Africa Is A Sports Crazy Continent
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 government 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 and who the biggest companies in the business are. I’ll also show you how the betting business makes money and a few important points to keep in mind, just in case you’re interested in getting a piece of the pie by setting up your own sports betting business. So, Why is Sports Betting Spreading So Fast Across Africa? For every business I analyse on Smallstarter, I always make it a point to unravel the fundamental reasons why it thrives. 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 does 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. They’re addictive. 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 and increasing regulatory pressure on 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. The Biggest Sports Betting Businesses in Africa While it can be hard to get information about the financial performance of betting companies in Africa, you can always spot the big boys by their spread (number of outlets and presence in several countries), and their popularity among punters. There are now over 2,000 different sports betting companies on the continent (many of them unlicensed), and this number is expected to grow. Below are some of the top performers from across Africa: 1) SportPesa Sport Pesa is arguably the biggest sport betting business in East Africa, with a very strong presence in Kenya and over 1 million registered users. This business, which only started operations in 2014, now sponsors a long list of sporting events across the region, including the Kenya Premier league to a tune of KSh360 million ($3.5 million) Reports estimate Sport Pesa’s revenues at over Ksh 4.2 billion (that’s just over $40 million). Sport Pesa enjoys partnerships with leading banks, telcos, radio stations and media houses in Kenya. This has helped to strengthen its lead in the sports betting market in East Africa. 2) Supabets Based in South Africa, Supabets is fast expanding across sub-Saharan Africa. It now has businesses in Nigeria, Ghana, Zambia, Zimbabwe, Kenya, Tanzania and the Democratic Republic of Congo. With floor payouts of up to 1.5 million Rand (roughly $100,000), Supabets is one of the leading businesses in the highly competitive sports betting market in South Africa. 3) Bet9ja Bet9ja is one of several homegrown sport betting businesses in Nigeria that’s doing its best to overcome the intense competition in the market. It’s arguably not the market leader in Nigeria by a long shot, but its highly visible promotional campaigns make it one of the most promising businesses to watch on the sports betting scene. In May 2014, on a weekend that saw few upsets in the European football leagues, and most predicted results going through, punters on Bet9ja reportedly earned up to N700 million ($3.5m) in winning bets. How The Sports Betting Business Makes Money The business of sports betting is based on odds and probabilities. People often place bets based on gut feeling, popular opinion, intense research or just plain luck. In every bet, there are always two categories of people who emerge in the end; winners and losers. Handling the losers is easy; they don’t get anything. But to stay in business and make money, the goal of every sport betting business is to make sure it makes enough money from the losers to reward the winners, and still earn a healthy commission on top. To accomplish this, sport betting businesses use a mix of simple and complex strategies to fix the odds of every bet, and ensure that the income from losers balances out the payouts for winners. It’s quite an interesting and technical business that has its own lingo and deals a lot with numbers. If you’d like to take a deep dive into the workings of the sports betting industry to learn more about how it works, here are a few resources that will be very useful: How Sport Betting Works: An interesting tutorial by HowStuffWorks How Bookmakers Make Money: A practical introduction to how the business works, by GamblingSites.org How Do Sport Betting Sites Make Money by Sammy Kikwai of Biashara Insight A Few Things To Consider In Setting Up A Sport Betting Business 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.