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Economics of the sports industry : Realities and challenges

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Economics of the sports industry : Realities and challenges

Africa is a major source of talent and athletes worldwide. Despite this undeniable potential, the sports industry contributes only marginally to the continent’s gross domestic product (GDP), accounting for less than 1 %.

Africa’s sports industry landscape

The sports industry, in its broadest sense, includes athletes, specialized infrastructure, media rights, sponsorship, and sales of derivative products. According to the Organisation for Economic Co-operation and Development (OECD), this sector is worth around 1,200 billion EUR, or almost 2 % of global GDP.

However, the vast majority of this value is concentrated in North America and Europe, leaving other regions on the sidelines. In Africa, the sports industry’s share of GDP is estimated at 0.5%. Nonetheless, the sector’s contribution to the African economy is expected to grow by 8% over the next three to five years.

Sport : Rooted in African culture

Sport plays a fundamental role in many African cultures and traditions, reflecting the continent’s ethnic diversity. For example, Senegal’s navétanes and rites of passage, as well as traditional sports like jukskei, nzango, awalé, and various forms of wrestling, are authentically African.

Traditional sports serve not only as entertainment but also as tools for education, social integration, and the transmission of cultural values. In contrast, modern sports such as soccer, basketball, and athletics have become major influences. These sports are sources of national and international pride, allowing Africa to shine on the world stage.

The continent is a significant talent pool for European soccer leagues, with over 500 African players currently under contract in major European leagues, according to KPMG data.

Lack of investment and structuring of sports sectors

The sports industry’s low contribution to Africa’s GDP can be attributed to the lack of commitment and financial investment from major players. This is largely due to the devaluation and immaturity of the African sports market.

Additionally, most African countries lack a legal and regulatory framework for the sports industry, which discourages private investors. Consequently, the state remains the primary financier of the sector, facing challenges in developing this promising ecosystem.

Nevertheless, Africa is home to several large-scale investment projects:

  • Senegal stadium, worth 238 million USD
  • Creation of the Caf Champions League, with endowments of USD 100 million
  • investment of 120 million USD by an Egyptian conglomerate in the Right to Dream soccer academy
  • Establishment of Decathlon, with an investment of several million USD and impressive annual growth.

Emergence of the sports economy in Africa

Sport generates jobs for young people and helps retain talent in Africa. To achieve this, hundreds of millions need to be invested in sports media, particularly streaming services. However, only 1 % of global sports sponsorship funds go to the continent. Despite this low rate, some investors, such as the IFC and Proparco, are betting on the sector’s potential. For instance, the Basketball Africa League, valued at USD 1 billion, has raised over 100 million USD from African and foreign investors, including billionaire Tunde Folawiyo.

Importance of naming rights and partnerships

Masai Ujiri, President of the Toronto Raptors, highlights the importance of investment over charity for developing the sports sector in Africa. He stresses the value of naming rights and the high demand for various events in sports facilities.

To support his argument, Mr. Ujiri references the naming contract of the Toronto Raptors’ stadium. Scotiabank is paying 800 million USD over 10 years to rename the stadium, making it unavailable for bookings for two years due to its success. Following this trend, Rwanda renamed the Kigali Arena to the Bank of Kigali Arena after a six-year, 8 million USD sponsorship deal.

In 2018, the Nigerian national soccer team partnered with Nike to sell over 3 million shirts in one hour, featuring designs inspired by traditional outfits. This success demonstrates Africans’ willingness to spend money on cultural products rooted in their heritage.

Boosting sport : The imperative of an authentically African model

Developing the sports industry in Africa demands an authentic approach, as advocated by Constant Nemale, founder of Africa24. This model must leverage the continent’s unique strengths and meet specific conditions. To facilitate this, the report titled « The Economics of Sport in Africa », published by the African Sports and Creative Institute (ASCI), offers 16 recommendations divided into three categories.

  • Make education paramount

Africa possesses a significant asset : its human capital, embodied in its young and dynamic population. Maximizing this potential requires prioritizing education. By investing in training and skills development, we can harness the capabilities and talents of this population to their fullest extent.

  • Gathering data to improve market analysis and strategic decisions

The lack of data hinders understanding of the sports market and strategic decision-making. To address this challenge, it is essential to train and inform industry players in the collection and analysis of relevant data.

  • Professionalize grassroots sport, the main revenue generator

Contrary to popular belief, the majority of sports revenue originates from grassroots sport. Therefore, it is crucial to elevate grassroots sport to the status of an economic pillar within the industry, treating it as a commercial product.

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