Africa The next big thing

While much attention is directed at North Africa when looking at value added services, the rest of Africa – SubSaharan Africa as it is better known – has the beginnings of its own thriving market. Paul Skeldon reports

Sub-Saharan Africa, a region with a youthful population and rapidly growing digital landscape, has emerged as a significant market for value-added services (VAS) content. With increasing smartphone penetration, affordable data plans and a growing middle class, the region offers immense potential for digital content providers. While much attention is focussed on North Africa – lumped in with its more culturally adjacent Middle East neighbours – it is easy to forget that there is a population of 1.24 billion Sub-Saharan Africans in the rest of the continent. Sure, mobile and internet penetration growth has been slow, but it is starting to rise and as a result the region offers the next big thing in VAS growth in the years ahead.

According to figures from the GSMA, mobile technologies and services generated more than 8% of Sub-Saharan Africa’s GDP, which amounted to $170 billion, in 2023. Small perhaps compared to other markets, but the potential for growth is enormous.

The video streaming market alone is valued at US$1.8 billion in 2022 and is set to grow at a CAGR of 11.39% between now and 2027.

By then, it is estimated that 6.6% of homes will have a TV and with it at least one subscription. But it is mobile VAS where Africa will come into its own. Already Netflix, Amazon,

Apple and Spotify are making early inroads across markets here. They are being joined by local players such as Boomplay and Showmax which are offering localised services in local languages to local markets.

GOING LOCAL

And it is this localisation that is key. While it is easy to look at ‘Africa’ as a market, SubSaharan Africa is in fact made up of 53 individual countries with a population of 1.03 billion people, each nation with its own tastes and traditions, their own languages, cultures and currencies.

This is what makes the region more of a challenge; tapping into each is tough and in many smaller nations, local players are the way to go. That said, for those looking to target SubSaharan Africa, there re several key countries that it is worth perhaps focussing on.

Kenya, Nigeria, Senegal, South Africa, Tanzania, and Zimbabwe account for 36.5 percent of the population, according to a 2016 World Bank survey. These markets already have a degree of established infrastructure, a burgeoning middle class and more robust banking infrastructure.

Of these, South Africa and Nigeria are the strongest markets with the most potential. Growth is also expected in West and East Africa, including countries including Angola, Tanzania, Kenya, Ghana, Uganda and Ethiopia.

MARKET DYNAMICS

As might be expected, the SubSaharan African VAS content market is dominated by both global and regional players, all seeing the latent potential in the market. Global tech giants like Google, Apple, Netflix and Spotify have made significant investments in the region. Meanwhile, local companies like MPesa, Boomplay, and Jumia are well-positioned to cater to the specific needs and preferences of African consumers.

Telecom operators such as MTN, Airtel and Safaricom are also playing a growing and increasingly crucial role in providing VAS content to their subscribers.

HOW THEY PAY

A variety of payment tools are used to purchase VAS content in Sub-Saharan Africa, but the two that have the most users and the greatest traction are mobile money services and carrier billing.

Mobile money services such as M-Pesa – which pioneered these services – Airtel Money and MTN Mobile Money have revolutionised financial inclusion in the region, enabling users to send and receive money, pay bills and purchase goods and services without a bank account and with their mobile device.

And it has proved highly successful. Mobile money processing volumes in Africa were estimated at approximately US$850 billion in 2023 and this is projected to double to more than US$1.8 trillion by 2028.

Carrier billing – another favourite with unbanked customers – is also popular in the region. No firm figures exist for how much is spent using DCB here, but across the Middle East and Africa together the number of carrier billing users is expected to grow from 742 million in 2024 to some 800 million in 2027.

With both mobile money and DCB both driven by growing smartphone penetration, both of these are starting to see some competition from mobile wallets. While still nascent in the region, they are starting to attract some attention and are set to grow strongly.

CHALLENGES

The Sub-Saharan African VAS content market is experiencing rapid growth, driven by factors such as increasing smartphone penetration, improving internet connectivity, and a growing middle class.

However, challenges such as infrastructure limitations, digital literacy and an array of regulatory hurdles need to be addressed to ensure sustained growth.