more expensive - in Uganda, the same Application fee for opening a betting business is 5,000 euros.
Expand in Africa or not?
In conclusion, I agree with the opinion that was expressed at the summit: the biggest mistake that can be made when deciding to enter Africa is to treat it as a single region. From my experience, CIS is closer to a single region as marketing and product in the CIS jurisdictions can be similar. It’s all because the people share the same history of the USSR.
Perceiving Africa as a very large unified region, where more than a billion people live, is very very wrong and will lead you to problems and mistakes. Therefore, the most correct approach is to choose one or two starting markets through some initial analysis or consulting with people.
It is clear that there are operators such as Parimatch, 1xBet and others who enter more than one country at once, but again these are world-class companies. If we are talking about smaller bookmakers, then, in my opinion, they should be very careful in analyzing and choosing the point of entry into Africa, since each country has its own specifics and requires a particular approach.
I wouldn’t recommend entering Africa right now, but these markets need active monitoring. Subject to the modification and revision of legislation, as well as the further development of technologies, it seems to me that in the next 2-3 years Africa will be one of the key regions for any major gambling operator.