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You may have noticed that we’ve all been using the internet a lot more than we used to. The global shifts towards remote working, online learning, cloud-based business operations and streaming entertainment – all of which were gathering steam before 2020 happened – have been propelled forward by the local lockdowns of COVID-19. That spells opportunity for developers who can meet the growing demand for South Africa’s internet backbone infrastructure needs.
Growing data demand
Amazon famously opened its first African Cloud data centre in South Africa in April 2020 (though the event may have gotten lost in other headlines). Since then, global tech giants like Microsoft, Google and Digital Realty have also made significant investments in the continent – and specifically in South Africa – to meet the growing demand for colocation and local connectivity.
Colocation centres – also known as ‘carrier hotels’ or just ‘colos’ if you’re cool – are data centres that make equipment, space and bandwidth available for rental to retail customers.
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It’s a rapidly growing market. The local data capacity provided by these facilities means faster connection speeds and smoother operation of cloud-based enterprise solutions. Whether it’s your Netflix series or your Zoom meeting, it’ll stream faster and in better quality if the data is housed in-country and doesn’t have to travel across the world to reach your screen.
That’s why, according to consultancy Turner & Townsend, Africa’s data centre market is set to grow at a compound annual rate of more than 12% to reach $3 billion in 2025.
An African opportunity
The growth forecasts are compelling. In November 2020 ITWeb and CommScope ran a small online survey around South African organisations’ data centres. The survey, which admittedly had a small sample size of just 110 responses (though 59% of them were at executive or middle management level), found that 64% of respondents expected their data centre investment to increase over the coming 12 months.
Riaan Graham, Enterprise Director for CommScope Sub-Saharan Africa, said that that’s to be expected, with a number of data centres under construction in South Africa. ‘There’s always rapid uptake of new data centres that offer proper storage, security and value to the market,’ he said.
The supply is hastily trying to catch up to a massive demand for data. According to a recent report by the African Data Centres Association (ADCA) and Xalam Analytics, our continent will have to add at least 120MW of multi-tenant data centre capacity over the coming decade just to keep up with the current demand.
The same report found that, at midpoint, the region will have to add nearly 1,000MW of capacity and an astonishing 700 data centres, just to get the broader region on par with the current South African levels.
‘Likewise,’ ADCA noted in its report, ‘the region would need to make available 1.5 to 3.5 million square metres of well-located and adequately provisioned land to facilitate the build-out of the necessary data centre infrastructure.’
For South African developers, the news was even more inviting: although the country already accounts for about 60% of the continent’s available multi-tenant data centre power supply, ADCA’s analysts expect South Africa to add 10 times more colocation power capacity over the next two years than all other African markets combined.
The numbers look good
Still, if you think the data centre property market is completely tapped out, you’re not paying close enough attention to the numbers. More than 30 facilities have been built and brought online in Africa since 2016, doubling the region’s capacity. But as that 60% figure suggests, the distribution of that capacity is horribly lopsided. Johannesburg, Cape Town, Durban, Bloemfontein all have at least one data centre each … but about two-thirds of the 80 African cities that have a population of more than 1 million do not.
There’s opportunity here – and money to be made.
In February 2021, Absa facilitated R2.5 billion in funding for vendor-neutral data centre provider Teraco to begin construction of JB4, an enormous new hyperscale data centre in the East Rand’s digital hub, Ekurhuleni.
Scheduled for completion in Q1 2022 as a stand-alone building, it’ll be the biggest single-site data centre in Africa, comprising 50,000 square metres of building structure, and serviced by 80MW of utility power supply.
‘South Africa is strategically located at the tip of the African continent, and, as a result, is positioned as a technology and data centre hub for sub-Saharan Africa,’ Teraco CEO Jan Hnizdo said at the announcement event. ‘This is further underpinned by growing undersea and terrestrial fibre connectivity to the rest of Africa. The continued increase of cloud adoption in Africa is also being enabled by investments in critical infrastructure, including hyperscale data centre facilities such as JB4. This will enable global cloud clients to service not only the South African market, but reach the rest of the sub-Saharan African region as well.’
JB4 is a landmark, in every sense of the word. It’s enormous and it’s important, but there’s a growing sense among investors, tech commentators and property developers that it’s really just the beginning of something even bigger.
