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24.11.2017

Data Centres Africa part one: Digital development

The first of a two part series on the African data centre market looks at how digital development is driving demand for new capacity across the continent.

The majority of the 54 nations that make up the Africa continent have historically been stymied when it comes the development of, and use, of IT. Poverty, political corruption, conflict, and lack of infrastructure have all contributed to low levels of IT penetration. A lot of these factors continue to hold the region back. According to the Intentional Telecommunications Union (ITU) Measuring the Information Society report 2016, the average level of ICT development across Africa was half that of the global average.

However there have been considerable advances over the last 20 years and clear indications of a growing level of technological sophistication across the continent. A lot has been made of innovations in mobile technology and other aspects of Africa’s technological development are now catching up. For example, Africa-based telecoms company Liquid Telecom has built out more than 50,000km of fibre across the region stretching from Uganda to Cape Town.

According to Disrupt Africa tech start-ups raised funding in excess of US$129 million in 2016, with the number of start-ups securing funding up by 16.8 per cent compared to the previous year. There is also expected to be significant growth around ecommerce and other forms of digital business. For example, the e-commerce sector in Nigeria is expected to grow to more than US$10 billion over the next ten years.

That digital growth is translating into growing demand for new data centre capacity including commercial colocation and even some cloud facilities. Being able to meet that demand still means overcoming some historical hurdles. And this may be partly achieved by employing new technologies and techniques – including prefabricated modular (PFM) – for data centre design, construction and operation. (These will be examined in more detail in part two of this series)

Regional analysis
Any analysis of economic or technical development in Africa is complicated to some degree by how best to describe its different regions. The term Sub-Saharan Africa (SSA), as with a lot of descriptions of the continent, comes with a certain amount of colonial baggage. Lumping together all of the countries below the Sahara under the term SSA may be an artificial delineation but it’s still used in some market analysis. For example, according to industry analyst Ovum, the data centre services market in SSA will be worth more than $900m by 2020.

Growing demand
A less controversial way to dissect the continent is just to divide it into North, South, East and West Africa as an increasing number of organizations now opt to do. However you decide to categorize the region, it appears that there is latent demand for new data centre capacity across the continent. A 2016 report from research company Xalam Analytics entitled ‘The African Data Center Rises: Colocation Demand, Supply, Forecasts & Business Models’ states that there is growing demand for data centre colocation services.

“Recent data centre expansion in Africa has been strong and has come in spurts. Data centre colocation white space is now 2.5 times larger than 2010 levels, with the incremental upticks coming in 2012, and most particularly 2014 as new data centres became operational in the continent’s largest markets, South Africa and Nigeria,” the report states.

Research organization BroadGroup has also analysed the commercial data centre market in 16 African countries and estimates that there are around 74 colocation providers operating more than 90 data centre facilities. The researcher argues that although change has been slow, there are signs that growth is quickening, and new data centre operators are discovering innovative solutions to provide services for their customers.

It seems that the current supply of data centres is not sufficient to meet the expected demand, according to Xalam Analytics. But demand is also not linear, and there are periods where supply temporarily exceeds demand in some locations. Some of the demand is from hyperscale and cloud service providers that may have self-built huge amounts of capacity in the US, Western Europe and Asia but have been reluctant – for a variety of reasons – to follow the same model in Africa. Microsoft however is planning two facilities in 2018 to support its Azure cloud services in South Africa.

Data centre capacity is also not evenly distributed across the continent. South Africa, Nigeria and Kenya represent around 95% of available colocation white space in SSA, according to Xalam Analytics. The group also estimates that Africa’s large-scale colocation data centres currently only touch approximately 30% of the continent’s Gross Domestic Product (GDP).

Obstacles and opportunities
As touched on already, there are a number of historical as well as more recent factors that have slowed technological development, and specifically data centre build outs, across the region to date. These include:

• Grid stability. The grid in many African states is notoriously unstable and fragmented. According to International Energy Agency (IEA) estimates more than 600 million people in Africa aren’t connected to their national grids. That instability requires operators to invest in resiliency, and on-site generation, to an even greater degree than other regions driving up capital costs. But as BroadGroup points out, there is a potential upside as grid instability could essentially force some enterprise users into colocation rather than invest the considerable capital required for self-build with the required back-up generation.

• Lack of infrastructure. The lack of other infrastructure such as paved roads in some African countries – especially in rural areas – also contributes to a lack of technological develop and makes accessing and servicing data centres outside of large cities more challenging.

• Latency/connectivity. Energy grid instability might be considered one of the main inhibitors to bringing on new data centre capacity. However, according to Xalam, network connectivity is a big issue, especially for colocation providers. The cost and availability of fibre connectivity is a significant issue in countries such as Nigeria and Tanzania, according to the researchers.

However there are also a number of reasons to be optimistic about future growth in data centre demand across the continent:

• Untapped markets. One of the most positive aspects of the African data centre sector is that it is a relatively untapped market with plenty of opportunity for new and innovative players. For example, operators such as edge data centre specialist Etix Everywhere are building out capacity in a number of sites across the region.

• Lack of legacy tech. As PWC puts it in its Disrupting Africa report: ‘One of the great advantages Africa has over other continents in riding the disruptive wave is that there’s far less legacy to get in the way than in other regions, creating a clean sheet on which companies can develop their own distinctive business models.’

• Resource rich. According to BroadGroup although grid stability is an issue some African countries actually have a power surplus that they are exporting.

• New technologies. Investment in on-site generation technology such as solar panels and fuel cells as well as energy storage technologies could help operators overcome some of Africa’s grid issues. Similarly, with the right investment 5G could also provide some answers to connectivity shortfalls.

Future direction
Despite a range of obstacles and impediments, demand for new data centre capacity across the African continent appears to be inevitable. Cities such as Johannesburg, Cape Town, Lagos and Nairobi are likely to see new capacity as well as emerging locations such as Accra, Dar es Salaam, Ibadan and Port Harcourt. Research group Xalam expects somewhere between 10,000 to 20,000 square meters of new colocation space to be brought onto the market over the next five years. If shell-only, non-equipped space is also included the amount of new capacity could be considerable higher.

However, building out new facilities in some Africa countries presents specific challenges that will be met by new technologies and construction methods. These will be explored further in part two of this report series.

Future-tech has helped clients with data centre projects at variety of stages including feasibility and design to supply chain management and construction in markets across the African and APAC regions. For more information contact us at: info@future-tech.co.uk

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