Investing in the BAL’s Success: Room for Private Investment in African Sports

By Aubrey Hruby, Luke Tyburski

Africa was ignored by professional basketball, despite producing talent. But as the NBA wakes up to the market potential of the billion-strong continent, things are changing. An investment by Barack Obama and Nigerian investors brought the inaugural season of BAL to the continent.

NBA STARS CONTINUE to break records garnering excitement from fans around the world as they follow their favorite teams. The NBA fan base has become increasingly global over the past decade and the league recognizes the importance of unlocking new audiences and discovering diverse talent.

Sports represent a $700bn a year industry but entire regions – home to billions – have historically been sidelined. This started to change in 2008 when the NBA invested $253 in NBA China—an investment now valued over $5bn.

African countries, though producing strong basketball talent for decades, have been largely ignored as a market.

No longer. In 2019, the NBA announced the creation of the Basketball Africa League (BAL) and in 2021 unveiled the operational entity NBA Africa. Former President Barack Obama joined a group of private investors in backing the new venture, including prominent Nigerian investors Babatunde “Tunde” Folawiyo of Yinka Folawiyo Group and Tope Lawani of Helios Fairfax Partners Corporation.

The inaugural season of the BAL was played in Rwanda in May 2021 and reached a global audience, while attracting high-profi le partners. Investors can be a part of this fast growth story by looking at opportunities in sports infrastructure,

media and content development, and sports diplomacy projects.

Infrastructure

A core defi cit exists in African sports infrastructure, particularly outside of soccer. While a collection of marquee stadiums are scattered across the continent, the average club team in the BAL played in front of a capacity crowd of only 4,600, closer in comparison to a small American college. And facilities matter for performance, brand-building, and creating sustainable business models.

The BAL teams from the markets with more developed basketball infrastructure fared better in the inaugural season. Teams from the seven markets the BAL tapped as hosts for the 2021 season (infl uenced by existing facilities and later restricted to just Rwanda due to COVID-19) outperformed others 12-1 and North African teams went 11-4.

Current facilities have largely been reliant on public funds built by Turkish construction fi rms, or the largesse of China’s ‘stadium diplomacy.’

While public subsidies are the norm in the United States too, models for private investment are becoming more prominent globally.

Private funding has built a handful of California stadiums, most English Premier League teams now own their grounds, and private equity funds are now investing in NBA team ownership. Funds can see 15-20% annual returns on top performing US sports franchises: above stock market averages and on par with the expectations of major PE fi rms.

In African markets, Senegal and Côte d’Ivoire are pushing ahead with blended models.

The AGORA project in Côte d’Ivoire, a partnership between the French and Ivorian governments, has brought in French corporate interest, and a sports complex in Dakar has attracted 25% equity funding. The potential for auxiliary development around stadiums, such as restaurants or hotels, can support profi tability and deepen the development impact of investments in sports infrastructure.

Media and Content

ptian giants Zamalek celebrate after winning the inaugural ketball Africa League in Kigali on Sunday, May 30, 2021. Media is core to the modern sports industry.

The NBA itself is eyeing a $75bn media rights deal starting in 2025 that would more than triple the current value to more than $8bn/year. In African markets, advertising, marketing, and merchandising are still nascent industries.

Fortunately for the BAL, other organizations have found media success through a similar tournament format. The NCAA’s March Madness basketball tournament every year brings in $800m and over 72% of the NCAA’s total revenue in just a span of weeks, compared to the NBA’s half-year, 82-game regular season and two month playoff period. Thus, even while BAL teams look to build their individual followings and upgrade facilities, the combined product can still be exponentially more lucrative. Telecom companies and TV stations make up a sizable share of domestic sponsors in

Africa, and the BAL successfully aired on

ESPN, Canal+, BeIN Sports, NBA TV, and

Tencent Video, targeting a global audience across premier sports channels. But the global trends of digital streaming and shortened attention spans, combined with a mobile-fi rst young African population mean that new media, as opposed to cable subscriptions will open the door to more innovative revenue models. With 690m active smartphone users expected in Africa by 2025, innovation will be the name of the game.

African Sports from page 75

For the NBA in China, Tencent struck an initial $500m deal to distribute games and others such as Weibo and ByteDance (the parent company of TikTok) have since inked deals to provide shorter form content and highlights, contributing to an atmospheric rise in Chinese basketball consumers.

The African market is a decade behind but on the same path

American tech and venture fi rms should move before the Chinese act on their learnings in their home market. Amazon, Hulu, Paramount, Peacock, or YouTube could build on their recent forays into live sports such as ‘Hulu has live sports’ and Major League Baseball’s free game of the week on YouTube to fi nd market success. Instagram could also leverage its bite-sized content to gain a larger African audience, especially given the following and prominence of the league’s stars on the platform.

The BAL clearly recognizes these media trends based on the announcement of a partnership with True Detective producer Richard Brown

for a documentary series on the league’s fi rst

season. Continuing to add creative distribution channels like this stands to benefit not just the league, but also any assortment of US tech giants and African startups willing to move fi rst to capture the growing African media market.

Human Capital

Gains can be made with stadiums and media, but the BAL’s longevity depends on enhancing the product on the court and growing the game of basketball on the continent.

This means investing in training camps, basketball academies, and other programming to support the next generation of African players, with the added bonus of supporting positive education and citizenship outcomes, a point repeated by many stakeholders within the BAL ecosystem and a longtime emphasis of BAL President Amadou

Gallo Fall’s Sports for Education and Economic

Development (SEED) Project in Dakar.

The program has not only produced NBA and WNBA talent but has led to jobs or university acceptance for 92% of its thousands of graduates since 2002. NGOs and player charities are also at work in this fi eld, and, for example, the US government worked with Morocco’s BAL affi liate and local NGOs to fund $250,000 in community basketball programming. The French Development Agency (AFD) has also signed on as a core BAL partner to strengthen its education and inclusion portfolio, strengthening its commitments to sports education in the recent New Africa France Summit.

Development finance institutions are also beginning to get involved. The Africa Investment

Forum at the African Development Bank

highlighted investments in sports at the annual forum in Johannesburg in 2019 and the West African Development Bank (BOAD) is fi nancing a $3.2m flagship sports center in Dakar. But the opportunity for mutually benefi cial partnerships remains huge, especially with the United States.

Given the NBA and BAL ties, the US, through Prosper Africa and the Development Finance Corporation, could invest more heavily in facilitating and supporting greater investment in the African sports sector.

The Obama investment, the innate celebrity appeal of athletes, the deep people-to-people ties between the US and African nations built on rich diaspora relations and educational linkages, and the reach of American tech giants give US investors a strong foundation on which to build market success.

The buy-in of African institutions and the NBA’s commitment to the BAL speak to the pent up but palpable demand for sports-centric investment on the world’s youngest continent. And while there is only one winner in a game of basketball, investments in the sports sector are win-win, providing educational opportunities, creating jobs, and spotlighting African talent. www.theafricareport.com/155603/investing-inthe-bals-success-room-for-private-investment-inafrican-sports/ Image credit: stg-nba.smart.com.ph, marocsportsnews.com

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