African artists, athletes and creatives are gaining global prominence, and the creative and cultural industries driving their success are attracting significant investment. Notably, industry titans such as Netflix and Universal Music Group are expanding their operations in Africa, while an increasing number of institutional investors are pumping significant funds into the continent’s media and entertainment scene.
Ibrahim Sagna, executive chairman of Silverbacks Holdings, a privately–held investment firm, is convinced that Africa’s creative economy offers one of the greatest chances for wealth creation and youth employment on the continent.
“Opportunities in sports, entertainment, media, and fashion abound,” he tells African Business, noting that the influx of capital into Africa’s creative economy by Silverbacks and other investors is driven by the phenomenal adoption of new technologies by young Africans, as well as the reinforcement of links between the diaspora and the continent, a broad network commonly called ‘Global Africa’.”
Exportable asset class
“There is growing market consensus that African culture is finally recognised as an exportable asset class of critical scale,” Sagna notes, citing a report by PwC projecting that Africa’s entertainment market will grow by 15% annually from 2020 to 2025, reaching $4.6bn. In addition to that, the continent’s sports sector, valued at around $7bn in 2018, is anticipated to exceed $12bn by 2027.
“Given the global success of Grammy –winning artists in the Afrobeats and amapiano genres, Hollywood blockbusters such as Woman King and Black Panther, Broadway hits like The Lion King, and international sports champions of African descent, it only made sense to have a focus on sports and entertainment, and the broader creative industries,” Sagna elaborates.
He says that Silverbacks has exposure to a large number of companies, with at least 10 companies having a valuation over $100m. The company says that its overall portfolio has a combined valuation of over $10bn. “Although Silverbacks has exposure to over 200 companies, we concentrate our primary investments around a dozen companies capturing over three quarters of our allocations,” he states. This includes stakes in e-commerce category leaders such as Omnibiz and Sabi, an Uber-backed mobility fintech called Moove, and two unicorns – startups valued at $1bn or more – Flutterwave and Wave.
Driving wealth creation
In terms of its performance, Silverbacks has enjoyed a strong run so far, with six profitable exits since its inception in 2019. Notably, its tech exits averaged over 5x – that is, the stakes were worth at exit five times what they put in. “We’re grateful, as it has been a blessed journey so far,” notes Sagna, emphasising that tech and the broader creative economy are proving to be a new source of wealth creation for some African founders and their funders.
Silverbacks’ latest exit was in the entertainment sector. The Postcards series, which the firm invested in, was sold to Netflix and, according to FlixPatrol is currently the most-watched series in Nigeria for 2024. It also ranked in the Top 10 in the UAE and the UK, and charted in many countries across the globe.
“The script was anchored around Nigeria, India and their respective diasporas. For us that combination provides formidable total addressable market (TAM). That’s immediately over 1.7bn individuals targeted in one go,” he says, hinting at more ventures of this kind in the pipeline. “We have a few more similar plays in store.”
According to Sagna, the convergence of technology and media – driven by tools like social media, artificial intelligence (AI), and other digital innovation – has significantly enhanced the reach, influence, and monetisation potential of African creatives. This has increased the pace of growth and investment in Africa’s creative economy – to such an extent that some of the tech founders that Silverbacks has backed in the past few years are now stepping up and co-investing with them and music moguls in different sports and entertainment ventures across the continent.
“It has become a virtuous cycle” adds Sagna. He believes that the future versions of Dangote, Sawaris and Motsepe mostly reside in the technology and media sector.
Sports and fashion show growing promise
Looking ahead, the key area to watch in Africa’s creative economy will be sports, Sagna argues, citing the rising fortunes of African athletes in the global sports arena. Sports teams, leagues and related technologies are a key focus for Silverbacks, which has invested recently in a sports tech company called NERGII which develops biotech-related product aiming to enhance athletic performance, as well as in the Cape Town Tigers, a South African basketball franchise that reached the semi-finals in the NBA’s Basketball Africa League’s 2024 tournament.
“We primarily target sports platforms with engaged communities and stable revenue streams from global leagues,” he explains. He contends that sports teams, for instance, present a better investment than legacy media. “They offer a superior financial profile with recurring revenue from participation fees and broadcasting rights,” he says, noting that in a world where billions are devoted to their favourite teams, corporate sponsorship and media spending heavily favour sports teams.
Additionally, there are opportunities to monetise teams through strategic partnerships. “We maximise fan loyalty to open new revenue streams from corporate sponsors and with leagues over and beyond the African continent. Last year, for instance, the team was invited and paid to play in a China Basketball Association (CBA) tournament.”
Sagna believes that there are striking parallels between the investment opportunities in sports and luxury, another area Silverbacks has ventured into. Both are based on loyal fan bases, and the devotion many have to their favourite sports team or fashion brand often borders on religious fervour, he argues. This presents an opportunity for recurring revenue that you can’t easily find in other economic sectors.
Discussing Silverbacks’ investment in Armando Cabral – a leading luxury lifestyle fashion brand with a retail presence on Fifth Avenue New York City – Sagna notes that the emergence of the African luxury and fashion sector is “an integral part of the global demand for African culture”.
“Authenticity has always been valued at a premium by humans. So, in the case of fashion, we are looking for authentic companies, with founders that deliver the highest quality products and enable us to craft timeless stories anchored in Africa.”
“With Armando Cabral, you can see that. There is the founder, born in Guinea-Bissau, who moved to Portugal and carved an international modelling career for himself, launching a luxury footwear brand. It is now a leading luxury lifestyle fashion brand.”
“It is an intriguing, interesting story,” he concludes, adding: “The story alone is not enough, however; the quality of his shoes is impeccable. It increases the level of captivation. Many celebrities including Burna Boy and Akindele Gold are already wearing his work.”
The ecosystem needs to grow
Despite its exciting prospects, Africa’s creative economy faces significant challenges unleashing its full potential due to an underdeveloped ecosystem. Lara Utian-Preston is director of creative consultancy Red Flag and co-founder and CEO of the Ladima Foundation, which supports, trains, and mentors women in creative industries. She tells African Business that the arts and entertainment sectors are often the first to suffer budget cuts whenever African governments run into financial headwinds. “The creative industry always seems to be the easiest area to target for budget cuts. It shouldn’t be that way.”
She argues that this chronic underinvestment in Africa’s creative economy – coupled with inadequate enforcement of intellectual property rights on the continent – places creatives and artists at a distinct disadvantage. This not only limits their ability to thrive, but also prevents the majority of Africans from participating in the creative industry’s wealth creation process.
“When you look at the overall landscape of how African creatives are doing globally, there is a lot to be proud of, there’s a lot of successes. But I think the problem is that it is not systemic,” she notes.
“You find that most of these artists are signed to European or North American record labels or management companies. The hugely successful African films are maybe being funded and produced by Netflix, Disney or Amazon. The real money is not being made or kept on the continent.”
Utian-Preston highlights a common misconception that the creative industry revolves solely around its stars – talented musicians, actors, or athletes. She argues that for Africa’s creative economy to truly flourish, this perception must change.
While the stars and celebrities that have put Africa on the map are important and special, it is crucial to consider the entire value chain and the broader financial ecosystem, rather than focusing on a few individuals achieving success.
“The challenge is creating an industry that creates real opportunity across the board and puts money back into African economies, whether it’s through employment, taxes or shareholder benefits. I don’t think we’re there yet.”
She emphasises that investing in skills development within Africa’s creative economy is crucial to growing and strengthening the creative economy’s ecosystem. She offers the example of mature markets such as Europe and North America, where there’s a higher level of expertise in areas such as management and artist representation – a significant gap that Africa needs to address.
“You’ll find that some of the top African talent are signed to huge talent agencies out of Los Angeles, London or Paris, because there’s a gap in business management and representation for artists on the continent,” she notes.
Crucially, young people in Africa need to view opportunities in the creative economy as pathways to serious careers and enduring success, rather than shortcuts to quick riches or chances to mingle with celebrities.
“Young people need to understand that those are careers. There’s incredible money to be made. You don’t need to be the star or the main talent; you can still be involved in the creative industry as a lawyer, an accountant, or a manager. Those are vital skills that I think we’re lacking across the continent,” she contends.
Open-minded about opportunities
Ultimately, African creatives must remain open-minded when evaluating opportunities, aiming to reach not only consumers on the continent but also those in the diaspora. “What is already apparent to many is that within a few years, one in four to five humans will be African. What is less apparent is the underserved customer base of at least 300m members of the African diaspora who reside outside the continent,” argues Sagna.
“This customer base has solid disposable income and they seek services, products and solutions not yet available where they reside. They are somewhat fragmented but highly digitally connected,” he explains. “The young African entrepreneur should ask him or herself what am I extremely good at that could benefit this group; then get their act together and just do it.”
Utian-Preston concurs that Africa’s diaspora presents an attractive opportunity for creatives on the continent, including in emerging areas like gastronomy, which explores the link between food and culture. “With the diaspora, there’s nothing like the taste of home.”
Other emerging opportunities in the creative economy include video games and esports. Acknowledging that investments in Africa’s video games sector still lag areas like film and entertainment, Sylvia Gathoni, a Kenyan esports player and content creator known as QueenArrow, notes that the sector is nonetheless growing robustly due to the popularity of mobile games. “Mobile gaming has allowed for the accessibility of gaming. The barrier of cost of entry is reduced.”
However, perceptions need to change for the sector to fully take off. “I believe that we need a re-examination of our existing laws that make gaming synonymous with gambling. This will help dispel negative preconceived notions about the gaming and esports industry.”
She tells African Business that social media platforms like TikTok have emerged as key enablers for African content creators in gaming. “Some of the opportunities for monetising gaming in Africa include streams and short form videos on Twitch, YouTube and TikTok. I think that initiatives being led by TikTok with hashtags like #GamingOnTikTok have proved useful in allowing for more gamers from this region to continue making content and monetising it.”
A holistic approach
Ahead of the Creative Africa Nexus Weekend (CANEX WKND) from 16 to 19 October in Algiers, Algeria, Utian-Preston emphasises the need for a holistic approach to unlocking the potential of Africa’s creative economy.
CANEX, she says, aims to unite players across all creative sectors, alongside key stakeholders such as investors and policymakers, to provide precisely this holistic approach. Organised by the African Export-Import Bank (Afreximbank) in partnership with the African Union Commission (AUC), the African Continental Free Trade Area (AfCFTA) Secretariat, and the Government of Algeria, CANEX WKND will gather delegates from diverse creative sectors across the continent.
“What differentiates CANEX from other initiatives is that it’s holistic. It’s working with governments, its working with the AU, its working with other financial institutions, its working globally with the diaspora, to make those systemic changes that are required,” she says, noting that her company has been involved in organising CANEX events since the concept was just an idea four years ago.
Afreximbank has committed over $1bn to Africa’s creative and cultural industries through CANEX. This funding supports the entire value chain, from content production to distribution and encompasses sectors such as sports, fashion, music, movies, art, media, and technology.
Additionally, Afreximbank has established a $100m venture capital fund to commercialise African intellectual property rights.
The bank’s investments have already facilitated film production, often in collaboration with platforms like Netflix, and supported the development of sports arenas and gaming technology.
Last year’s edition of CANEX WKND featured over 21 live performances, 115 industry-leading speakers and experts, 13 masterclass sessions, and a fashion show. Attendees also enjoyed a high-energy music concert, gastronomical showcases and a vibrant marketplace and exhibition centre.
Discussing what to watch out for in this year’s edition, Utian-Preston admits that fashion is an area that will undoubtedly have her attention. “One of the initiatives we are going to be launching at the CANEX WKND is the pan-African fashion alliance that is going to bring together all the large fashion weeks.
“Literature is also another key one to look at. There is no shortage of huge internationally well-known African authors, but there’s not a lot of African publishing houses. I think that’s something that is starting to change.” She believes that while private investors need to increase the pace and scale of investment in Africa’s creative economy, governments have to step up as well. “African governments need to subsidise the creative industries. If you look at Europe or the US, the arts are always something that are subsidised by governments. The French had a model where every cinema ticket had a tax that went back to the industry.”
“It is true that the creative industries are economically viable, but I think it’s important that African governments understand the importance of supporting the cultural industries – not just because they are creating jobs and they can add money into the economy, but also because it’s of vital importance in telling our stories, sharing cultural history, and changing narratives around the world.”
For more on the event see canex.africa/canex-weekend
Source link : https://african.business/2024/10/arts-culture/how-africas-creative-economy-is-driving-transformation
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Publish date : 2024-10-07 03:09:54
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