The Next Billion-Dollar Industry: Why Investors Should Back Africa’s World-Class Creative Industries
Africa’s creative industries have witnessed a meteoric rise in recent years, with stars such as Burna Boy, Ayra Starr and Tyla at the forefront of the global music industry. With the eyes of the world on artists with roots spanning from Lagos to Johannesburg, the continent’s burgeoning cultural influence is now translating into significant investments in its creative industries.
African creatives face several challenges, one of which is limited access to capital and enabling infrastructure, hampering growth and scalability. Additionally, there is often a lack of formal intellectual property protection, which prevents creatives from generating income and building wealth to scale their businesses.
The creative economy is also a relatively new sector for traditional financial institutions, which struggle to assess potential returns and exit options due to inadequate market data and metrics. Diverse regulatory environments and market fragmentation further complicate investment efforts. Investor education is therefore required to build an understanding of Africa’s creative industries and the many areas with untapped investment opportunities.
Potential for growth
In the same vein, the widespread adoption of technology in Africa is making it easier for creatives to produce content, with international players developing content production infrastructure. Platforms like Spotify, Paramount+, TikTok, and Netflix are taking advantage of the expanding market with compelling, locally produced content that taps into sizable populations in emerging markets and consumer class longing to be represented while living in the US, Europe, and other countries as African diaspora.
Global financial institutions are also beginning to enter the space. In 2023, the International Finance Corporation (IFC) and Sony Group Corporation signed a cooperation agreement to identify investment opportunities in companies in the creative industries in Africa. The agreement will focus on early-stage startups in film, music, animation studios, post-production services, fashion, sports, and technology and platforms supporting the creative ecosystem.
The IFC has further explored new opportunities to accelerate the growth of sports and entertainment in Africa, alongside Proparco, Agence Française de Développement, and Helios Investment Partners. In 2022, Afreximbank’s CANEX programme announced a funding package of US$1 billion dedicated to supporting Africa’s creative industries. At the just concluded CANEX WKND in Algiers this October, $540 million worth of deals were signed. Key among these was a 245 million global facility agreement with New World Television (NWTV) to part-finance the network’s acquisition of media licensing rights for sports broadcasting across 24 African countries.
Private capital can close the funding gaps
We are seeing a range of investors beyond development finance institutions and multilateral development banks that have identified the sector’s attractiveness. AVCA’s research shows that 58 private capital investments, with a total reported value of $346 million, were recorded in Africa’s creative industries between 2012 and 2022. Venture capital investments attracted the largest share of these investments, accounting for about 67% of the total number over the 2012–2022 period, followed by private equity investments at 33%.
In music and entertainment, Universal Music Group’s landmark acquisition of a majority stake in Mavin Global from TPG Growth and Kupanda Capital marked one of the largest exits in Africa’s entertainment sector, while the Recording Academy, the organisation behind the Grammys, has announced the launch of its operations in Africa and the Middle East.
In the content creation space, AMAKA Studio recently raised $2 million in a funding round led by Equitane (previously Africa Transformation and Industrialization Fund), with participation from Morgan Stanley Inclusive Ventures Lab, Silverbacks Holdings and angel investors. Mastercard is also backing the creator economy, having announced in June 2024 a $2 million investment in collaboration with influencer marketing platform Wowzi and Masria Digital Payments (MDP) to enable content creators to obtain digital payment cards to simplify financial transactions. Sports and fashion are also attracting investor attention, with Silverbacks Holdings recently acquiring a significant minority stake in NERGii, a South African sports technology company developing performance-enhancing shoe insoles; and TLG Capital announced its investment in Liberty & Justice (L&J), an African swimwear brand.
The sector is attracting investment from local funds and angel investors, too. Based in Kenya, HEVA Fund and Growth Africa invest in creative businesses across East Africa, providing financial support and business development services to ventures in fashion, music, film, and gaming. The HEVA Fund promotes youth-led and women-led digital and creative enterprises as an opportunity to invest in groups often overlooked by traditional investors.
Tremendous opportunity for impact investors
A major advantage of investing in Africa’s creative industries is the significant potential for generating impact particularly in job creation. With rising unemployment and millions of Africans entering the workforce each year, investing in creative industries is an effective way to create opportunities for Africa’s abundant young and entrepreneurial talent who may be unable to access the traditional ‘formal’ job market. Investment in the creative industries also maximises efforts by investors to improve connectivity and inclusion in Africa, creating new technology-enabled jobs in sectors such as animation, graphic design and film.
The increase in investments and funds focused on Africa’s creative industries show that far from being outliers, globally recognised African artists are just the tip of the iceberg. The continent is home to abundant and diverse creative talent. With a burgeoning youth population, a rich cultural heritage, and a growing global demand for African content, Africa’s creative industries are poised for a significant cultural and economic transformation. By investing in local talent, education for creative arts, and providing the necessary financial resources and strategic support, investors can help unlock the immense potential of this sector. Now is the time to invest and contribute to a more prosperous and culturally vibrant continent.
