DatacentreSpeak looks at the the sub-Saharan opportunity for DC developments in Africa concentrating on the key players, recent developments and drivers that affect change in the region.
There is no doubt that data centre growth in Africa has reached a pivotal point where its urban population, currently at 1.3 billion people, is set to grow by 60% toward 2050 fuelling data demand. As of 2021 Africa as a whole had the lowest number of data centres per million internet users even though it has nearly 17% of the world’s population. In catch up terms that would require over 700 new data centres of approximately 1,000 MW capacity to keep pace with the proliferation of mobile phones, business software and to fulfil the content hunger of the social transformation underway.
As service requirements increase then the off continent ‘Marseille’ content hub, currently the primary gateway for the transfer of 80% of African data will increasingly limit premium data transfer speeds. With internet adoption predicted to be around 50% (GSMA) by 2030 and pressure from regulators to bring local content back to Africa, new data centre infrastructure is required along with localisation.
Cairo, Johannesburg, Cape Town, Lagos and Nairobi have an established data centre capacity with other developing areas essentially focussed around cities such as Giza, Alexandria, Addis Ababa, Kinshasa, Dar es Salaam, Kampala, Algiers and Luanda. Areas with low population and poor infrastructure have not attracted investment. That’s not to say investment hasn’t been significant across Africa. In 2020 the size of the African data centre market by investment was $2bn and is expected to reach $5bn by 2026. (OBG DC Africa report). But development is patchy.
Currently South Africa has the highest number of data centres (Africa Data Centres Association) with a capacity of 54.9MW led by Teraco, which is backed by international investment companies Berkshire Partners and Permira. The scale is impressive with Teraco recently investing $220m to build an 80-MW data centre in Johannesburg – the largest standalone facility on the continent. Digital Reality acquired a major stake in Teraco January 2022 illustrating the kind of M&A activity currently underway in data centre acquisition.
A lot of the imbalance in investment in Africa is due to the digital infrastructure gap. Clearly some countries are more developed than others however primarily most investment is based around sub-sea cable connections. Africa does have a widespread terrestrial fibre networks and 5G, but terrestrial cross-border fibre connections remain limited. Leading Telco provider MTN, Global Connect and Liquid continue to develop fibre connectivity across the continent. MTN has over 100,000km of fibre and a further 10,000km recently connected Cote d’Ivoire, Ghana, and Uganda with cross-border links. A national backbone fibre and cross-border network by Liquid Intelligent Technologies (LIT) is also underway to provide a new 100,000-km fibre-optic network across 14 African countries, linking Egypt with South Africa overland. LIT is also partnering with Facebook to build a 2000km network between the Democratic Republic of Congo and Rwanda that is expected to considerably improve connectivity in Central Africa.
Other factors affecting large scale adoption of data centres include the reliability of the electrical grid, their proximity to large populations, access to skilled labour and the introduction of data privacy laws in each country all influencing multinationals, developers, operators and investors. There are also some seismic players already heavily invested. Google’s Equiano project, a sub-sea cable roughly 20 times larger than any other in the region connecting Africa to Europe and Facebook’s 2Africa sub-sea cable set to circumnavigate the continent, serve to demonstrate how these mega-companies view the potential of the region.
Super powers too are directly involved. The ‘Digital Silk Road’ featured prominently in Chinese President Xi Jinping’s keynote speech to the Forum on China-Africa Cooperation (FOCAC) Nov 2021, in which he promised that Beijing would fund 10 digital economy projects in the continent over the next three years. The US government’s International Finance Corporation has pledged US$300 to Liquid Telecom’s Africa Data Centres which itself has earmarked US1 billion for expansion across Nigeria, Ghana and further into Egypt and Morocco. The sector has also witnessed a steady growth in interest from major global cloud service providers such as AWS, Microsoft and Huawei over the last five years.
Michael Adams MD DatacentreSpeak Ltd commented: ‘DatacentreSpeak has been monitoring the data centre industry in Africa for the last 2-3 years and has a strong understanding of the market for colocation and telecom players in this sector. DatacentreSpeak offers specialist insight to assist in connecting the dots between global markets and Sub Saharan Africa’s digital future to fully expose its developing opportunity.’
However one of the problems of doing business in Africa is that cross border investments are affected by capital transfer tax and separate taxes on equipment. Moving finance between countries for such projects is also liable to currency fluctuations. This has made development in more stable countries like South Africa the preferred base, however with the introduction of the African Continental Free Trade Area (AfCFTA) proposing free movement of labour and zero tax on capital and equipment transfers within the continent, investment across Africa is gaining traction. As of July 2021, 54 of 55 African countries had signed on to AfCFTA, with 37 of those ratifying the agreement. This will continue to drive data centre build closing the patchy coverage.
Real world regional concerns remain which include water volumes for electricity generation as well as for cooling and as climate change affects the scarcity of these water supplies, data centres have to look to renewables to even the dependency on power generation. According to the International Renewable Agency, Africa’s renewable energy sector increased by 28% to $11bn in 2020. This may be due to the reduction in the cost of installation of solar down 73% and wind powered hardware down by 22%.
Global economics in the form of the recent pandemic and now the fuel shortage brought about by the Ukraine conflict could still affect the data centre build in the Sub continent, but this may delay rather than postpone. Africa Data Centres alone is currently building 10 hyperscale data centres in 10 countries at a cost of more than $500m – an investment that transcends short term geopolitical obstruction.
Data centres are set to be at the heart of economic growth in Africa going forward. With a young and savvy population accepting digitisation Africa may well be able to profit from the use of its natural resources to fund expansion along with government grants and overseas investment. Focussing on the future technologies and forward planning beyond the build time of the new data centres will be the challenge for policy makers in each African country. A challenge that Africa is clearly ready and able to embrace.
For more details, please contact Paul Nicholls | paul.nicholls@datacentrespeak.com
