State of the Market: African investment and growth opportunities in data centres

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Nicolas Sheard

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Nicolas Sheard

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Is Africa the new frontier for data centres?

Africa has been a region under discussion for quite a while in the data centre market. So I really enjoyed the opportunity to take part in a panel discussion entitled The State of the Market: African Investment and Growth Opportunities at the recent Datacloud Global Congress 2021 alongside industry colleagues Amine Kandil, CEO of N+ONE Datacenters and Dobek Pater, analyst at Africa Analysis. With the data centre sector first entering the African market in 2008, investment and development in the region has been cautious over the last decade with the likes of IBM only arriving in 2016. Yet the last five years has seen the region gathering pace with Microsoft, AWS and Huawei now present and with Africa recently being described as “the new frontier”.

No cookie cutter approach

Africa cannot be talked about with a broad brushstroke – with 54 countries across the continent, 2,000 languages spoken and countries differing in their population and density, it is a continent with many differentiators. Each region needs to be looked at individually, country-by-country yet the one overriding challenge is infrastructure maturity. With over 80% of the Africa’s population without access to electricity, power of course is a key consideration. However, it is not just energy that can hinder connectivity across the region with  many countries on mainland Africa landlocked, to build often means transporting materials and often bringing labour across one country to the other. Then there are different legalities, financial issues to negotiate including differing VAT and import duties resulting as Amine commented, “there can be no cookie cutter approach to Africa.”

A land of opportunity

However, it is also a region with great opportunity with the investment in the data centre market in Africa estimated to grow by 15% by 2026 and the market size by investment valued at $2billion in 2020 with an expected valuation of $6billion by 2026. To date, South Africa and Nigeria have led this growth with the region witnessing an increased adoption of cloud-based solutions and its rapid emergence as a centre for private and public cloud hosting. Microsoft’s cloud services alone look to create approximately 112,000 jobs in South Africa by 2022 and Africa data centre providers currently committed to rolling out 14MW of white space.

Teraco Data Environments remains one of Africa’s largest data centre operator with a 38MW data centre planned through to 2022 and NTT Data has its Johannesburg 1 data centre expansion project.

However, many of the other African countries are now gathering pace with countries in the West including Ghana and Kenya seeing movement in the sector. As my fellow panel member, Amine commented, while North Africa has been the forgotten piece of Africa, it is now too seeing an increase in activity that may not be as fast as other markets, but still of significance in countries such as Egypt and Morocco.

Momentum is not a post pandemic rush

While historically space for data centres couldn’t be pre-sold, and investors and developers wanting to visit the space before signing up, those in African states are now getting anchor tenants on board before the space is ready to use. The momentum was growing prior to Covid and although pressure to move might be faster since Covid, this isn’t a knee-jerk short-term uptick, but a more strategic movement of those seeing opportunity in a previously underdeveloped region.

There is also a growing domestic market. With up to 77% of the population in many of the African countries under 35 years old and with that younger demographic having a desire for the Internet of Things, the local demand is high.  Presently it is estimated that Africa needs 1000MW and 700 data centre facilities to meet demand with four large scale data centres due to be developed in 2021 close to Johannesburg.

Although foreign investment had been decreasing across the years in the region, we are now seeing many investors wanting to dip their toes into the market. Chinese investment with China Mobile and Huawei continues, and many European providers will look to reach across to Africa to develop their data centre capability in this unchartered territory.

At RLB, we have been working across Africa especially from our RLB Pentad and RLB Africa offices and in the last three years have delivered services for 175 projects over 60,100m including Africa’s first concentrating solar cooling plant for numerous data centres across Africa for MTN, the Greenfield MT Tier 4 data centre, African Data Centre projects in South Africa and Nigeria, and more recently appointed to a new project in Johannesburg to an undisclosed client, so we understand the challenges and the opportunities this region brings. With office across the globe and having worked in other regions such as London and Amsterdam, seen as centres of excellence for the data centre sector, we can bring our knowledge and experience to Africa, yet also have things we can learn from the region.  With many of the data centres in places like Morocco and Senegal needing to be designed and built from scratch a fresh approach and creative solutions to meet local challenges and resources needed to be applied. As did patience commented Amine both in terms of understanding the limitations but also waiting for the market to mature and hand holding some of those clients in the region.

Sustainability is also a key aspect of the development of this region. With the climate allowing for plenty of sustainable energy to run and maintain the data centres of the future, it makes commercial as well as environmental sense to use energy and cost-efficient methods when constructing and running the data centres of the future.

What is clear is that it Africa remains an untapped area of opportunity within the data centre market. The challenges of the past including the lack of infrastructure across different levels – whether connectivity or transportation – will soon be just this, in the past and the time is right for Africa to show what it has to offer in the data centre development arena.

FURTHER INFORMATION:

Nicolas Sheard
Nicolas Sheard

Chief Executive Officer (RLB Pentad & Africa Group)

Andrew Fettes-Brown
Andrew Fettes-Brown

Partner - National Head of Data Centres