Expert analysis by Marina Korobeinikova, Head of Business Development, New Markets Launch
As one of the most rapidly developing markets, Sub-Saharan Africa has long been the focus of the attention of hundreds of global businesses. The region presents beguiling opportunities for digital tech companies across various sectors, from FMCG to Fintech to digital entertainment. The market remains far from saturated, indicating substantial potential for further development.
I am Marina Korobeinikova, a BizDev executive with 10+ years of experience launching digital entertainment and streaming products in markets from EMEA to LatAm to APAC. Sub-Saharan Africa is one of the regions where I’ve led successful business expansion campaigns, and today, I will present to you this booming region, as well as practical insights and strategies for overcoming the challenges it presents. I will also tell you about the prospects of forming strategic partnerships with local companies to more easily tap into the immense potential of Sub-Saharan Africa’s digital economy.
To keep the size of this piece within reason and give more attention to the practical sides of the subject, I will focus on two of the region’s markets I find the most promising in 2024: Nigeria and Kenya.
Market Opportunities in the Region
The Giant of Africa
With a GDP of USD 472.6 (2022) and steady growth of 3.2–3.6% over the last three years, Nigeria is one of the best-performing markets in the region. Another prominent feature is the country’s large and young population. With almost 200 million people (#1 in Africa) and a median age below 18 years, it’s a massive audience for digital entertainment. At the same time, as of 2023, Nigeria had 122.5 million internet users, translating to an internet penetration rate of only 55.4%. Put together, these figures tell us Nigeria has the potential to become the leader in the region’s digital entertainment industry.
Indeed, the digital entertainment sector in Nigeria is expanding rapidly. For instance, the SVoD market is projected to grow by over 10% annually in the next three years, reaching a volume of $1.22 billion by 2027. The market has raised local players like IrokoTV (focused on Nollywood content) and attracted global giants Netflix and Amazon. In 2023, YouTube had 31.6 million users in Nigeria, demonstrating high demand for digital video content.
Lagos, the country’s largest city and economic hub is often called the “Silicon Valley of Africa” due to its booming startup ecosystem; the 15 million-strong city is home to numerous tech hubs and incubators. Additionally, Nigeria’s film industry Nollywood is a significant contributor to the country’s economy, producing around 2,500 movies per year and generating substantial revenue from both local and global streaming platforms.
Silicon Savannah
Kenya is another up-and-coming, quickly growing market in the region. Although, with a GDP of USD 114.9 billion (2022), its economy is only ¼ the size of that of Nigeria, it has been growing steadily in recent years with a medium rate of 5.3%. The country’s median age is 20 years, which makes it a fertile ground for digital services. In 2023, Kenya’s internet penetration rate was even lower than that of Nigeria – 40%. Again, these numbers show us there is a large potential for the development of digital entertainment and streaming services.
Kenya’s digital entertainment sector is driven by several advantageous factors, the foremost of them being the broad adoption of mobile technology. Although the internet penetration rate is still low, the country’s mobile penetration rate equals 118.7%, and 97% of Kenya’s internet users access the web through their phones. These numbers are direct results of the availability of affordable smartphones and deployment of 3G and 4G networks. Successful governmental policies like the Digital Economy Blueprint (enhancing digital infrastructure and promoting technological growth) and National Optic Fibre Backbone (bringing connection to both urban and rural areas) have also contributed to the surge in Internet and digital services use.
Combined, these factors make Kenya an attractive market for new product launches in the digital entertainment and streaming sectors. Over the next five years, the local SVoD market is expected to grow with a CAGR of 12%. Home-grown Video-on-Demand platforms like Showmax (2 mln subscribers) and Baze (partnered with a local MNO Safaricom to reach their 35 mln users) are examples of successful products in our focus area.
Overcoming Business Development Challenges in Sub-Saharan Africa
As with any region, Sub-Saharan Africa presents its own set of challenges to a business expanding to this market. The two that require our attention are of a technical and cultural nature.
Infrastructure and Connectivity Issues
Even in 2024, both Nigeria and Kenya continue to suffer from infrastructure challenges impacting the delivery of digital services. Despite dramatic improvements in recent years, many areas in Nigeria experience power outages and have limited broadband infrastructure. Reckon these factors in your expansion strategy, for instance, optimizing your services for lower bandwidth consumption and using CDNs to reduce latency and improve performance.
As I already mentioned above, 97% of Kenya’s population has access to mobile networks, but broadband coverage in the country is still expanding. My advice is to follow the local companies and focus on mobile-first strategies. Larger players often collaborate with local ISPs and telecoms to leverage existing mobile networks for data services.
Both countries are currently heavily investing in their national backbone infrastructures. Kenya’s National Optic Fibre Backbone project I mentioned above and similar efforts made in Nigeria are rapidly improving the situation with broadband access. If you consider entering the region, stay on top of these developments and explore possibilities to leverage new infrastructure as it becomes available.
Cultural and Socioeconomic Challenges
There are three significant cultural and socioeconomic challenges in the region that you need to be prepared to address:
1. Cultural Diversity
The population of Sub-Saharan Africa is 1.2 billion people and Nigeria and Kenya make up more than ⅕ of this impressive figure. There are more than 250 ethnic groups in Nigeria and more than 40 in Kenya, each with its languages, cultural norms, and traditions. This diversity naturally impacts consumer behavior, preferences, and communication styles and makes creating a unified marketing strategy a challenging task.
Strategic steps:
- Conduct thorough research to understand the cultural nuances of your target audience.
- Create localized content in different languages and culturally relevant marketing campaigns. For instance, adapting your advertising strategies to embrace local customs and festivals may dramatically enhance user engagement.
- Employ a local talent who can provide insights into regional preferences and behaviors.
2. Income Inequality
Income inequality (Gini index: Nigeria 35, Kenya 38) affects purchasing power and access to digital services. In Nigeria, 38.9% of the population lives below the poverty line. This number is significantly lower for Kenya (16.1%), yet the country also faces disparities in income distribution between rural areas and major urban centers.
Strategic steps:
- Adopt tiered pricing models to cater to different income groups.
- Offer affordable subscription plans or pay-as-you-go options to cover a broader audience.
- Consider targeting lower-income segments with promo offers and discounts to drive adoption.
3. Socioeconomic Disparities in Urban and Rural Areas
I have already touched on this point several times throughout the article: both countries feature a stark contrast between the economic development and infrastructure of urban centers like Lagos and Nairobi and rural areas. You will have to address the specific needs of both urban and rural consumers. In urban areas, focus on high-quality, high-bandwidth services and premium content. In rural areas, optimize your offer for low bandwidth and include offline access to content to enhance usability and coverage.
Leveraging Local Partnerships and Knowledge
In the complex and diverse markets of Sub-Saharan Africa, strategic partnerships formed with local providers may notably increase your chances of success. Such collaborations provide invaluable insights into local market dynamics, consumer behavior, and regulatory landscapes.
Understanding the Importance of Local Partnerships
Local partnerships are crucial for several reasons:
- Local partners have a deep understanding of market nuances, customer preferences, and cultural sensitivities. This knowledge is invaluable for tailoring your products and marketing strategies to meet local needs.
- Navigating the regulatory landscape in Nigeria and Kenya can be a challenging task. Local partners can help you understand and comply with local regulations, reducing the risk of legal issues and delays.
- Building trust in a new market takes time. Local partners already have established relationships and credibility with consumers, which can help you gain a foothold more quickly.
If you want to learn more about the advantages and strategies of forming mutually beneficial local partnerships, please read my article Market Entry Partnerships: Collaboration as the Way to Success. Here, I will provide you with a couple of case studies that demonstrate the power of a partnership.
Conclusion
Expanding into Sub-Saharan Africa’s digital entertainment and streaming markets holds vast potential, but also presents unique challenges that require careful planning and local insight. Leveraging partnerships, understanding local nuances, and staying informed about market dynamics are essential to carry out a successful entry and achieve sustained growth.
Still, although I hope I managed to tell you of the major opportunities and strategies for success in this region, one article naturally cannot cover all aspects of these complex markets. For a more comprehensive understanding and additional business development strategies, I humbly invite you to explore my other works on this topic.
