Making the most of data centre development opportunities in Africa
Global developers have their sights set on Africa’s data centre market, and local players are eager to play their part. The right approaches by both can bring about benefits for Africa’s construction industry, connectivity and regional economies.
Use of the internet has taken off dramatically in Africa over the last decade, with banks, the telecoms sector and business all demanding more rapid computing capability. South Africa is leading the way with more than 60 percent of its population online, while neighbouring nations are taking their own steps to drive their digital economy.
This growth, and the prospect of more to come, is making Africa one of the world’s most eagerly watched markets for data centre development, with investment expected to reach USD5bn by 2026 and a flurry of activity already underway in South Africa.
The leading global cloud service providers (CSPs) including AWS, Microsoft and Oracle, are all moving into the South African market, whether through self-build or via developers.
Each one brings with it employment, economic opportunity and global business practices that have the potential to drive advances in Africa’s construction sector.
These best practice approaches can play a part in helping local developers, contractors and supply chains build capability, increase efficiency and better serve clients, ultimately delivering projects more effectively and helping to raise the bar for the broader construction industry.
But to make the most of this opportunity, local and global players need to develop a mutual understanding and apply expertise to plot a route to success.
Changing the way opportunities are identified
For landowners and developers looking to pursue data centre builds, the focus must be on ensuring that a site meets providers’ requirements. Power is essential, while factors such as proximity to major fibre routes, public cloud services or other existing data centres can also have an impact on suitability.
While the concept of working at risk until a deal for a project is signed is often accepted in fit-outs and base builds in South Africa, it is out of step with global best business practice for data centre projects and may hinder local developers’ efforts to secure the interest of global providers.
Investment in initial due diligence is essential to equip providers with the information they need to make their decisions and give confidence that a site has the right qualities and power strategy for their operations. This upfront investment can help local developers establish a continuing and trusted relationship with providers as they bring further sites forward.
The cost of development can vary widely across the regions, but new benchmarking tools are helping developers to navigate the uncertainties. These tools can provide developers with cost data to inform viability assessment, allowing them to respond rapidly to market opportunities.
Once a local developer has established the suitability of a site, marketing is key to enabling commercial advantage. That marketing needs to present a clear vision of what could be built on the site, and include, as a minimum, a site maturity model, masterplan and fly-through.
Evolving approaches to programmes and projects
The procurement strategies promoted by global clients are not yet commonplace in Africa, so there is a need for approaches to be tailored to local markets. There are a number of ways in which that can be done to enable Africa’s construction industry to respond to today’s opportunities while giving local businesses the opportunity to build capability.
Standard procurement practice in Africa is for design responsibility to rest with the client, while the contractor is responsible solely for construction. The design and build procurement route common to global development can therefore present a challenge for local contractors, particularly in pricing potential work.
For those contractors unable to secure the support of an outsourced design resource, adapted cost plans are being deployed to facilitate pricing, enabling them to secure work and develop their business.
Global players bring with them significant expectations on programme and project delivery, which is driving changes in how we engage with contractors and the supply chain to better enable them to move at pace.
One way of limiting time pressures is by securing items that have long lead times directly from suppliers, which can help in mitigating the current global constraints on supply and lead times for capital equipment.
The promotion of global standards in health and safety is already having a positive impact on site practice, but there is scope to go further. A move to fabricating large elements of a design off-site could enable construction time on-site to be reduced, with more work being carried out in the controlled environment of a factory where health and safety risks can be better managed.
This approach has been adopted in Africa for other building types and as the supply chain for data centres evolves, we hope to see a similar shift to prefabricated/precast solutions.
Fostering skills and inclusion
A significant skills shortage is afflicting the development of data centres in Africa, with that shortage being particularly acute in South Africa where the market is most active. The sector is heavily reliant on global consultancy expertise and experience, but there is an opportunity to build capability for the future as global players work more extensively with local businesses.
Skills supply/demand tensions are already prompting some developers and contractors to establish partnering-style relationships. For developers, these ongoing relationships promise benefits in increased certainty and quality of delivery of projects and programmes, while for contractors the continuing pipeline of work provided by a partnership can pave the way for investment in skills, resources and equipment. This in turn enables practices and standards to be raised across the industry as a whole, potentially boosting overall productivity.
Evolution in the data centre market itself is another factor in this change. As little as two years ago clients were bringing forward individual data centre buildings, but as confidence has grown they have adopted master planning approaches, plotting the phased development of sites over a number of years.
This also allows a pipeline of work to be programmed, giving the market and the local supply chain the impetus to invest in upskilling teams and developing resources for the future.
Working towards sustainability
The stability of power supply varies significantly across Africa, with nations drawing on a range of fossil fuel and renewable sources. South Africa depends largely on coal, which provides relatively low-cost electricity, Kenya in East Africa relies mostly on its hydropower and geothermal plants, while gas generators are the key power source for Nigeria in West Africa.
Global data centre players are, therefore, having to balance local power stability and costs with broader corporate environmental commitments, as highlighted in our Data centre cost index 2021. Oracle has notably pledged to power all its cloud regions entirely by renewable energy by 2025.
Already, developers are commonly incorporating photovoltaic installations into data centre roofs and forecasts of rising energy prices are likely to help drive the inclusion of more sustainable technologies and approaches in data centres in the future.
Building a better future
Increasing connectivity across Africa is a massive undertaking that makes significant demands of local players. Change will take time, but local landowners, developers and contractors are already beginning to rise to the challenges being set by the global data centre sector.
As they gain experience, local players can reap business benefits and boost practices and standards across their broader industry.
Projects and programmes are already bringing much-needed employment to local businesses and economies, helping them recover from the severe impacts of the pandemic. As the market grows its understanding of when, where and how to develop data centres, it can begin to step up productivity more widely. This era of data centre development can help equip Africa’s construction industry and its regional economies for the future.