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">
“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">
“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?

AFRICAN STARTUPS ARE RAISING UNPRECEDENTED AMOUNTS AT RECORD SPEED. FOR NOW, THE CONTINENT IS THE ONLY REGION IN THE WORLD SEEING A RISE IN VENTURE CAPITAL FLOWS. PERSPECTIVES FROM WEST AFRICA.



AS FUNDING FOR STARTUPS FALLS ACROSS the globe, Africa it seems is undergoing a renaissance in this regard.



“We are seeing a time where funding for African startups rose to a massive $3.14 billion in the first six months of this year alone,” says Eric Idiahi, Co-Founder and Partner at Verod Capital, a leading West African private equity investor. “That is unprecedented and it really shows the interest in the continent!”



African entrepreneurs are raising money to solve pertinent socio-economic problems on the continent ranging from financial inclusion, providing access to healthcare for the underserved and vulnerable, and bridging the education gap.


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“Africa investment firms and angel networks have started putting money into African companies,” says Dr Akintoye Akindele, yet another West African entrepreneur, who is the Founder of investment vehicle Platform Capital in Nigeria.



“It took African entrepreneurs almost 10 months to raise $1 billion in 2019. It took the same group eight months to raise $1 billion in 2020. It took them four months to raise $1 billion in 2021 and it has taken them less than six weeks to raise $1 billion in 2022. That means capital is coming in faster into deals and last year for the first time in our history, African investors invested more than European investors. This is a major milestone.”



Akindele is himself focused on inviting investors “to see Africa the right way”.



“This is because we know the narrative that exists about Africa and the negative questions we get asked.”



The thesis of Platform Capital is that it deploys long-term capital to startups whose center of gravity is Africa.



“Africans need long-term, nurturing and patient capital. Four to five years is too short in Nigeria for a business to turn capital around and grow and deliver profit to capital providers. I believe from my experience that five to six years does not create enough alignment,” says Akindele.



Based on their extensive research and experience investing in over 100 portfolio companies with a valuation north of $1.5 billion, Platform Capital invests in businesses that will become top in their sectors in 15 years. Akindele also believes his investments should be sector-agnostic.



“I believe in Africa, we should not be choosing what we cannot invest in&#8230; whether it’s energy, telecom, agriculture, infrastructure or value-added services like gaming, I believe consumers need their basic needs met and then on the back of that we can evolve.”



Akindele’s primary focus is those sectors fundamental to the development of Africa.



“We invest in key areas that Africa needs to catch up on&#8230;so things like technology infrastructure, agriculture or food value chains. They form our anchor sectors and that represents about 60% of our portfolio. Then, when you have people who have electricity, food and water, they then go into the next sector like finance as well as education or healthcare&#8230;Then our final sector is robotics, artificial intelligence, such as one of our companies that do smell cyborgs,” says Akindele.



The company he is referring to is Koniku, a synthetic biotech company that creates ‘smell cyborgs’ that can detect a range of compounds in the air in real-time, and which recently partnered with Airbus to launch biotech solutions for aviation.



The company has so far reportedly raised $49.2 million in four rounds and is part of a long line of African startups bucking the trend of venture capital (VC) investment worldwide.



According to Yaa Agyare-Dwomoh, a consultant with growth strategy consulting and research firm Frost &amp; Sullivan, African VCs reached $1.8 billion, up 150% compared to $730 million in the same period in 2021 and was subsequently, also the only region in the world to record three-digit growth in the first quarter of 2022.



As the biggest catch-up market, Africa’s advantage lies in its need for innovative solutions to leapfrog years of underdevelopment. For some pioneers like Oshiorenoya Agabi, the Nigerian-born scientist based in Silicon Valley and Founder and CEO of Koniku, that need for innovation has brought the continent to the age of biotech solutions.



The company, which was founded in 2017, is using technology to combine traditional computer cells with living biological neurons.



“We are creating a device capable of thinking in the biological sense like a human by creating neurons that are sensitive to particles and are able detect smell. By this method, the solution can be used for particle detection for aviation, military or agricultural application,”says Agabi.



Apart from biotech, the figures show that it is fintech that attracted the largest funding by sector by far, mostly spurred by the need to extend banking and financial services to millions of unbanked and underbanked Africans across the continent. “Fintech is now the most popular sector for investments in Africa. In 2021, fintech funding broke the $1 billion funding barrier and continued to receive the largest amount of funding on the continent, representing 54% of all venture funding deals. In 2022, the fintech sector was responsible for the biggest deals securing two-thirds of the total funding for Africa’s technology firms,” says Dwomoh.



And this trend looks set to continue.



“Despite the global trend of tech companies struggling to raise money, African VCs are still raising money at record speed,” adds Akindele.



An unexpected side effect of the coronavirus pandemic has been the need for inclusive development in areas that fundamentally impacts society. This new trend known as impact investment has also consequently been on the rise in the African VC space.



Impact investing is based on the notion that when money is managed effectively, it has the added benefit of positively impacting the lives of people as well as creating a return on investment.



Africa is home to the youngest population in the world, with a median age of less than 20 years, and 70% of the population under the age of 30. According to the Global Impact Investing Network 2020 survey, almost half of global impact investment capital goes to the African continent.



Raised to appreciate poverty and wealth at the same time, Akindele is also a firm advocate of his investments positively making an impact on his portfolio companies. Platform Capital writes cheques anywhere from $10,000 to $10 million with most of the companies in the portfolio growing by 500% in terms of money raised, according to Akindele. As an African advocate, each investment the firm makes has to have an impact that



is transformational to the continent and its people and most importantly, makes a profit.



The new influx of money into Africa is just an attestation of everything entrepreneurs like him have consistently been working towards.

Tag: venture capital

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