How South Africa can grow its gaming industry

In 2018, the worldwide gaming industry consisted of two.3 billion consumers, who spent nearly US$ 138 billion on games. Research done two years ago showed that there have been greater than 11m gamers in South Africa.

A recent PricewaterhouseCoopers (PwC) report showed that spending on gaming in South Africa in 2017 was R3,060m. While this is barely 2.37% of total South African entertainment and media spending in that 12 months, the video games sector had the fastest year-on-year growth rate (16.8%) in 2017 of any of the media and entertainment sectors in South Africa. It includes sectors like books, magazines, cinema, music and podcasts.

The growth is partly due to the rise of mobile gaming via smartphones which has meant that many more South Africans can afford to play. Schools and better education institutions are increasingly offering competitive online gaming activities, known as “eSports”, that are watched by spectators. This too is driving the recognition of online gaming.

The PwC report identifies the digital video games sector as considered one of “the most important success stories” in South Africa’s entertainment and media industries.

To understand the scale, international growth potential of the local market, and to discover challenges and opportunities, the Department of Arts and Culture commissioned the South African Cultural Observatory to provide a study of the sector.

The Observatory is a research hub funded by the Department of Arts and Culture. Based at Nelson Mandela University, partners include Rhodes University, the University of Fort Hare and the University of KwaZulu-Natal. Its purpose is to supply policy relevant research on the cultural and inventive industries. It also provides capability constructing resources and data to cultural sector practitioners.

The size of the South African animation and gaming sector is relatively small. Yet, the international rise in demand for his or her content, and the growing quality and recognition of South African products, shows that the sector is maturing. It could play an increasingly vital role in driving innovation and growth.

Not only entertainment

Gaming is just not nearly entertainment. For example, the Serious About Games (SAG) movement in South Africa promotes online gaming for educational purposes and social change. Serious games seem like video games, but their purpose goes beyond that.

Online games are also getting used to check and develop artificial intelligence (AI) programs that could possibly be put to more serious uses in the long run. OpenAI is a non-profit AI research organisation. Its aim is to advertise and develop friendly AI that advantages humanity. It also supports technologies driving the Fourth Industrial Revolution – technologies like artificial intelligence, robotics, virtual reality and the web which are driving major changes on the planet.

To establish the scale of the South African market we undertook a comprehensive online seek for South African gaming and animation corporations. We also sent out an internet survey to gather information on the business environment and industry perceptions of the challenges and opportunities faced by the sector.

We identified 59 gaming, or gaming and animation (hybrid), corporations in South Africa. Nearly half (48%) are based within the Western Cape. The mostly used gaming release platform continues to be a PC.

In the long run this, combined with high data costs, could possibly be a constraining factor given the international shift to mobile platforms.

What we found

There is a substantial overlap between gaming and animation, with 46% of corporations producing games also doing animation work. Most of the gaming and animation corporations (65%) within the database were founded within the last 10 years. 57% of gaming corporations are “very small”, with annual turnover of lower than R2-million.

Turnover data was provided via an internet survey. It is estimated that the turnover for the gaming and animation industry (that’s, corporations based in South Africa who develop video games or offer animation services) within the 2017/2018 financial 12 months was R476m. This is a substantial increase from the R100m revenue for the gaming industry in 2015 present in a previous study.

South African gaming corporations currently create 310 direct jobs, a rise from the 255 direct jobs present in previous research 4 years ago. While still small in comparison with other creative industries, the speed at which the sector is growing, and its potential applications to education and artificial intelligence, mean that it has great potential.

Advantages and challenges

We identified plenty of challenges facing the industry.

Firstly, most individuals who work in it are white men. The reason for this appears to be that the industry isn’t developed enough to supply a viable profession path. This signifies that only individuals who can support themselves can become involved. Given South Africa’s history, this tends to be white, middle class individuals who grew up playing video games.

What contributes to this can be the undeniable fact that the present gaming meta is “Free-to-Play” (F2P). In this business model, game developers release early versions of their game that users can play without charge, in exchange for user feedback that aids development. Later on, players could have to pay for added game levels, or for virtual goods which are a part of the sport.

While useful for development, the F2P business model signifies that only those that can afford to have periods of no, or low, income can afford to work within the industry.

To help establish the gaming industry as a viable profession path for more diverse participants, more support for the technical training required needs to be considered. To encourage more start-ups the federal government could provide tax breaks for smaller corporations within the sector, or targeted support just like the film and tv rebates offered by the Department of Trade and Industry.