Our external business environment
We operate in a dynamic industry in markets that are often unpredictable. This requires us to anticipate and adapt to shifting circumstances in a way that allows us to pursue our longer-term strategic objectives without compromising consistent short-term execution.
Short-term operating challenges for our businesses
The global and regional operating environment continues to experience headwinds, with inflation remaining elevated, global interest rates continuing to rise from historic lows as central banks seek to rein in inflation, and global capital markets experiencing further volatility. We talk in terms of calendar years below to align with how leading macro-economic statistics are generally reported in the market.
The World Bank estimates that gross domestic product (GDP) in sub-Saharan Africa declined by 2.0% in 2020, before recovering well with growth of 4.3% in 2021 and 3.4% in 2022(1). It expects the region to generate a slight acceleration in that rate of growth into 2023 (3.6%) and 2024 (3.9%).
Inflation remains a critical concern in many of our markets, notably food and fuel inflation which place significant pressure on discretionary consumer spending. In South Africa, electricity price inflation is also a contributing factor.
Rising unemployment continued to negatively impact key markets like South Africa, which ended the fourth quarter of 2022 at 32.7% (42.6% under the expanded definition).
Regulators continue cooperating more closely across the continent, with incremental scrutiny on the traditional linear pay-TV sector and competition matters somewhat offset by proposals to regulate nascent areas like OTT more inclusively relative to traditional or established areas of the market.
A significant deterioration in power availability through the course of 2022 saw loadshedding ramp up in South Africa, placing significant pressure on businesses and households. The SARB estimates that the crisis will reduce South Africa’s GDP growth in 2023 by 200bps, and the situation did indeed deteriorate further into the first quarter of CY 2023. We discuss this further in our performance review for South Africa. Our Zambian and Zimbabwean markets also suffered from power shortages due to low water levels in the Kariba Dam, but our subscriber base showed more resilience than what we have seen during prior droughts.
Commodity demand outside of gold and energy softened somewhat in 2022 on the back of slowing global growth, notably in China. Oil prices remained elevated, with a price of ~USD80 at year-end exacerbated by a strong USD. Nigeria continued to face challenges in its oil sector with security and theft, technical and maintenance issues, rising production costs, and the offset from its fuel subsidy.
The US Federal Funds rate increased from 0.25% at the start of 2022 and ended the year at 4.50%, increased its key interest rate from 0.00% to 2.50% over the same period. Rising global interest rates place overindebted businesses and consumers under direct financial pressure, as well as African governments with hard currency borrowings. Rising global interest rates have also created volatility and downside risk in equity, bond and real estate markets. In South Africa, the South African Reserve Bank while the Bank of England increased its base rate from 0.25% to 3.50% and the European Central Bank (SARB) raised its repo rate from 3.75% to 7.00% in 2022.
Beyond circumstances in sub-Saharan Africa, we are also impacted by global trends to varying high demand areas. The ongoing conflict in Ukraine has also negatively impacted global markets and economies as well as Irdeto’s operations in Ukraine and Russia. The geopolitical environment remains fraught, though, notably between Western and Eastern powers which carries risk to sub-Saharan Africa’s degrees. Silicon chipsets shortages started to broadly ease, albeit with constraints remaining in some global trading activities.
Currencies in our markets generally weakened into the second half of the year, with the average rand naira rate and the Kenyan shilling. The unofficial parallel rate in Nigeria came under significant pressure, particularly in the latter part of the year as the country moved towards its elections in early 2023. The exchange rate weakening against the US dollar in 2022, along with the Ghanaian cedi, official Nigerian Angolan kwanza and Zambian kwacha both ended the year stronger.
| Real GDP growth(1) | Inflation rate(2) | Exchange rate versus USD(3) |
||||
| 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | |
| South Africa | 4.9% | 1.9% | 5.9% | 7.2% | 10% | (10%) |
|---|---|---|---|---|---|---|
| Nigeria | 3.6% | 3.1% | 15.6% | 21.3% | (7%) | (4%) |
| Kenya | 7.5% | 5.5% | 5.7% | 9.1% | (3%) | (8%) |
| Zambia | 3.6% | 3.0% | 16.4% | 9.9% | (6%) | 13% |
| Angola | 0.8% | 3.1% | 21.0% | 13.9% | (7%) | 27% |
| (1) | GDP data from the World Bank Global Economic Prospects Report (January 2023). | |
| (2) | Inflation data represents the inflation rates in December of a given year, extracted from the Trading Economics website. | |
| (3) | Exchange rates represent the average of the month-end rates for the calendar year per our group’s accounting system. |
Medium to longer-term opportunity for our businesses
As we flagged last year, sub-Saharan Africa’s growth story will be driven by favourable demographic trends in terms consumption, as well as increased broadband connectivity and affordability. A growing middle class will create of population growth, working age population growth, urbanisation, growth in disposable income and private a compelling market opportunity over the medium to long term, underpinned by the trends we flag below.
Rising electrification supports economic activity and consumer access to services: the International Energy Agency estimates that household electrification for sub-Saharan Africa will increase from 48% in 2020 and to 56% by 2025 (a 12% increase in electrified homes).
A growing traditional linear pay-TV market provides runway for our traditional video business: Digital TV Research expects traditional linear pay-TV subscriptions in sub-Saharan Africa to grow by 46% between 2021 and 2027, increasing TV household penetration from 42% to 47% over that period.
Strong growth in the nascent SVOD space provides runway for our Showmax business: Digital TV Research expects SVOD subscriptions in sub-Saharan Africa to grow by 178% between 2021 and 2027, increasing TV household penetration from 5% to 11% over that period.
Improving connectivity supports economic activity and consumer reach and engagement: the GSM Association estimates that sub-Saharan Africa will see rapid uptake of mobile connectivity solutions:
- mobile subscriber penetration of the population to rise from 46% in 2020 to 50% in 2025
- mobile internet penetration of the population to rise from 28% in 2020 to 39% in 2025
- smartphone penetration of mobile connections to rise from 48% in 2020 to 61% in 2025, and
- 4G and 5G penetration of mobile connections to rise from 12% in 2020 to 31% in 2025.
Competitive dynamics
Our industry is in a constant state of evolution in terms of technologies, consumer behaviour and competitors. additional non-video entertainment services. Affordability and penetration have historically prevented widespread adoption of broadband, but we are approaching an inflection point and are likely to see an acceleration of uptake in the coming years. In addition, global markets have demonstrated a propensity for households to stack video subscriptions and we expect growing complexity from competing services to benefit established aggregators like As our markets become more connected, so do they gain access to more paid and free video services and ourselves offering more compelling value propositions over time.
StarTimes remains our largest traditional competitor across sub-Saharan Africa, competing largely in the mass market (notably in DTT). We also continue to compete with strong regional operators such as ZAP in Angola, Azam in Tanzania and Zuku in Kenya.
Free-to-air (FTA) remains an important competitor for viewership and advertising revenue in a number of our markets, such as South Africa, Kenya, Ghana and Ethiopia. News consumption is a critical driver of demand, and local content and affordability are other important considerations.
Competition from global and local OTT players continues to increase, mainly through:
- global SVOD services such as Netflix, niche international SVOD services like BritBox, and local SVOD services like iRoko in Nigeria and ViuSasa in Kenya
- traditional studios, networks or media companies going direct to consumer with SVOD (or hybrid) services e.g. Disney+
- non-video businesses deploying their value-added services to drive user engagement in their ecosystems, such as Amazon (Prime Video) and Apple (Apple TV+)
- transactional video on demand such as the iTunes and the Google Play stores and advertising video on demand such as Viu and YouTube, and
- linear broadcasters introducing OTT services to complement their existing traditional linear pay-TV offerings, e.g. StarTimes ON by StarTimes as well as FTA operators launching services, e.g. eVOD by e.tv.
What these major trends mean in the context of our markets
We have identified the evolving video entertainment landscape as a material matter. We see the ability to adapt appropriately to changing needs as a key strategic requirement. It is important to adopt a measured approach to change that is suitable in the context of our markets.
Refer to Opportunities and risks of our material matters opportunities for our business.section, which presents risks and opportunities for our business.