Sunday, April 14, 2024

Are Online Industries Flourishing in Africa?

Over the past few years, there has been a debunking of a popular narrative regarding African economies. From the early 2000’s to around 2014, the “Africa is rising” narrative had gained widespread acclaim both in the West and within the continent. Backed by economic growth rates above 6 percent per annum, countries in the continent were global leaders in economic growth.

A drop in commodity prices in the global market coupled with adverse weather patterns and political instability soon derailed the steps that had already been made. It turns out, there was little to no actual and sustainable economic growth. The same is largely true when it comes to online industries within the continent.

Much has been made, and rightly so, of the technological innovations originating from within the continent. Businesses such as Mpesa, Jumia, OLX and Konga, have put Nigeria and Kenya on the global technology map. They have demonstrated an innovative utilization of technology in tackling domestic challenges.

However, these major achievements must not blind us to the reality pertaining online industries within the continent. They are yet to flourish. The uptake of technology in Africa is still erratic, though at times breathtakingly disruptive.

A Success Story

An analysis of the gaming industry would aptly illustrate this point. For instance, many betting enthusiast first heard of Sportpesa; an online betting company when they were announced as the official sponsors of Hull City football club. The sponsorship of these global sporting brands had hitherto been a preserve of other global brands and not of an online gaming start up from Africa. Sportpesa is now among the top most recognizable brands in Kenya. 

Sportpesa’s success has since attracted several entrants into the market offering online casinos with a strong bias on sport betting. However, the majority of the new entrants aren’t doing as well. This is largely true across the rest of the continent. A few are thriving, but the majority is struggling. The growth is stunted, if any at all. 

Why aren’t Online Industries Flourishing?

The first challenge facing most online businesses within the continent is a lack of trust. Interacting with tech savvy individuals, you encounter a lack of trust regarding transacting online. A fear of frauds keeps many off online industries. Most will research but never transact. To operate, businesses have had to adopt payment methods familiar to the locals. Jumia and OLX illustrate this model aptly. All their payments are made after delivery, in cash or through the trusted Mpesa platform. 

The second challenge is lack of infrastructure to support the online enterprises. Electricity and internet access is unreliable, expensive or absent. Internet access remains primarily by mobile phone. This, whilst adoptable for sport betting, isn’t so good for most online commerce ventures. The main reason behind Mpesa’s success is that it offered a form of banking to the un-banked.

This reach shows just how weak the banking infrastructure is. Credit cards, PayPal and other forms of online payments are just not accessible. Mobile platforms are the way to go in this continent. 

Another major challenge to online gambling is the uncertain policy environment. Whilst governments can offer incentives and suitable environments for tech start-ups to grow, they are often a major source of difficulty. In Kenya for example, following a change in administration, the momentum gained by the installation of the undersea fiber optic cable was lost to a change in policy priority. In 2017, under pressure to increase revenues, the government targeted betting companies and casino, raising the tax from 30 percent to a staggering 50 percent. 

A unique challenge has arisen to counter the progress made by online gaming. Prior to the entry of sport betting, much of the continent was ignorant on the subject of gaming. This awareness of gaming has opened the door to local entrepreneurs to offer other forms of gaming. Slot boxes and back alley unregulated gambling dens are sprouting across the land offering competition to online companies. 

Future Possibilities

Whilst the outlook for online industries in the continent is positive, it has yet to flourish given its potential. Gambling, however, is at the forefront of this expansion having ridden on the popularity of European football, locally established/familiar technology (Mpesa) and mobile telephony. Other forms of online enterprise, including non-sport-betting casino, are some distance behind.

Whilst there are several challenges to this growth, technological innovations will probably see the continent across the Rubicon.

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