Meeting the growing demand for data centres in Africa

Gordon Cook

Head of Project Management

Africa

Driven by increasing demand from end users, the data centre market in Africa is one of the most active in the industry.

Survey results from our Data centre cost index indicate further growth, with 95 percent of respondents expecting an even greater demand for data centre construction in the next 12 months.

For hyperscalers, operators and contractors, there’s tremendous opportunity to deliver services across the continent. However, the success of large data centre projects will depend greatly on collaboration among industry players, and with regional governments, to provide the skills and infrastructure required.

High and growing demand in Africa

Preliminary work being done across the continent indicates confidence in the data centre market.

The Africa data centre construction market by revenue is expected to grow at a CAGR of close to 12 percent during the period 2019–2025.

Almost three in four (74 percent) respondents in the 2019 Data centre cost index survey consider the data centre industry to be recession-proof, and 68 percent expect data sovereignty and data protection laws to increase demand for data centre construction.

End user requirements are also impacting demand, accelerated by the recent rise in remote working and need for data connectivity. While most activity is in the more established regional hubs for now, we can expect to see growth across the continent

as demand increases and markets in various countries become more mature.

The Data centre cost index shows that Africa tends to be one of the more cost effective regions to build data centres. Nairobi is ranked 20th and Johannesburg 25th cheapest destination for data centres making it an attractive option for international investors.

Regional hotspots

Most hyperscalers and operators look to sub-Saharan Africa as their starting point, with a view to branching out to hubs in East and West Africa.

South Africa has been somewhat of a stepping-stone to the rest of the content. The country’s data centre industry is thriving. The last 18 months saw an increase in market size in both Cape Town and Johannesburg with global brands such as Microsoft and Amazon Web Services investing in the country’s data centre infrastructure. In Botswana, hyperscale investments are increasing and key projects are coming into operation. Botswana Fibre Networks, BOFINET, is looking to construct three additional data centres in 2020.

East Africa is an emerging market in every sense. In Kenya, rising internet use on mobile devices, the introduction of a data protection Act and the shift to cloud services has seen investment flowing to data centres. Currently, there are ten colocation data centres in Kenya, and the market is expected to grow year-on-year. In Uganda, the data centre design and construction industry is slowly maturing. Rwanda is investing in the development of ICT infrastructure across the country that is set to drive their demand for data centres. 

In West Africa, the data centre industry is growing fast. Nigeria, has eight colocation data centres in Lagos and two in Abuja. Several corporate organisations embarked on data centre construction projects in the last 12 months. The demand for quality internet services and the increased number of internet users will drive the expansion and upgrading of existing IT infrastructure.

Skills and power critical to meeting demand

Just five percent of survey respondents believed the construction industry was able to meet demand in Africa. This is likely due to three key factors: skills, procurement and power availability.

Throughout Africa, the pool of resources and skills available to construct data centres locally is limited. Most hyperscalers and operators use global engineering firms for design and construction, with skills coming primarily from the US and Europe.

The same can be said for equipment, much of which is imported and therefore subject to price increases driven by exchange rate fluctuations. Ongoing maintenance and support that’s not procured locally can also drive up costs. Close to half (47 percent) the survey respondents said data centre construction market conditions caused construction price inflation over the past 12 months.

The availability of power continues to be the biggest perceived challenge, particularly in certain regions where even key industries aren’t guaranteed a reliable power supply. Survey results show 37 percent of respondents believe this will be the biggest threat to data centre construction in Africa over the next five years.

While another 37 percent of respondents believe solid state batteries combined with green energy will render generators obsolete. There’s a great deal of research in this area, however, this is an optimistic rather than realistic view and we may be some way off from sustainable long-term solutions.

Delivery should not be at the expense of innovation

The highly competitive nature of the industry in these emerging markets likely accounts for 95 percent of respondents saying that delivering on time and on budget should be prioritised over innovation. This may be something of a short-sighted view, however.

Delivering on time and within budget is important but should not come at the expense of innovation that benefits the entire industry.

Restrictions on sharing intellectual property will limit progress in the region. Respondents suggested the industry needs to be more open to building a shared body of knowledge and take a collaborative approach to developing local skills.

Addressing current challenges and establishing a foundation for long-term success will require innovation in every aspect of data centre construction, from design and procurement to how projects are delivered.

In addition to working more closely with governments in the areas of infrastructure and power supply, knowledge sharing and the upskilling of local consultants and contractors by data centre owners will be critical to ensuring the Africa region doesn’t fall behind Will they be prepared to support local suppliers and innovate in the way they procure services in Africa to develop the local skill set?

89 percent of respondents felt that the operational structure of data centre owners contributes significantly to the lack of industry progress in building faster and cheaper data centres in Africa. Will data centre owners have the appetite to reconsider procurement risk and innovate within the supply chain?

Through the Data centre cost index survey it is evident that parallel to ambition and growth, social awareness and the sustainable agenda is rising and we need to continue exploring these opportunities to innovate and develop the data centre market across the region in a sustainable way.

Data centre cost index

Our Data centre cost index highlights the intensification of investment in leading locations in the global data centre network as a trigger for escalating costs. The report points to the rise of new hotspots across the globe as technological investment in emerging economies takes hold.

The most significant limiter on growth globally over the next five years is seen as availability of power, especially in the context of pressure on the industry to decarbonise.  In our survey, the industry globally is split 50:50 on whether technological advances with solid state batteries alongside green energy sources can render traditional fossil fuel generators obsolete.

The research analyses input costs – including labour and materials – across 32 key markets, alongside industry sentiment and insight from data centre professionals.

For further information contact:

Gordon Cook
Head of Project Management