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NBA Africa’s Dreams Turn Into Nightmares and Regrets

The NBA's foray into Africa has largely been a failure with investors losing most of the capital already invested. It entered Africa too aggressively and with too big of a splash. It has experienced success in China, Japan, the Philippines, Israel, UAE, Mexico, Argentina, and Europe. In these markets, it tested the waters and responded to market dynamics to build appropriate and sustainable businesses. There is something about Africa, for some investors, that makes them go all in. The NBA case study is a good one for investors considering a first investment in Africa.

The NBA's engagement with Africa dates back to the 1990s, with grassroots programs and exhibition games fostering love for the sport. In 2003, the NBA Academy Africa opened in Senegal, grooming young talent like Pascal Siakam and Giannis Antetokounmpo. The next major milestone came in 2019 with the launch of the Basketball Africa League ("BAL"), aimed at showcasing Africa's basketball prowess and creating a professional league for its promising athletes.

The league in Africa is controlled by the NBA and FIBA, the international body that regulates basketball. Other shareholders include Barack Obama, Grant Hill, Luol Deng, Mo Ibrahim, Nike, MTN, PepsiCo, and Helios Fairfax Partners. According to Bloomberg sources, the money raised in 2021 is running out but the investment and balance sheets have been largely kept under wraps so we don't have details. The official position is that the NBA is staying based on this statement from NBA COO Mark Tatum, “We view both NBA Africa and the BAL as long-term investments and are encouraged by the success and the growth of both initiatives since their launch a few years ago."

Recent reports of financial woes, with executives departing and empty seats in arenas, raise questions about the long-term sustainability of the venture in Africa. The league struggles in Africa for a number of reasons including: (1) ticket prices are out of reach for many fans, (2) lack of readily available and well-maintained basketball facilities, (3) small marketing budgets, (4) the best players in Africa get poached to America so the Africans are left with the leftover players, and (5) other sports like soccer are well entrenched and difficult to replace.

Ownership of the real estate associated with NBA Africa is a mixed bag and difficult to ascertain. The league is headquartered in Johannesburg, with offices in Senegal, Kenya, and Egypt. NBA Africa doesn't appear to own any real estate in Africa and sporting venues are owned by local governments and private parties which are leased on a per-event basis. Three of the main arenas in Africa are located in Kigali, Luanda, and Dakar. Each is owned by the respective governments and funded and built by Chinese and Turkish backing.




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