Powering The Digital Age: The Rise Of The African Data Centre Industry
Linda Oniwe, Vice President, Technology, Media and Telecommunications, Standard Bank
The global data center industry has become a cornerstone of the digital age, facilitating the storage, processing and management of massive amounts of data. As businesses and individuals increasingly adopt advanced technologies such as artificial intelligence, machine learning, the Internet of Things (IoT), cloud-based solutions and edge computing, the need for powerful data centers has grown exponentially.
The global data center industry has seen unprecedented growth over the past decade. The market will be worth US$93.7 billion by 2023 and is expected to maintain a strong growth trajectory, with a CAGR of approximately 22% from 2018 to 2025. As digital transformation becomes a strategic imperative across industries, the demand for secure, scalable and reliable data storage and processing solutions has and will continue to soar. Concerns about data privacy, data nationalism and data localization requirements have further accelerated digital transformation initiatives, driving the need for local data centers.
In Africa, the industry, while still in its infancy, is rapidly growing and evolving, driven by the continent’s booming digital economy and its ability to leapfrog basic services through technological innovation. Access to the internet primarily through mobile phones and increased data usage are driving the digital revolution, making Africa the next frontier in the global data center industry.
We continue to see strong demand fundamentals favoring Africa as a data center destination. Growing interest from major global cloud service providers such as AWS, Google Cloud and Microsoft, as well as content delivery network providers, continues to drive demand for data center infrastructure over the past few years.
Demand has also been significantly increased by enterprise demand from governments and private companies migrating servers to third-party leased space, as well as from connectivity providers. Many global, pan-African and local data center operators are recognizing this potential and are investing in building robust data center ecosystems to meet the growing demand for digital services. For example, Equinix is ​​investing US$160 million in its first facility in South Africa, which will provide 1860 square meters of rack space and 4MW of IT load. Likewise, it acquired West African data center provider MainOne. The acquisition enables Equinix to expand its presence in Africa and leverage MainOne’s existing infrastructure to strengthen its position in the region. Africa Data Centers is one of the largest pan-African operators on the continent, with facilities in Johannesburg, Cape Town, Lagos and Nairobi and continues to have a strong pipeline of expansion sites. Digital Realty, another major player in the global data center industry, has completed a deal to acquire a majority stake in Teraco, an African data center provider with multiple facilities in South Africa. Private equity firms are also active in data center investments across Africa. Notable companies include Actis and Helios Investment Partners, which have invested in multiple data center projects across the continent.
However, the region faces challenges due to insufficient investment in infrastructure, high temperatures requiring advanced cooling systems, and late adoption, resulting in excessive capacity gaps. The African data center colocation market also remains highly concentrated in a handful of countries, namely South Africa, Egypt, Nigeria and Kenya, which account for most of the available white space. South Africa is Africa’s largest market, with a live capacity of approximately 300MW, accounting for approximately 70% of the continent’s IT load.
With its advanced telecommunications infrastructure, strategic location and robust regulatory environment, South Africa is the preferred destination for data center investment in Africa and serves as a hub for the region. The country has a vibrant digital ecosystem, a growing tech-savvy population, a strong financial sector, and has various initiatives in place to promote the information and communications industry. Favorable land prices (compared to other countries on the continent and developed markets), connectivity and infrastructure make it an attractive option for hyperscale tenants to expand their operations across the continent, thus driving data centers in the country Infrastructure needs.
Despite this potential, some country-specific challenges may inhibit growth. These include energy supply issues and costs, other environmental issues (such as cooling and water consumption), security issues (including crime, construction mafia, and cybersecurity), and shortages of skilled labor.
International and local data center operators continue to show strong interest in investing in Africa, particularly South Africa, where demand remains strong. However, building strategic public-private partnerships is critical to boost industry growth and address current challenges. These initiatives may include investments in renewable energy to support reduced electricity costs and environmental impact at these facilities, enhanced safety measures on construction sites, and innovation and skills development in educational institutions.
Africa’s demand for cloud computing and data centers plays a crucial role in driving digital transformation. Businesses benefit from increased processing speeds, reduced latency and enhanced reliability, thereby increasing operational efficiency and contributing to the organization’s digital success, ultimately improving service delivery and enhancing user experience.
