An in-depth look at investment in some of the continent’s most promising entertainment industries reveals areas of growth, challenges and what the future might hold.



Africa’s heartbeat is in rhythm with the passion, culture and creativity of its people. On a continent of 1.4 billion people according to estimates by the United Nations (UN), there are effectively 1.4 billion stories to tell, each one unique and brimming with potential.



The question is: what is the narrative, and who is telling the story? 



Africa’s prospects in creative industries like art, fashion, film and television, crafts and architecture, among others, are well-documented. An oft-quoted fact comes from the United Nations Educational, Scientific and Cultural Organization’s (UNESCO) 2021 report African Film: A Booming Industry. It illustrates the potential in the film and audio-visual industries, which could result in generated revenue of $20 billion per year.



Speaking on the outlook for entertainment and media in Africa over the next few years, Charles Stuart, PricewaterhouseCoopers (PwC) South Africa’s Entertainment and Media Partner, says to FORBES AFRICA:



“We look at consumer spend in terms of what’s covered from a cinema perspective. [It] is growing; it’s just taking longer to recover to where it initially was. Is cinema dead? No, we are not seeing that.”



But where is investment for this forecasted to come from? With the growth of video-on-demand (VOD) and over-the-top (OTT) services, and a burgeoning appetite for authentically African media and content, venture capital (VC) is poised to be at the forefront of development on the continent, for film and television in particular.



<h4 class="wp-block-heading has-text-align-center" id="h-show-me-the-money-jerry-maguire-1996">“Show Me The Money” (Jerry Maguire, 1996)</h4>



The African Private Capital Association (AVCA) indicates that 58 private capital investments, with a total reported value of $346 million, were recorded in Africa’s creative industries over the last decade (2012-2022).



“Starting from a low base of only four investments in 2012, private capital investments in Africa’s creative industries more than tripled, reaching a total of 13 in 2022,” says AVCA.



Notably, VC investments attracted the largest share of these. They accounted for about 67% of the total number over the 2012-2022 period, followed by private equity investments at 33%.



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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“WE LOOK AT CONSUMER SPEND IN TERMS OF WHAT’S COVERED FROM A CINEMA PERSPECTIVE. [IT] IS GROWING…
<cite>Charles Stuart, Entertainment and Media Partner, PwC South Africa</cite></blockquote>
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“These investments spanned various sectors, including the development of online gaming platforms, music and video streaming developers, operators of music websites, live broadcasting, film streaming platforms, providers of advertising and marketing services, and clothing designers, among others,” says AVCA.



Jeff Schlapinski, Managing Director, Research, at non-profit, independent membership organization, Global Private Capital Association (GPCA), echoes these sentiments. 



“Africa’s VC investments in media and entertainment companies reached $31.2 million across six rounds in 2022, a new record in terms of deal value.”



However, Schlapinski notes that investments into this sector have, historically, represented a very small percentage of investment activity in Africa’s venture ecosystem (~1% of the $2.75 billion invested in VC in Africa in 2022, according to GPCA).



“The significant growth of the venture capital asset class in recent years, along with the increased allocation of capital towards technology or technology-enabled businesses, has contributed to the growth of investments in this sector as well,” says AVCA.



<h4 class="wp-block-heading has-text-align-center">Economies In The Spotlight</h4>



According to AVCA, the increase in the number of investments in Africa’s creative industries strongly indicates investors’ increasing interest and recognition of the sector’s potential. A handful of countries attracted the biggest chunk of that investment over the 10-year period (2012-2022).



“In terms of their geographic distribution, South Africa has attracted the largest share of private capital investments in Africa’s creative industries at 24%.” Following South Africa is Egypt, accounting for 14% of these investments. The country has also emerged as a significant technology hub on the continent in recent years.



“Nigeria and Kenya, two of Africa’s largest private capital markets, have each accounted for 10% of these investments,” says AVCA. Speaking on 2022, in particular, Schlapinski notes that the markets that led VC investments in media and entertainment – in terms of deal value – were South Africa with $22.5 million, Nigeria with $5.7 million and Egypt at $2 million.



They represent three of the four most active countries for overall VC investment with Kenya rounding off the top four.



<h4 class="wp-block-heading has-text-align-center">The Redefinition Of Main ‘Stream’</h4>



Regarding three of sub-Saharan Africa’s emerging economies, namely South Africa, Nigeria and Kenya, streaming service, Netflix, released its Socio-Economic Impact Report earlier this year, where it reveals its impact since entering the market.



Over the 2016–2022 period, it invested $175 million in content and in the overall creative environment in these countries specifically.



South Africa received the bulk of this investment, accounting for at least $125 million. In addition to that, over the same period, it invested in upwards of 425 licensed titles in these economies, further opening up the market to a host of proudly African films and television series.



Expanding on PwC’s outlook for Africa, Stuart says that success for OTTs necessitates an understanding of the type of content you put out there.



“You can have a wonderful distribution platform [but] if you’ve got nothing good to show – which is part of cinemas’ challenges over the last while; some of those big titles and also the lack of big titles has worn out in terms of what we’re seeing.”



He emphasizes the fact that content is always going to be king.



“Coming back to Africa, the culture and the richness and the heritage that we have, if you drive around, you’ve got Shaka [iLembe], there’s Rosemary’s Hitlist (both documentary series) advertised on billboards. You’re seeing the importance of local content to the success of your streaming platforms. Initially, when a Netflix entered Africa, it didn’t do really well. All it was doing is, ‘here’s the international content’. People were familiar with it but we like our African stories as well,” says Stuart.



With streaming platforms, the cost base is mostly fixed, so, in reality, he says that it’s the subscriber base that drives the growth.



“How do you really translate things into profit? It’s getting more people to subscribe to your service. What they were lacking a lot in the early days was this local content – that really resonated with it. What many of the streamers have learned is that it is about finding that balance between your international content, supplemented with your local content. When you look at a lot of the communication coming out of Apple, Netflix, Amazon, there’s continued communication around the fact that they are investing in local content.”



Stuart adds, “There’s still opportunity for your local players but it’s not an easy industry. For every bit of content that ends up on Netflix, there’s probably 10 pieces of content that doesn’t end up on Netflix.”



<h4 class="wp-block-heading has-text-align-center">A Continent Up For The Challenge</h4>



The African Export-Import Bank (Afreximbank) recently took an in-depth look at the continent’s Culture and Creative Industries (CCIs) in its African Trade Report 2022: Leveraging the Power of Culture and Creative Industries for Accelerated Structural Transformation in the AfCFTA Era.



It noted that some of the obstacles hindering the growth of CCIs include policy frameworks, finance, infrastructure, intellectual property rights, standards and norms in the area of cross-border trade, accurate data, language barriers, colonial legacy and an extroverted model.



Furthermore, it states that “a positive outcome of the pandemic has been the necessitated shift to digital solutions and online streaming, which has helped boost the performance and resilience of creative industries underpinned by digital models and platforms”.



While Africa does have its fair share of challenges, PwC’s Africa outlook for 2023-2027, which is expected to be released in September, sheds light on infrastructure investments, particularly in the telco space, which has a fundamental impact on streaming platforms, data consumption, and the growth of mobile gaming on the continent.



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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“AFRICA’S VC INVESTMENTS IN MEDIA AND ENTERTAINMENT COMPANIES REACHED $31.2 MILLION ACROSS SIX ROUNDS IN 2022, A NEW RECORD IN TERMS OF DEAL VALUE.”
<cite>—Jeff Schlapinski, Managing Director, Research, GPCA</cite></blockquote>
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“For the first time, in this year’s entertainment and media outlook, there’s a telco outlook that has gone with it. One of the aspects that has been covered as part of that telco outlook this year is telco capex spend – how much are the telcos actually looking to spend from a capex perspective in the various markets,” says Stuart.



A glance at the numbers in the assurance, tax and advisory services provider’s Perspectives from the Global Entertainment &amp; Media Outlook 2023–2027: Resetting expectations, refocusing inward and recharging growth for the three aforementioned sub-Saharan African regions seems to indicate an appetite for investment. This includes the convergence of the creative and technology industries.



“When we look at capex spend – and there is some further breakdown in terms of broadband, mobile broadband – in Kenya in 2022, there was $470 million worth of spend in the capex space and that’s going to grow each year at around 2.2%. By 2027, telcos are forecast to be spending around $520 million on their capex infrastructure in Kenya. The vast majority of that – about 85% – is going to be in the mobile space. That probably comes as no surprise given the strong mobile- first characteristics that the market has.”



Stuart adds: “Nigeria is going to be spending more than three times that, so almost $2 billion by 2027. There is a lot of investment in Nigeria. You’ve got your big players – Glo, MTN – they’ve been spending in terms of upgrading the network. They’re already sitting at about



$1.8 billion and it’s going to be a bit above and below that over the forecast period; fairly consistent with that level. Again, the vast majority of that is sitting in the mobile space. South Africa is spending $1.6 billion and that’s actually going to drop a little bit over the forecast period. It makes sense in a way because a lot of the 5G stuff is already in progress. There’s a lot of spend happening at the moment but over time, that does mean it will slow down.”



Data consumption is expected to continue its increase, leaving telcos with solutions to find from an economic and infrastructure perspective. “The challenge that telcos and, particularly, the content providers have is the monetization of that because [it’s] very expensive to upgrade this. There’s obviously downward pressure on data prices but money needed to be spent to upgrade the infrastructure to cater for the increasingly data-heavy world that we live in.



About 80% of data consumption is sitting in the video space, and there are various other categories around communications, music etc. Does it mean that people are watching more than listening to music? Not necessarily. Video [is] just much more heavy from a data usage perspective,” says Stuart.



<h4 class="wp-block-heading has-text-align-center">African, Tech Savvy &amp; Proud</h4>



Another notable point in the report is the impact of the continent’s youth on the growth of the mobile gaming sector.



“The fastest growing segment of video games we’re seeing is in what we call casual and social gaming. That’s your Candy Crush, it’s mobile games that people either play on a free-to-play model or ‘freemium’ where it’s free to start but then you might start paying for things down the line. A lot of that is also funded potentially through advertising that appears in those games so that’s where a lot of that growth is coming from,” says Stuart.



These developments have also opened up an emerging avenue in the cinema space and he adds that this could create opportunities in emerging economies that are primarily tech and mobile-focused.



“Video games are seen as one of the access points to the youth. [They] engage in it and we’re seeing things expanding. During Covid, the Fortnite platform, which people access from a video games’ perspective was used to host music concerts – Travis [Scott], I think, was who appeared on the Fortnite platform and had thousands and thousands of people watching his show, whereas you previously wouldn’t have seen it. There’s a bit of multi- functionality within the video games space.



“What we are seeing in the cinema space is interesting. We’ve always had, traditionally, other sorts of areas like Lego, and then you’ve got Lego: The Movie. We are now starting to see video games that have movie titles and movie franchises attached to them. Why? Because you’ve got this audience that’s already engaged with your content in the video games space and how do you try and stay engaged with them but in a different media format? It could be a series on OTT or it could be an actual big screen film. Maybe that’s some sort of element of opportunity within Kenya and Nigeria – as video games continues to grow, that could help to spur some growth as that content is repackaged into the cinema space,” Stuart concludes.

singer on stage with crowd reaching for him

Where Does Venture Capital Feature In Africa’s Entertainment Sector?

The IMF says the global economy is likely to expand 3.7% in 2018. What is your personal investment philosophy? 
A 3.7% growth rate for the world economy is quite thought-provoking when considering that some emerging markets, such as South Africa, are not expected to grow by much more than 2% in 2018. The foundation of my personal investment philosophy is the elimination of debt, starting with the most expensive debt.
Is it mainly cash, stocks or mutual funds where there is growth? Any other preferred financial instruments? 
The organization that I work for restricts me from directly investing in shares, due to independence requirements, and so I generally do not invest in shares. The asset I find attractive is property, followed by unit trusts. Interest rates are currently low, and have been so for some time as a result of the pressure that the global economy has been under, and so I do not consider cash to be an attractive asset class.
What about real estate, art, jewelry, wines, watches…? Do you see them as worthwhile investments too? 
I strongly believe that real estate should form part of any wealth creation and preservation strategy. I have never invested in art, jewelry or wines (as an asset), and so cannot speak with any authority on these type of investments. Over time, and with the exception of the odd property bubble, real estate has proven itself to be able to generate inflation beating returns for relatively low risk. However, one should always be cautious of property bubbles and unrealistic expectations.
How do you balance your portfolio between liquid and fixed assets to build wealth? 
We are fortunate enough to live in a country that still makes it possible to hold a good balance of both, and where fixed investments can be liquidated with relative ease. This is not always guaranteed in other parts of the world. When one is still young, I believe a portfolio should always be weighted towards fixed assets, with the liquidity being prioritized as and when one gets nearer to retirement.
Is investment about getting rich or increasing savings? What are your own long-term goals? 
The first goal of investment should be to secure financial independence and the ability to sustain one&#8217;s lifestyle long after retirement. This does not necessarily translate into being wealthy. After all, wealth is a relative term. With people living longer and longer, the ultimate long-term goal is to have enough to live on after retirement without having to make significant changes to one&#8217;s lifestyle.
What returns do you target from your investments and how do you monitor it? 
As a minimum, one should target for one&#8217;s investments to outstrip inflation and to cover any investment and financing costs associated with that investment. I enlist the services of a broker to monitor performance. 
 
What do think the seven habits of successful investors must be? 
Perhaps not seven in total, but a good mentor once told me the following: 
1. Try and pay off your debt in the shortest possible time. 
2. Do not be greedy. 
3. Do not follow the herd. 
4. Invest for the long-term, and do not be fazed by short-term volatility. 
5. Life is not only about money.
Was there any one time when you thought your plans didn’t work, especially in a volatile market? 
All asset classes come with some exposure and risk. Very few people in the world can claim not to have been impacted in some way or another by the 2008 global financial crisis.
With longevity increasing and global billionaires investing in prolonging life, how best can one be retirement-ready? 
Retirement-readiness is a big problem in society today, and it is an accepted fact that people generally do not save enough for retirement. There is unfortunately no silver bullet to this. The simple fact is that one gets retirement-ready through exercising discipline in saving, and to start saving for retirement at the youngest possible age. Of course, one is always in control of one&#8217;s lifestyle.

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Where Does Venture Capital Feature In Africa’s Entertainment Sector?

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