The Business of Sports Betting Is Taking Over Africa. Here’s Why…
Africa is crazy about sports, especially football (soccer).
But while you hang out with your friends on a cool Saturday evening to enjoy a high-energy football match by your favourite team, there’s something big happening around you that you just don’t realize.
Sports is no longer just about entertainment in Africa. It’s also about making (and losing) money.
A lot of money.
According to a recent investigation, roughly 60 million Nigerians between the ages of 18 and 40 are involved in active sports betting. On average, these punters spend around 3,000 Naira (about $15) every day on bets.
In South Africa, government statistics show more than half of the adult population is involved in gambling activities, predominantly sports betting, on a regular basis.
This trend is roughly the same across West, Central, East and Southern Africa.
In the 2014 Gambling Outlook Report released by PricewaterhouseCoopers, the combined size of the betting market in Kenya, Nigeria and South Africa is projected to be worth nearly $37 billion by 2018.
While Africa is still touted as a poor continent where up to 40 percent of people live below the poverty line, our continent is also fast emerging as one of the most promising and lucrative markets for sports betting.
Betting businesses in the US and Europe are expanding into Africa as they position themselves to tap into an explosive growth opportunity for sports betting on the continent.
Supporters of sports betting in Africa claim it’s a business that offers employment to thousands of young people, provides quick money for ordinary people, generates tax revenue for governments and contributes to economic growth in African countries.
They may be right, but betting still has its critics on the continent.
In this article, I’ll take you into the heart of the sports betting business in Africa. You’ll find out the interesting reasons why sports betting is spreading across the continent. I’ll also share with you a few important points to keep in mind, just in case you’re interested in getting a piece of the pie by entering this interesting market.
So, Why is Sports Betting Spreading So Fast Across Africa?
If Africans are spending huge sums on betting, and sports betting companies from across the world are spreading into Africa, there’s got to be good reasons for this, don’t you think?
So, here are five key reasons for the growth in sports betting on the African continent.
1) Youthful population and high unemployment
Africa has the youngest population in the world, with over 200 million people aged between 15 and 24.
In addition to its very youthful population, a high number of these young people are unemployed. ‘Official’ unemployment rates in some African countries are as high as 25 percent.
What do youth and employment have to do with sports betting, you ask?
Young and unemployed Africans make up the bulk of the target market for sports betting in Africa. Betting provides them with an opportunity to earn an income, while keeping them stimulated by sports, a strong attraction for many young Africans.
Africa’s population is expected to double by 2050. By then, the continent will have the largest population of young people in the world.
This will be a potential source of growth for the sports betting industry in Africa.
2) A high potential for addiction
Alcohol and cigarettes are popular consumer products across the world, and sell huge volumes every day.
Both products also have something in common with sports betting.
The biggest attraction of sports betting is its value proposition:it costs you almost nothing, but you can win a lot of money.
That’s what makes it addictive!
Across the continent, with bets as little as $1, people can win up to $500. It’s this possibility of higher returns that lures millions of Africans, including the poor, to ‘invest’ in sports betting.
Given this potential for profit, it’s no surprise how sports betting becomes an addiction for millions of people on the continent who place bets daily and weekly.
And even when they don’t have the money, they borrow.
3) Strong sports fan base on the continent
Africa is a sports crazy continent.
Although football (soccer) takes the lead with the highest number of fanatic fans on the continent, there’s also a huge following for cricket and rugby in Kenya, Zimbabwe and South Africa.
European football leagues (especially the English, Spanish, French and Italian leagues) have millions of fans on the continent. But there’s also a lot of betting that goes on for tennis, basketball, hockey, boxing, car and motorcycle racing, horse races and several other sports.
Africans bet on the outcome of games, number of goals (points), which players would score, etc.
Africa’s strong and often fanatical interest in sports makes it a very promising market for the sports betting business.
4) Lax laws on sports betting
Due to more stringent laws andincreasing regulatory pressureon sports betting companies in the US and European markets, many of them are branching into emerging markets like Africa, where most laws on betting are relatively lax.
Except for South Africa which is a more established gambling market, betting laws in most other African countries are quite recent, and regulation is still poor.
This lax regulatory environment, while potentially dangerous to consumers, provides an attractive incentive for both local and international betting companies to enter the African market.
However, countries like The Gambia and some Muslim-majority countries on the continent have placed outright bans on betting or have very strict rules and restrictions around betting of any sort.
5) Growing internet penetration and widespread use of mobile phones
As one of the world’s fastest growing markets for mobile phones, the widespread use of mobile phones in Africa has been a positive game changer for the sports betting business.
More Africans can now place bets from the comfort of their homes via mobile phones.
Sports betting companies on the continent now partner with major mobile phone operators to link their betting products with mobile money services like Airtel Money, Orange Money and M-Pesa.
What’s more, with rising internet penetration rates across the continent, more people are able to make bets online.
These days, sports betting is available by SMS and over the internet. Every day, it’s getting easier to pay and play.
Thinking of entering the market? Here are a few things to consider…
Don’t be fooled, getting started in the sport betting business can be a tough and highly competitive venture to take on.
It may look like easy money at first, until you look under the hood. In this business, the margins (commissions) are quite tight, a large portion of the costs are fixed, regulatory compliance is strict and profitability depends on volume.
Nevertheless, it can be a very lucrative business if you can pull it off successfully.
If you’re up for the challenge, here are some of the most important things to consider in setting up a sport betting business.
1) Registration and Licensing
The betting and gambling industry is closely regulated in many countries. African governments are interested in the sports betting market for two main reasons: consumer protection and tax revenues.
The cost of registering your business and obtaining the required license varies from country to country across Africa. In Lagos, Nigeria for example, licensing fees come up to about N10 million ($50,000)
2) Fierce competition
Although sport betting is still in its early days in Africa (compared to the US and Europe), the competition in the market is already very fierce.
The growing numbers of both licensed and unlicensed sport betting outfits on the continent, coupled with the entry of highly experienced and deep-pocketed international players has intensified the competitive rivalry in the industry.
Unless you can carve a niche for yourself or develop a very competitive advantage for your business, you’ll need to prepare yourself for cutthroat competition.
3) Capital outlay
Setting up a sport betting business often requires a considerable upfront investment in office space, building an engaging and highly functional website, developing payment systems and channels, investing in customer awareness, marketing and promotion etc.
More sport betting businesses are getting involved in sponsoring sports events and related programs that help to increase brand recognition and woo more customers to their side (like Sport Pesa in Kenya).
Putting it all together…
While sports betting could be a huge source of revenue for betting companies, ordinary people and government taxes, there can be a dark side to all forms of betting and gambling.
That’s why they must be very tightly regulated, especially to protect the consumers who can lose themselves in their addiction.
I hope this article was a fun read and you learned something from it.
ABOUT THE AUTHOR
John-Paul Iwuoha is an author, impact entrepreneur, business strategist, and founder of Smallstarter Africa. He works with entrepreneurs and investors to start up and grow businesses in Africa. He is also the co-author of 101 Ways To Make Money in Africa, the widely-acclaimed book which reveals several interesting business ideas, market opportunities, and inspiring entrepreneur success stories across Africa.
To read more of his riveting articles on small business and entrepreneurship from across Africa, visit www.smallstarter.com
John-Paul IwuohaAuthor, Business Strategist & Champion for Entrepreneurship in Africa