According to a recent PwC report, South Africa’s gaming sector is one of the “biggest success stories”. The industry is not only experiencing stratospheric growth, but it also still has plenty of upside potential.
The projected growth between 2021-26 is 12% CAGR. In concrete numbers, the market was worth a total of 3.5 billion South African rand in 2018. Projections put the value of the overall gaming sector at 5.44 billion by 2023. Compared to established markets, this is a staggering growth rate.
Expect Further Growth
Yes, South Africa’s gaming sector leads on the continent, but in world terms, it can still be classified as relatively small. But expect a significant catch-up in the coming years. There are a few key reasons why the sector should see significant expansion:
Young Population
While video games are also popular with the older demographic, it is still very much the youth that commands the market. The greater this demographic, the bigger the market share for video games.
In South Africa, those aged under 24 are increasing. By 2050, it is expected that the country will see a 50% growth compared to current figures. This trend is leading to an increase of gamers in the country, a figure which will only go up over time.
Smartphone Penetration
Smartphone penetration has been a significant factor for growth in South Africa. The Independent Communications Authority of South Africa recorded 81.72% smartphone penetration in 2018, up from 43.5% two years prior. Subscriptions to smartphone plans are also on the upward trajectory, with 46.9 million at the end of 2018.
This comes as a result of several factors, including the cost of plans being more affordable compared to just a few years ago. Basic smartphones are now also not too expensive. The average South African citizen is now able to use a data-enabled smartphone on a daily basis without breaking the bank.
Expansion of iGaming
South Africans have long been interested in sports betting and live casinos, and so it’s no surprise that iGaming has also seen stratospheric growth in recent years. Once smartphones reached a lower price point and data plans became more widely available, iGaming companies had a hungry market ready to go from day 1.
There is a sticking point, however. The government currently has very strict laws surrounding iGaming, which has driven players to online casino websites that specifically cater to South African users. For example, casinos.co.za makes it a point to offer games at local casinos such as Springbok or Yako and to review locally available payment methods. Despite these options however, there has been significant pressure for laws to be changed; it is expected that things will move towards a more lax attitude towards iGaming, which will undoubtedly push the number of users upwards.
Growth of Local Developers
While most South African gamers still stick to the AAA titles made by developers in the United States and Europe, the local gaming development market is slowly becoming a significant player in the industry.
For example, the popular game Boet Fighter has quickly developed a cult following amongst locals, not least for its South Africanisms and humor. It also attracts players who feel that deep nostalgia for classic titles like Double Dragon and Street Fighter.
In a similar vein, Broforce has experienced similar success; created by Free Lives, a studio based in Cape Town, the game has also won multiple awards. South African developers have some real talent, and are finally getting the opportunity to showcase it.
Potential Stumbling Blocks
The future certainly looks positive for the South African gaming sector, but it’s not all good news. There are potential stumbling blocks that may stunt the market’s growth:
Competitors Also Growing
South Africa is seeing a rapid rise in gaming, but so are other neighboring countries. Egypt, for instance, is also seeing significant growth in the market, with local developers showing a lot of promise.
Should these trends continue, we may see investment moving elsewhere. This is particularly worrying when considering the aforementioned legal blocks in iGaming. If South Africa doesn’t provide an amenable situation for investors, will they take their dollars to Egypt or another African nation?
Economic Downturn
The whole planet is currently suffering from an economic downturn, with most sectors seeing decreased profits across the board. Gaming has so far thrived under these new conditions, but if the worldwide economy continues to suffer, it will eventually trickle down.
The question then becomes: how will South Africa bounce back from the recession? If the country proves to be resilient, the gaming sector should continue to see an upward trajectory. However, if economic shocks continue for the foreseeable future, it will lead to less disposable income, and thus less spent on gaming.
Outlook Still Positive
Despite the economic effects of 2020/21, the gaming sector has continued to grow. While a continued recession will undoubtedly stifle growth, it will only serve to limit it, rather than stop it or lead to a negative trend.
The fact is that the gaming sector is exploding, and with so much room for growth, the market can absorb some of the negative effects of an economic downturn. The crisis that started in 2020 has so far had a positive effect, if any, with more people spending time at home and on their smartphone devices.
While there is no such thing as a sure bet, the gaming market is as close as you can get to it. Expect to see a positive end for 2021, and further growth going into the coming year.
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