November 11, 2020

Lucrative yet scarcely understood gaming industry in South Africa

Gaming as a sub - sector of the digital creative industry is lucrative , yet it is scarcely understood. The significant contribution of Cultural and Creative Industries (CCIs) to the GDPs of South Africa, like many countries and the world over, is not refutable. It is also not refutable that despite the significant contribution, there is limited research and therefore knowledge, meaning that the full potential of Cultural and Creative Indus tries in South Africa is not yet quantified and possibly not realized . Ramifications of limited knowledge about CCIs is hard - hitting on less visible subsectors of CCIs such as gaming. Gaming, Animation and Illustration are not delimited because they tend t o blend not only into each other but rather across other sub - sectors of the CCIs and beyond. The pervasive nature of these sub - sectors makes it hard to account for resources, role - players, relationships, rules and results in the value chain and within the CCIs ecosystem. There is a need for continuous, innovative and sub - sector specific quantitative and qualitative research.

Many questions need to be answered before the full potential of the gaming industry in South Africa is realized

1. Given that gaming falls within the CCI’s framework, the critical question is around policy , i.e. whether gaming should be considered as part of the wider CCI’s from a policy perspective and secondly whether it’s current location within the Department of Sports, Arts and Cul ture is adequate?

2. What strategies are required to ensure that gaming becomes accessible to a wider demographic than existing scenarios in South Africa?

3. What interventions are needed to grow South Africa’s current market share which is currently estimated to be around 1.2% of the global industry?

4. What lessons can be drawn from other African countries where gaming and e - sports are growing , such as Kenya and Nigeria?

5. What strategies are required to change public and critical stakeholder perception of gaming as a viable career path?

6. Gaming hardware and software are mostly imported, what strategies can be developed for local manufacturing of these components?

7. What opportunities and barriers exist in the 2017 Revised White Paper on Arts Culture and Heritage for the promotion of the Gaming industry in South Africa?

8. Multinationals hold gaming IP and software , is there space for the development of South African and by extension African software and IP through secondary licensing rights of well - known games?

Overview of the Sub - sector

Gaming in South Africa Including Key Insights Gaming in South Africa is still in its nascent stages with researchers like Hall (2019) arguing that the industry makes up only 1.2% of the global industry. The 2019 SACO industry r eport titled ‘Unlocking the growth potential of the online gaming industry in South Africa: Challenges and Opportunities’ also supports this argument regarding the size of the gaming industry in stating that gaming is “still small and new, but growing quic kly, with an estimated turnover of R200m for 2017/18”. Indications from available research such as a BigFish report ( https://www.bigfishgames.com/blog/stats /the - video - game - industry - of - south - africa/ ) argue that the industry is now probably worth over $163 million (almost R3 billion) due to year - on - year exponential growth.

Source https://www.bigfishgames.com/blog/stats/the - video - game - industry - of - south - africa/ The 2019 SACO report also argues that there is “considerable overlap between gaming and animation” a scenario which makes it difficult to fully understand the total value of each , as well as the revenue share and this , presents a considerable knowledge gap which needs to be investigated further.

The 2018 - 2022 PWC Entertainment and Media Outlook report which among other things focuses on different forms of e ntertainment make the assertion that of the success stories is “video games, which will surpass books, magazines and B2B to become the third - highest contributing consumer segment” in terms of entertainment. The same report argues that gaming’s “dizzying ri se” is driven by the increasing proliferation of smartphones, providing an accessible and affordable route into the gaming market for millions of consumers”.

The 2019 FAKUGESI Games Research Roundtable Report together with the 2019 FAKUGESI Futures and Ne tworking Report are two essential documents which offer more in - depth insights on gaming in South Africa and other parts of the African continent such as Kenya and Nigeria. The reports were compiled using interviews and workshop sessions with key stakeholders in the South African and African gaming industries during the Fakúgesi Arcade events of 2018 and 2019. The arcade is a platform focusing specifically on game development and is part of the Fakúgesi African Digital Innovation Festival.

What has emerged is those game developers are mostly under - financed and small start - ups meaning they struggle to access adequate funding from banks and other lenders to scale - up their businesses. Gaming requires a vast capital vase and intensive tech - heavy productivity tech - heavy so that new games are continuously being churned out. The disadvantage local and African gamers face is that the lion’s share of gaming revenues are gobbled up by international players which means they are always ahead of the curve .

In 2018 it was reported that South African game developers are reported to have earned around R150 million (Hall, 2019) but what is not clear is how those revenues were divided within the gaming ecosystem to get a sense of the areas which are capital and/or labour intensive among other things. The fragmented nature of the industry makes it difficult to get an accurate picture of how different parts contribute to the final product. The unavailability of such key information makes potential investors struggle to understand where to invest and what kind of returns to expect on their investment.

Regular, structured up to date research into gaming is needed in order to assist role players in making key decisions on matters of policy and also what kind of support is needed for the growth and development of the industry. Issues of access and transformation need to be addressed at various levels because the industry remains closed with complex barriers of entry , all of which does not augur well for the development of the sector . Gaming remains a hugely untapped industry with huge potential for growth , so key stakeholders from government and private sector have to come together to ensure that adequate strategies are put in place for the growth of the industry

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