Highlight on the Gaming in South Africa: Producers and Consumers

In this edition we highlight one of our latest research reports, specifically Gaming in South Africa: Producers and Consumers. The report was commissioned with an intention to build on the information contained in previous related reports with a focus on understanding gaming economies, business models and the consumers of games. This is with the hope that the information will shed light on the kind of interventions that could be made to strengthen the industry in South Africa at such an early stage of its development.

To this end, the report sought to uncover several related questions such as how much of the local market is captured by local gaming companies? What insights do we have into patterns of consumption vis-à-vis gaming? Are international companies the primary beneficiaries of games being consumed in South Africa? Is our gaming fraternity robust and growing?

The findings suggest that it is an industry worth investing in and developing. We underline a few key ones below. For Producers/Studios as a part of the industry value chain the local gaming sector is in its infancy with most companies under ten years old. There are about 49 studios in number, but only a fraction of them are bona fide businesses that are active and generating an income in producing games. There are currently no studios in South Africa producing their own AAA games. This means no big budget ‘blockbuster’ type games are being created. The focus is on smaller premium indie games for a niche audience beyond SA’s borders. The largest companies in terms of staff are those involved in third-party service work.

A skills deficit at the mid-career level was cited by third-party service gaming companies and those pursuing their own IP as one of the restraining factors to their companies' growth and that of the industry at large. Successful studios driving their own IP are mostly aligned to a publisher based in the US or Europe.

The information obtained shows that conditions in South Africa are not favourable to encourage growth of the industry. Factors discouraging growth include insufficient local audience, population’s lower cost of living, lack of government support and unfriendly trading practices. In addition, the country’s unreliable and inconsistent supply of electricity has become an added burden and discouragement. 

There is high demand for African content at an international lever, but local studios, and yet local studios are not creating content targeting South African consumers as consumers can only afford (and have access to) mobile devices and Free-to-Play (F2P) games.

Global consumers of the gaming industry seem to be predominantly from the Asia-Pacific region, followed by Africa and the Middle East and then North America. While this is the case, consumers in the US and Europe spend proportionally more than in the other regions.

South African gamers prefer playing games on mobile devices. This is not only shaped by the fact that the penetration of smartphones has been high, but because there is more and better connectivity to the internet through smartphones and mobile phones.

Only 10% of the population have access to a fixed internet connection, which is generally a prerequisite for PC and console online games.

Given the statistics around South Africa’s shrinking middle class and the income brackets that define this group, the market for online gaming is small.

In terms of the industry’s economics game publishers account for the bulk of revenues in the value chain. US publishers are benefitting from South African IP. If they invest in the development of a game, the studio will not be able to claim full royalties on sales of the game until the publisher has recouped this investment and other costs. The standard royalty split between a publisher and a studio is 30/70 in favour of the studio. All the studios in South Africa barring those involved in third-party service work sell their games on Steam, which is how they generate an income. Only 20% of games are F2P on the platform and that figure is said to be declining.