We are now open for business 👋

Increasing electricity tariffs, Cinemas are open for business in SA, Esports in an Emerging Market

Hello Goodmorning,

It’s sad to wake up to hear that Chadwick Boseman is gone. Thank you for giving us our first African superhero (Black Panther) and for reminding us that superheroes are simply people who use their powers to do good. 🙅‍♂️

Power Bills are going up

A few months ago the Nigerian National Assembly promised that electricity tariffs wouldn’t go up until the first quarter of 2021 but it’s happening sooner -- next month.

Rewind a bit

It was always going to happen. Nigeria has spent N1.72 trillion in five years on electricity subsidy and none of Nigeria’s 11 electricity distribution companies is profitable, but the government has always pushed back against the increase in price because it’d increase the cost of living.  

Why the sudden change then?

Terms and conditions of Loans.

The IMF’s $3.4 Billion COVID-19 response relief fund to Nigeria and World Bank’s recently approved $750 million power sector loan for Nigeria have one thing in common. They require the Nigerian government to make the power sector cost-effective. These funds come with requirements: Unify the exchange rate (which the government has done), Introduce new electricity tariffs to reduce the need for government subsidies and remove fuel subsidy, ahem!

Why it matters

Any increase in the cost of electricity would increase the cost of living and doing business, with power being a major component of Nigeria’s inflation rate. But also a power tariff increase should lead to power supply increase to cater for the 47% of Nigerians who do not have access to grid electricity, and those who do have access, face regular power cuts. Nigeria has the potential to generate 12,522 megawatts (MW) of electric power from existing plants, but most days is only able to generate around 4,000 MW, which is insufficient.

Also, the eventual reduction or removal of electricity subsidy would mean the funds ‘could’ be put to better use somewhere else.  The Nigerian government promised the IMF that electricity tariff deficit will be capped to N380 billion in 2020. Sounds like slow painful progress.

We are now open for business

Cinemas in South Africa are back to business, this time bigger and with new safety rules. 

After almost 6 months of business shut down, Cinemas in South Africa are gradually opening up, with Nu Metro and Ster Kinekor movie theatres taking the lead. 

The COVID-19 situation in South Africa: So far, the country has tested over 3.6 million people, with 611,450 positive cases, over 500,000 recoveries and more than 13,000 deaths. With revenues dropping to zero since March following a non-functional business period, cinemas in the country have been at the receiving end of the blows from the pandemic.

New rules of operation: The new rules of operation will be in line with already committed to ensuring the health and safety of customers and staff. For now, cinemas will only be open to the public on Fridays to Sundays, also on public holidays with limited showtimes per day and some films being screened over multiple screens with staggered time slots per complex, limiting overcrowding.  Showtime will follow the curfew and mobility regulation in its state of operation.

In Nigeria, the Lagos state government had earlier hinted reopening of cinemas but sitting capacity must not exceed 50% and with a maximum duration of three hours per sitting.  

Just before the lockdown, cinema attendance in Nigeria stood at over 176,000 with box office topping ₦198 million ($525,328). But since March, movie theatres have been shut down with revenues crashing to zero.

Other sectors: In Lagos, the government has set protocols for the operators in the hospitality and tourism sector and this ranges from social distancing arrangement and for starters, fast food and lounges are to maintain take-away services. This is a major disruption from the regular business operation but it is better than nothing.  

What this means for show business: With cinemas gradually going back into operation, this, more likely than not, is the hope the music industry has been longing for. Having survived only on digital shows for the past five months, artists now look forward to having their physical concert in the coming months. 

Esports in an Emerging Market

Image source: Kucheza

Stay-at-home restrictions have made outdoor entertainment very impractical in the last few months but for the younger population, entertainment can be retained virtually through gaming.

A bit about Gaming

Gaming is the fastest-growing form of entertainment globally, with revenues increasing at 9% per year. By 2022 the global video game market is expected to surpass $190 billion in revenues.

One popular segment of gaming that has generated interest in the last few years is Esports.

Esports (electronic sports) is a multiplayer sports competition using video games, between professional players, individually or as teams. These ‘sports’ events became popular in the late 2000s when professional gamers and spectators started participating while being live-streamed on platforms like Twitch, Hitbox.tv, Azubu, and YouTube Gaming. Ginx E­sports TV, an international TV channel, features on the sub-Saharan satellite platform DStv.

How big is this?

Sports analytics firm Newzoo estimates that this industry will be worth $1.1 billion in revenue by the end of 2020, a growth of 26.7% from last year, projected to reach $3 billion by 2025. The rapidly expanding market also fuels streaming revenue is forecast to hit $18.2m globally, up 33% from 2019, but could now be significantly higher given the pandemic. 

For Africa

Africa’s growing young population and uptake of internet and smartphone technology has led some industry players to look at investing in the emerging market. Futuresource Consulting estimates annual audience size in the region will grow from 30m in 2020 to 53m by 2023.

What makes Esports stand out is the community which connects game, player, team and brand where you can reach a huge audience.

The South African video games market is one of the largest on the continent and is expected to grow to R5.44bn ($292m) in 2023,  with a large population of eSport players and fans in the country. The boom has created a new class of celebrity “athletes” capable of endorsing products to a young demographic. This opens up sponsorship opportunities for companies investing in these ‘athletes’, with advertising targeted to better reach young Africans.

So...good news?

Well yeah, but most African countries still face fundamental problems like the high cost of data, slow broadband speeds, electricity and a lack of game-specific servers. Then again, we have seen some investment recently in the digital/connectivity space (wrote about it here) so we expect this industry to be more popular in the future.

Worth reading 📚

Quote 💭

People don't want to experience change; they just want to wake up, and it's different.

— Chadwick Boseman 🖤

Thank you for reading this week’s edition 💙

Written by Daniel AdeyemiDamilola Amusan Bright Azuh