Africa’s Gaming Market with Jay Shapiro, CEO of Usiku Games

The Canada Africa Business Forum recently spoke with Jay Shapiro, CEO of Usiku Games and Chairperson of Pan Africa Gaming Group, the continent’s largest game developer. We discussed the swift expansion of mobile gaming in Africa, exploring the trends, opportunities, and challenges for local and international players in this rapidly evolving sector.

With Africa’s burgeoning youth population and increasing internet access, its gaming industry is poised for substantial growth, positioning it to become the world’s third-largest market, trailing only the US and China. The demand for locally relevant content is evident, attracting attention from major players like Xbox and Sony who are expanding their presence in the region. Despite challenges in monetization, improvements are underway. The industry’s low barriers to entry make it a significant contributor to addressing the continent’s need for millions of new jobs annually. Usiku Games is experiencing rapid growth, anticipating a 300% increase this year and planning for further expansion to meet Africa’s gaming projections.

Jay Shapiro

Founder & CEO Usiku Games, Chairperson of

Anthony Atigari: Hi Jay, Thank you for joining me today. Can you please share your background and involvement in gaming in Africa?

Jay Shapiro

My name is Jay Shapiro, and I was born in Toronto, Canada. However, I have been living in Kenya for the past seven years, where I am the CEO of Usiku Games – a social impact gaming development studio that I co-founded with David Hoare, who is a fellow Canadian residing in Coburg, Ontario. I also hold the position of the chairperson of the Pan African Gaming Group (PAGG). PAGG was conceptualized a few years ago as a pilot project in Kenya and has now become the largest game developer on the continent. It consists of nine of the top game development studios across Africa, with hundreds of developers working on game development projects everywhere from Tunisia and Egypt in the north to Cape Town in the south and from Dakar in Senegal in the West to Ethiopia and Kenya in the East, covering numerous African countries in between.

Anthony Atigari: Was the formation of PAGG a response to the recent growth of the gaming industry in Africa?

Jay Shapiro:

PAGG has been part of Usiku’s plan from the beginning, aiming to replicate the success of global tech businesses within Africa’s gaming industry. Having already grown and exited a few big global tech businesses, I was excited to do it again, this time in Africa with gaming. With this objective in mind, PAGG was established around two and a half years ago to drive the process.

Anthony Atigari: Let’s discuss the growth of Africa’s gaming industry. Has it been a consistent trend, or is it a recent development?

Jay Shapiro:

The gaming industry in Africa is a rapidly growing and unique sector. Globally, gaming is a $250 billion industry, more than Hollywood and the global music industries combined. It is especially popular among Africa’s youth. About a decade ago, Africa had a negligible presence in the gaming industry. However, population growth, demographic factors such as a billion-plus youth and increasing smartphone connectivity are driving the acceleration of gaming on the continent. This unique growth trajectory is positioning Africa to be the third largest market for mobile games, just behind the US and China, with annual growth far exceeding that of developed markets. Gaming is the number one media for youth globally today, and Africa has more internet-connected smartphones than all of Canada, Mexico, and the USA combined. It is still growing at 20% year over year – half a billion devices already! Therefore, Gaming in Africa is set to go from zero about ten years ago to becoming the third-largest market for mobile gaming globally. In contrast, the US, for example, is growing at 2%. The fact that Africa has 12% of the global internet-connected smartphones, even if it gets 1% of the global gaming revenue would still be a $2+ billion industry for the continent, which is enormous.

Anthony Atigari: Is the growth mainly due to changing demographics or shifting appetites and preferences?

Jay Shapiro

Like youths everywhere, African youth are digital natives in the post-iPhone era. They are accustomed to consuming content through platforms like TikTok, YouTube, and Twitter. So, with 480 million smartphones on the continent, almost everyone has at least one game installed. The challenge is creating local content that reflects the players themselves. Historically, the gaming industry has not been diverse, with content primarily created in the West. However, there is a recent trend towards localizing the creation of games in Africa.

Anthony Atigari: How is the trend towards localization progressing? Has it shown potential for exportability and scalability?

Jay Shapiro

Let’s examine the success of Nollywood from Nigeria and Afrobeat music as case studies. We’ll explore the history of Afrobeats, tracing it back to Fela Kuti in the 1970s and look at the emergence of local content from Kenya. What we’re seeing is a strong sense of pride in African identity among people on the continent. They genuinely want to consume local content, even if it doesn’t match the quality or quantity found on platforms like Netflix or Hollywood. This trend isn’t limited to film and music; it’s also noticeable in the gaming industry, although lagging slightly behind. This delay is due to the fact that the gaming industry is still in its early stages here, especially within the last five years. While there may not be an abundance of local African games yet, there is a significant pent-up demand for them. As a result, when these games are released, they often perform well, assuming they meet certain quality standards.

Now, let’s address the second question: Is there a global appetite for these games? The fact that Disney has made a considerable investment in Nigeria to develop an African-themed game suggests that there is. Additionally, the success of “Black Panther,” which became the second highest-grossing Marvel movie of all time (not including the Avengers films), highlights the abundance of untold stories, legends, and characters from Africa. Many Hollywood films are simply rehashes of earlier narratives, indicating a genuine hunger for fresh perspectives. Furthermore, the African diaspora, with its significant economic influence, shares a strong desire for high-quality content originating (like them) from the continent. All of this indicates undeniable potential within this market.

Anthony Atigari: How is this potential being harnessed? Are international investments fueling this endeavour, or does it remain primarily driven by local initiatives? Can you discuss Xbox’s involvement?

Jay Shapiro: 

Major international studios like Xbox, Ubisoft, and Sony have recognized the potential of Africa as both a market and a source of talent and narratives. This trend is similar to India’s gaming industry about 15 to 20 years ago when significant game development studios emerged to target Western markets. However, the games produced in India were not necessarily Indian-themed but were offshore productions catered to Western tastes, like FIFA or GTA. Similarly, Africa may follow a similar path. As skill levels rise and costs remain competitive, companies like Xbox Studios may start producing games in Africa for Western markets, regardless of their African themes, as seen in South Africa.

At the same time, African narratives are gaining popularity in Western markets. For instance, “Iwaju,” an animated series produced by Kugali from Nigeria and Rwanda for Disney Plus, along with its accompanying game developed by Maliyo Games in Lagos, has achieved global success. Furthermore, our studio “Usiku Games” from Kenya recently launched a game featuring an endangered Tanzanian Gecko called the Electric Blue, which reached 20 countries worldwide in collaboration with the UK-based Wildlife Conservation group “On the Edge”.

There are also examples from South Africa and Ghana, such as “Leti Arts” and Cameroon, with “Kiro’o Games” developing a game named “Aura” slated for release globally on the Xbox console. While this sector’s growth isn’t yet substantial, its potential is evident. 

Anthony Atigari: Is the growth of gaming on the continent driven by international entities like Xbox or local investments and creativity?

Jay Shapiro: 

Financial sustainability is currently a significant challenge in the gaming industry. Over the past six years since our inception, most of the development and funding were driven by local consumers and investors, particularly local angel investors. Some of these initiatives were driven by individuals with a genuine passion for gaming, while others recognized the financial potential within the market.

However, there has been a significant shift in recent times. In 2019, Phil Spencer, the head of Xbox, and Sarah Bond, who is now the President of Xbox, visited Nairobi in recognition of Africa’s potential. This led to the establishment of Microsoft’s “Africa Development Center” in Kenya and another in Lagos. Additionally, Google has formed a product team for Android in Kenya, Visa has set up a significant innovation center, Nvidia has stationed personnel on the continent, and Epic Games is looking to expand into Africa.

This surge of major investors by renowned global companies demonstrates a marked shift towards external investments aimed at nurturing the gaming market in Africa, signalling a significant change in perspective and strategy.

Anthony Atigari: So, while currently not profitable, does the potential for profit appear to be significant in the future?

Jay Shapiro: 

Profitability is a major challenge for the gaming industry in Africa. Unlike game studios in Europe or the US, African studios are typically smaller, with fewer than 100 staff members each. This has made gaming more of a cottage industry on the continent so far. One of the main obstacles to profitability has been monetization, which has been difficult to achieve in Africa.

Traditionally, games in Western markets have generated revenue through various means, such as selling boxed copies or subscription models like Xbox Game Pass. However, the economics of a $60 game purchase simply don’t align with the realities of the African consumer market. Moreover, subscription models face challenges in Africa due to the low prevalence of credit card ownership.

In Africa, mobile money is a significant means of transaction, with Kenya’s M-Pesa alone accounting for 85% of all economic transactions in the country. However, recurring billing options are limited in mobile money systems, making subscription-based SAAS models impractical. As a result, the prevalent free-to-play model, supported by advertising revenue, becomes the primary option for many game developers.

Yet advertising revenue in Africa faces its own set of challenges. Advertisers are willing to pay significantly less to reach African consumers than in Western markets, resulting in much lower CPM (cost per thousand impressions) rates. This discrepancy makes it difficult for developers to generate substantial revenue from advertising alone.

In response, many African game companies have turned to bespoke contracted games commissioned by brands, NGOs, and government agencies. These “serious games”, aimed at education and social impact are funded upfront by the client and offered to players for free. While this model provides an avenue for revenue, it relies heavily on external funding and does not guarantee sustained profitability for game developers. Thus, despite producing high-quality games with eager players, developers in Africa continue to face challenges in finding viable monetization strategies.

We investigated a lot of these structural issues in our recent Africa Gaming Industry Report, co-produced with market research firm GeoPoll, who interviewed over 2,000 game players in Nigeria, Egypt, South Africa and Kenya.

Anthony Atigari: Perhaps this is a good time to discuss any potential barriers and whether they are insurmountable.

Jay Shapiro: 

There is great potential for action in Africa, and I’ll break it down into three parts. Firstly, the continent has a significant youth population, with a median age of just 20, half of what it is in Canada at 41 years. These young people require job opportunities, and according to the World Bank, Africa needs to create 23 million incremental new jobs annually to meet this demand. The gaming industry offers a low barrier to entry and is a cost-effective and accessible means of economic development. All you need is a laptop and talent, making it a viable option for young people looking to enter the workforce.

The real question then becomes whether we have the talent and the people to take advantage of this opportunity. I believe that talent is evenly distributed globally, but opportunity is not. Therefore, we must create those opportunities and provide training to individuals, potentially transitioning them from other industries like advertising or IT. The Nairobi Game Development Center is one initiative that provides those opportunities, with a 6,000-square-foot community co-working space to nurture the next generation of developers. Currently, we’re running an incubator program funded by the French Government, supporting small startups with grants and mentorship from experienced industry professionals worldwide. This mentorship is crucial, given the youth of the gaming industry in Africa.

By providing resources, mentorship, and support, we aim to help kickstart the industry. The response has been promising, with 54 companies applying for just six spots in our incubator program. As these startups grow and succeed, we plan to expand similar initiatives in our other studios across Africa, fostering growth and opportunity in the gaming industry. Once these startups establish themselves and expand, we plan to replicate this model in other African countries like Nigeria, Senegal, Ghana, and Cape Town, fostering the growth of the gaming industry across the continent. This is how we build a sustainable gaming ecosystem in Africa.

Anthony Atigari: The benefits for organizations like the UN and Xbox appear apparent, but why would investors from Canada or elsewhere want to train individuals who might later start their own ventures? Is there profitability or incentive for smaller investors entering the market?

Jay Shapiro: 

Rarely do investors come across a completely new market right from the ground floor, where they can get in early. However, Africa is currently presenting an exceptional opportunity for early-stage investors like them. Though the industry may seem small at present, it is projected to surpass a billion dollars already in 2024 and is destined to become a multi-billion dollar industry across the continent. Entering during these early days holds immense appeal for many investors. Of course, any venture carries risks, but what’s intriguing on a broader scale, especially when considering Africa, is its demographics. With a billion young individuals all equipped with smartphones and a hunger for content, the demand is undeniable. However, this content can’t solely come from Western markets or existing studios; it needs to be created domestically. Investors can look at the past examples from markets like Korea, Japan, and China, where their local language, local culture, and domestic games dominate the top rankings and have become multi-billion dollar domestic enterprises. The same trajectory is expected for Africa. Therefore, from an investor’s perspective, now is an opportune moment to invest in Africa.

Anthony Atigari: Can you shed more light on the value chain, including opportunities and advantages?

Jay Shapiro: 

From a value chain perspective, the gaming industry in Africa offers multiple investment opportunities across various sectors. It all begins with capacity building and education, which are provided by schools and vocational training programs across the continent. For instance, the Africa Digital Media Institute in Nairobi and the Moringa School are both promising investment opportunities in this regard. 

The game development studios themselves are the next step, and we’ve discussed them at length tonight. Following that is the publishing side, which includes companies like Carry1st from South Africa, which has already raised 50+ million in funding from investors like Google Ventures and Andreessen Horowitz. 

On the infrastructure side, there is a growing demand for data centers in various African countries like South Africa, Kenya, Lagos, Rwanda, and Egypt. However, there is still room for expansion in this area across more nations. 

Next up is the player environment, which involves the sale of devices, particularly used phones and consoles, as well as the emergence of gaming centers. Though large-scale venues similar to Dave and Busters in Canada and the US are yet to arrive, places like Craven in Lagos and Paradise Games in Abidjan are leading the way in establishing eSports centers. 

Finally, there’s the eSports sector itself, which encompasses investments in tournaments, media sponsors, marketing, and production costs. As you can see, the value chain is extensive, and the gaming industry in Africa offers numerous investment opportunities across various sectors.

Anthony Atigari: What challenges do you foresee? You mentioned payment, but are there other regulatory barriers or potential pitfalls to be aware of?

Jay Shapiro: 

As an individual who has led a studio for the past six years, I believe that anything is achievable in Africa, but it’s not going to be easy. It’s essential to keep in mind the challenges that lie ahead. It’s difficult to generalize Africa because the continent comprises 55 different countries, each with its own unique economies, regulations, governments, populations, and interests. Comparing the business environments of places like the DRC and Cairo, as well as Morocco vs South Africa, demonstrates this diversity. Poverty continues to be a significant problem throughout much of the continent despite having the fastest-growing middle class globally, with 300 million people reaching a middle-class status comparable to that in the US. However, this middle class is spread across 55 countries, making Africa’s fragmented nature a significant challenge. Unlike in the US and Canada, where there’s uniformity in language and singular major markets, Africa boasts over 2,000 languages and diverse markets, making business growth complex. Other challenges include payment systems, security concerns in some regions, and unstable power supply, as seen in South Africa’s recent rolling blackouts. Nevertheless, navigating the diverse cultures and mindsets across different studios in Africa has been an exciting experience. For instance, our studio in Senegal faced disruptions due to a contentious election, highlighting unique challenges not typically encountered in places like Ottawa or Toronto. Similar situations emerged in Kenya during the election cycle in 2022, compounding the effects of the pandemic. Despite these challenges, the opportunities in Africa are limitless. Nollywood and Afrobeats are excellent examples of Africa’s diversity and its ability to thrive amidst fragmentation.

Anthony Atigari: How would you describe the role and activities of policymakers in driving the growth of gaming in Africa?

Jay Shapiro: 

The question you have asked requires us to look back at the two main policy approaches taken toward creative sector development in the past few decades in other countries. The first approach was a centralized government-driven model, which was best exemplified by Canada’s National Film Board and “CanCon” music regulations. This approach used tax incentives and playlist regulations to foster a vibrant music and film industry, showcasing Canada’s exceptional talent pool. On the other hand, the rise of Nollywood demonstrated the power of purely organic, grassroots creativity and the ability to grow independent of any government intervention.

Fast-forward to today, and we can see a significant shift in the landscape of content creation. Platforms such as TikTok and YouTube have democratized creativity, allowing individuals worldwide, including in Africa, to showcase their talent and reach global audiences. This decentralization of content creation is particularly evident in Africa, where the youthful population enthusiastically embraces these digital platforms.

This transformation is re-positioning Africa not just as a recipient of charity but as a dynamic hub of innovation. Major companies such as Visa, Google and Mastercard are recognizing this potential and establishing innovation centers on the continent to tap into the wealth of talent and creativity. It’s a paradigm shift that underscores Africa’s emergence as a global powerhouse of innovation, challenging traditional perceptions and opening up new avenues for collaboration and growth.

Anthony Atigari: Are there any decentralized conduits or platforms in the gaming industry that facilitate innovation, similar to Twitter and YouTube?

Jay Shapiro: 

Certainly! Let me give you an example. Roblox is one of the largest platforms globally, and several of our studios are actively developing games on it, joining countless individuals in leveraging its vast creative potential. Minecraft, which is owned by Microsoft, boasts a staggering array of user-generated content, particularly in the educational sphere. Epic Games, with its colossal $30 billion valuation, has introduced UEFN, a revolutionary tool combining Fortnite & Unreal Engine. This tool empowers users to craft their own games with minimal coding expertise, which is a significant step towards the democratization of game creation. This trend is gaining momentum and heralding a future where niche, independent mobile game studios in Africa can produce innovative and compelling experiences for their users.

Anthony Atigari: How do you fund these projects, personally or through investments, and is there profitability in the activities you’re involved in or have observed in this space?

Jay Shapiro: 

Let’s discuss the business model of Usiku Games in Kenya, which I co-founded with David Hoare. Both of us came with a lot of business experience and past exits, so we were initially able to fund the project ourselves before bringing in external investors, mostly local ones. This initial investment helped us in the early stages, during which we completed custom projects for NGOs and governments to generate revenue. I am pleased to announce that in 2023, our company achieved a 65% annual growth rate and profitability for the year. However, this is only the beginning. Our estimates for this year indicate a growth rate of around 300%, which aligns with the industry’s future demands. But this is just the start of our journey. We anticipate five consecutive years of doubling or tripling our size annually to meet the industry’s five-year projections for the continent. Sustaining such rapid growth poses its own challenges, but my past experiences equip me to navigate these hurdles. Despite the many challenges, the industry offers abundant opportunities, making it an ideal time to enter.

Anthony Atigari: Congratulations on that success story. It’s very inspiring. Given what you said earlier about monetization challenges, can you shed light on where the expected revenue will come from?

Jay Shapiro

Our company has historically generated most of its revenue from creating custom games for clients. However, we are gradually shifting towards generating revenue from our own IP. We are exploring opportunities in international markets, particularly in advertising for Western markets. We also anticipate an improvement in CPM rates for ads in Africa, along with the emergence of recurring billing and other innovative models. While some may consider other initiatives as part of Web3 gaming, I am not fully convinced, especially from a gaming perspective. We are experimenting with various approaches that are tailored specifically for the African market. We do not believe in blindly copying Western models but rather in finding what works best for our unique local environments.

Anthony Atigari: Thanks for your time, Jay and for an insightful conversation!

Jay Shapiro

You are welcome, Anthony.