Where is Africa in the cloud? (3)

According to the 2021 State of Industry Report by the Africa Data Centres Association (ADCA), the $2 billion African DC market will expand at a CAGR of 15 percent in 2021-26 to $5 billion in investments. The ADCA’s projection is underpinned by the following. Teraco is building a $220 million 80MW DC in Johannesburg, South Africa, which is expected to come online in 2022.

Africa Data Centres, a DC firm, is projecting total data capacity of 54MW by 2025, with plans for new DCs across the continent, as is Raxio Group, which has plans for DCs in the Democratic Republic of Congo. Other capacity boost plans are afoot, according to the ADCA. IX Africa Data Centre is constructing a 42.5MW DC in Nairobi, Kenya, for instance, so is Icolo with an additional 1.6MW DC in Mombasa to its existing two DCs of the same size.

Futhermore, Wingu.africa is building a hyperscale DC in Addis Ababa, Ethiopia’s first, with another planned for Adama city. Other DC investments in the pipeline, according to the ADCA, are in Senegal by Morocco’s N+ONE and in Togo by the World Bank, which will be that country’s first carrier-neutral DC.

There is anecdotal evidence pointing to growth as well. In September 2021, for instance, IBM secured cloud deals with some of Africa’s largest banks in Morocco, South Africa, Nigeria and Mozambique, pointing to evidence of growing demand. A boom in the digital economy is boosting demand for online data storage by banks and mobile telecommunication firms. Apart from cost advantages, cloud services also offer time efficiencies, vendors aver, allowing firms to boost sales optimally. Data localisation requirements by African governments is also a major driver of demand. In the South African case, for instance, the authorities explicitly state in the draft national data and cloud policy that data generated on the country’s shores will be the property of South Africa.

While some DC operators in Nigeria locate their facilities close to power transmission stations, their distribution capacity, even when running fully, is so inadequate that they are only able to spare a few megawatts of electricity

The African Continental Free Trade Area (AfCFTA) is also expected to be an enabler of greater and easier cross-border DC investments as current trade barriers like varied taxes limit investments to existing hubs, with South Africa often a preference owing to its relatively better infrastructure and opportunities for synergies due to an already high concentration of DCs in the country.

But that is changing. Planned DC investments in Nigeria, when completed, will put South Africa in second place over the immediate medium term of 2022-26, for instance. Regulation requiring compulsory onshore data domiciliation will also be a catalyst, as the General Data Protection Regulation (GDPR) by the European Union has shown. At least 19 African countries had passed data protection laws in 2019, according to the ADCA, and they almost always insist on data onshoring.

Read also: Where is Africa in the cloud? (2)

Infrastructural constraints will weigh on data centre growth

Despite the rising number of DCs in African countries, about 80 percent of the continent’s data continues to be offshore in Marseille, France, thus limiting the ability of African DC operators to offer the fullest range of services. For this to change, the African continent will need more submarine internet cables of its own, compared to the current scenario were only a few pipes branch to the continent.

A report by the Africa Data Centres Association and Xalam Analytics put the land requirements to meet the continent’s DC deficit at about 1.4m to 3.5m square metres, with much of that to be concentrated in Algeria, Egypt, Ethiopia, and Nigeria. As only about half of sub-Saharan Africa’s population have access to electricity owing largely to undercapacity, a perennial power generation deficit in many African countries means DCs have to quite literally generate their own power outside of South Africa. In Nigeria, this is almost entirely via diesel stand-by generators, which are prohibitively expensive to maintain.

While some DC operators in Nigeria locate their facilities close to power transmission stations, their distribution capacity, even when running fully, is so inadequate that they are only able to spare a few megawatts of electricity. In South Africa, Eskom, the state-run power utility, has been facing perennial challenges, with load shedding increasingly the norm. DC operators will increasingly now be able to source power adequately in South Africa, however, as restrictions on private power generation, especially renewable energy, were removed in late July 2022.

An edited version was first published by the NTU-SBF Centre for African Studies at Nanyang Business School, Singapore. References, figures and tables are in the original article. See link viz. https://www.ntu.edu.sg/cas/news-events/news/details/where-is-africa-in-the-cloud