AI is driving data centre growth in Africa

The data centre industry in Africa is experiencing exponential growth, driven by advancements in artificial intelligence, cloud services, and various emerging technologies.

The African continent is becoming a focal point for cloud investments, motivated by the imperatives of business expansion and innovation, even as challenges related to skills and cost planning persist. Dominated by industry giants such as AWS, Microsoft Azure, and Google Cloud, the global cloud computing market is expected to swell to an astonishing $1.6 trillion by 2030.

In Africa, the data centre sector is attracting the attention of Hyperscalers and investors, primarily catalysed by emerging market opportunities in countries like South Africa, Kenya, Egypt, Nigeria, and Morocco. 

The proliferation of data centres and the rapid emergence of edge data centres across the continent are fuelled by diverse factors, including the need for real-time data processing and strict adherence to data residency regulations. Sustainability and energy efficiency have become central themes in the data centre industry, prompting the exploration of renewable energy sources and more efficient cooling systems. The dispersion of data centres across varied geographical locations holds the promise of alleviating power constraints and expanding the horizons of data centre investment.

The overall investment landscape in the data centre domain is on the rise, offering untapped potential across the entire value chain, encompassing green energy solutions and innovations in cooling technologies.

South Africa, in particular, is witnessing remarkable growth, poised to secure a substantial share of the projected $5 billion investment in the African data centre market by 2026, with an estimated $3.1 billion earmarked for South Africa.

 Recent developments underscore its growing significance and expansion. Forecasts indicate significant expansion in the South Africa data centre market size, set to reach 346 MW in 2023 and exhibit robust growth at a 15.7% CAGR, ultimately reaching 829 MW by 2029. Additionally, the total raised floor area is expected to expand to 4.4 million sq. ft, while the number of installed racks is projected to exceed 220 thousand units by 2029, primarily concentrated in Johannesburg and Cape Town. 

This growth is attributed to factors like the adoption of 5G, increasing smartphone penetration, and the ongoing digitization of services and industries in the region. Prominent trends in the South African Data Centre Market, as identified by research experts, include the dominance of Tier 3 facilities, as Tier 1 and Tier 2 centres experience waning demand due to their inability to support uninterrupted services.

Tier 3 and Tier 4 data centres are becoming more preferred, with Tier 4 centres expected to see substantial growth at 20.41%, closely followed by Tier 3 data centres with a growth rate of 12.87% through 2029, offering minimal downtime and enhanced facility efficiency. In terms of industries, the BFSI and media and entertainment sectors are expected to predominantly adopt Tier 3 facilities. This trend is driven by the growing acceptance of technologies like bitcoin, digital cards, biometric payments, “buy now pay later” (BNPL) services, and open banking for various financial transactions, in line with the 95% of South Africans who used developing digital payment methods in 2021. Furthermore, consumer habits indicate a growing preference for online purchases and digital services in these industries, with social media engagement steadily increasing. The South Africa Data Centre Market is moderately concentrated, with the top eight companies collectively holding over 85% of the market share. These key players include Teraco Data Environments (Digital Realty), Africa Data Centres (Cassava Technologies), Vantage Datacentres, NTT, Digital Parks Africa, MTN and BCX.

Global data centre giant Equinix has unveiled a $160 million investment plan to build its first South African facility, set to commence operations by mid-2024. This move underscores South Africa’s status as the most developed economy in sub-Saharan Africa and Equinix’s commitment to serving large enterprises, including banks, content and media companies, and hyperscalers in Africa.

South Africa has gained recognition as one of the few locations in Africa with fully established cloud regions, hosting prominent cloud operators like IBM, Microsoft, Oracle, Huawei, Amazon Web Services, and Google. BCX, a systems integrator, formed an exclusive distribution partnership with Alibaba Cloud in October 2022 to distribute Alibaba Cloud’s products and services in South Africa. BCX is in the testing phase for a local public data centre and is preparing to expand its cloud data centre presence across Africa, commencing in South Africa. Google has also announced its intention to launch a Google Cloud region in South Africa, accentuating the country’s growing importance as a strategic destination for cloud and data centre services, supported by its status as the most developed economy in sub-Saharan Africa.