Four Trends- Sub-Saharan African Data Centres January 2015

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Four Trends- Sub-Saharan African Data Centres January 2015

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Four Trends- Sub-Saharan African Data Centres
The Sub-Saharan African Data Centre Landscape
In 2013, mature markets generated
60 percent of total global data. By
2020, that figure will be turned on
its head and emerging markets will
produce 60 percent of global data.1
We believe Sub-Saharan Africa will
be a considerable factor behind this
substantial shift.
International companies are continually
including Africa as a chief theme of strategic
discussions due to its favourable growth
prospects, its improved governance and the
rise of the middle-class African consumer.
Highly regarded news publications such as The
Economist and the Financial Times continue to
promulgate the view of Africa as the Rising
Continent. And, global consultancies are
increasingly promoting the continents
compelling growth story and profiling Africa as
a destination market for foreign investment.
Many international companies in Africa are
looking for local data centre solutions in order
to better serve their in-country customers and
to support their regional expansion strategies.
However, despite its massive opportunities,
economists and business leaders recognise the
January 2015
complexities and challenges of Africa as a
destination for foreign investment and other
economic activities. The data centre market in
Africa is particularly daunting to navigate since
key requirements for the successful operation
of a data centre such as infrastructure, security,
and data privacy laws are weak across the
continent.
Source8 has conducted research into the data
centre markets of 17 Sub-Saharan African
countries and explored the local challenges
and opportunities of each one. This white
paper summarises four principal trends that
our research revealed. If these trends continue,
Africa will play an increasingly vital role in the
global data centre market.
The main purpose of our research is to help
companies looking for data centre and co-
location facilities in Sub-Saharan Africa gain a
better understanding of the continents data
centre market.
Provided in this paper are key insights
into the potential pitfalls and
opportunities of these environments,
information that could greatly benefit
companies in making a more informed,
evidence-based investment decision.
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Four Trends- Sub-Saharan African Data Centres January 2015

Market Development in the Sub-Saharan African Context

Africa has made massive progress over the by 20 times between 2013 and 2019 double
past decade. In recent years, there has been a the forecasted global expansion.6
proliferation of exciting news about Africas
Recent developments also indicate that the
booming telecoms, burgeoning apps scene
data centre market in Africa is poised to take
and dynamic entrepreneurs and innovators.
off. In the following pages, we will examine key
These successes are increasingly replacing the
factors driving the African demand for data
stories of war, disease, famine and corruption
services as well as the central trends affecting
that for decades shaped the Western narrative
the growth of data centres across the
of Africa as the Dark Continent.
continent.
Africa is the worlds fastest growing
region with a forecasted real GDP annual
growth of 5.2 percent this year. The
continent hosts seven of the worlds
fastest-growing economies.2 It is also one
of the youngest and most populated
markets in the world, with more than half
of its population under the age of 24. By
2050, Africas population will grow to two
billion people, higher than that of both
India and China.

The rapid urbanisation in Africa (40 percent of

the population already lives in cities, a higher
ratio than in India) will create demand for
quality goods and services as Africans move to
cities and have greater disposable income. By
2050, 63 percent of the continents population
will be urban.3 The number of middle-class
households in 11 key Sub-Saharan African
countries excluding South Africa is expected to
triple to 22 million by 2030.4

An astounding growth in mobile phone

subscription, more than 500 million users
according to industry estimates, combined
with the arrival of new undersea data cables
are reshaping Africas connectivity. A majority
of urban Africans own internet-capable devices
and use the internet regularly.5 Some analysts
predict voice call traffic in sub-Saharan Africa
will double, while mobile data usage will grow
Illustration by Hubert Blanz

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Four Trends- Sub-Saharan African Data Centres January 2015

Four Trends Shaping The Future of Data Centres in Africa

Sub-Saharan Africas demand for data centres is largely

driven by the surge in: citizens increasing use of data

1 services; businesses looking to host their fast-growing digital

information locally; governments moving towards e-
governance; and the roll out of fibre infrastructure across
Africa.

Africans are currently consuming a Businesses are demanding high-

broader range of data services
Fuelled by a host of new mobile phone
applications developed by software engineers
across the continent, an innovative and IT
savvy culture is flourishing across Africa. Kenya
led the way with a ground-breaking mobile
phone technology that allowed those without
a bank account to transfer funds and pay bills
via mobile phones as quickly and easily as
sending a text message. The system, known as
M-Pesa, has since been exported around the
world.
Jumia, a leading online shopping platform in
Africa, is already the fourth most-visited
website in Nigeria. It is also the first African
company to win the award for Best New
Retail at the prestigious World Retail Awards.7
By 2025, e-commerce will account for 10
percent of retail sales in Africas largest
countries, this represents around $75 billion in
annual revenue.8
Ninety percent of African Internet content is
currently hosted outside the continent.9
However, with the rise in Africans
consumption of data services the local content
generated will soon need to be hosted in local
or regional data centres.
speed, and secure local facilities to
store their digital data
The mindset of enterprises in Africa is slowly
changing and data centres are increasingly
viewed as critical in supporting essential
business functions and services.
Local businesses are shifting from running their
enterprise servers in-house towards
outsourcing this part of their business to
commercial operators. Multinationals, mainly in
the financial, oil and gas, and
telecommunications sectors, need local
presence to better serve their customers in-
country and support their regional expansion
plans.
Since 2011, IBM has signed more than 20
lucrative deals in the financial sectors across
Africa in order to provide the necessary
infrastructure to support smarter banking
solutions.10 In 2014, IBM announced its 2015
plans to expand in Africa and the Middle East
by setting up data centres to assist companies
and government with expansion and
optimisation of operational costs.11 IBM is also
promoting Cloud Services in Africa with the
opening of two new Mainframe Innovation
Centres in Nairobi and Johannesburg. The aim

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 Four Trends- Sub-Saharan African Data Centres
of these facilities is to provide clients, business
partners and academic institutions with access
to extended big data, analytics, mobile and
Cloud Computing technologies. 12
At present, demand for Cloud Computing
is greatest in South Africa, but there is an
increasing appetite in other African
countries like Kenya and Nigeria. And,
with internet connectivity improving,
Cloud Computing will rapidly gain pace in
other African countries as well.
Cloud adoption in South Africa and Kenya has
so far has been dependent on the enterprise
size and sector.13 Small and medium
enterprises have been especially keen to
adopt Cloud Computing, taking advantage of
affordable and convenient public cloud
offerings. Some sectors such as the financial
services, healthcare, and the government have
so far been reluctant to adopt cloud services
due to security concerns. Nevertheless, banks
and insurance companies are starting to shift
some of their non-core applications such as e-
mail to the cloud to test the reliability of cloud
services.
In addition to the simple catch up effect with
developed markets, cloud solutions are
IBM unveils new Mainframe Linux Centers in Africa, Source: IBM.com, May 2014.
January 2015
expected to grow quickly due to the
comparative lack of traditional data centre
infrastructure and IT skills in Africa, thus
making cloud services very appealing for
companies in the continent.
Governments across Africa have
recognised the potential of using
communication technology
platforms and applications in the
public sector to deliver government
information and services to their
citizens.
There are already many examples of successful
e-governance projects in countries like Kenya,
Senegal and Mozambique among others.
Many predict the rest of Africa will also join the
global transition towards e-governance. As the
online content that African governments
produce begins to be updated and changed
daily, the demand to store this information in
local data centres will increase in order to
reduce costs and access times.
Africas total bandwidth usage has
grown considerably with the rollout
of fibre infrastructure across the
continent.
An important driver behind the rise in demand
for data centre services is the rollout of fibre
infrastructure across the continent, which has
made local hosting more viable and cost-
competitive. This creates a good opportunity
for international data centre operators to
expand into the Sub-Saharan African markets.
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Four Trends- Sub-Saharan African Data Centres January 2015

Figure 1. The Key Drivers of Data Centre Demand in Sub-Saharan Africa

Citizens Data

African Data
Government Data Centre Growth Business Data

Fibre Infrastructure

Figure 1 explained. A surge in the consumption of data services by

Africans
The main drivers behind the Local businesses capitalising on the
advantages of outsourcing as well as
rising demand for data
international companies wanting to support
centre facilities in Africa are: their expansion plans
A rise in e-governance projects
Deployment of new national & regional fibre
backbones

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Four Trends- Sub-Saharan African Data Centres January 2015

Although South Africa currently has the highest

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concentration of data centres in the whole of the continent,
we expect Nigeria, Ghana, and Kenya among others to
capture more of the Sub-Saharan data centre market share
over the next decade.

The data centre market in Sub-Saharan Africa
has expanded in capacity and revenue, but this
growth has so far been concentrated in South
Africa. South Africa has the most developed
and sophisticated data centre market on the
continent, with an estimated 100,000 sqm of
floor space as of 2014, according to some
estimations.14 After South Africa, the countries
hosting the highest number of data centre
facilities are Nigeria, Ghana, and Kenya with
major ISPs and Telcos dominating the data
centre scene.
At the other end of the spectrum, there are
countries like Mozambique, Niger, and Zambia
whose data centre markets are still at a nascent
stage. In these markets there exist only a few
small local operators, with no global operators
currently offering data centre services.
The current unequal distribution of data
centres between South Africa and the rest of
the continent is illustrated in the diagram
below.

Figure 2. Treemap of Number of Data Centres by Country

South Africa Ghana Nigeria Zambia

Cote dIvoire Rwanda Tanzania

Botswana Zimbabwe

Kenya Ethiopia Angola

Mozam-
Uganda bique

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Four Trends- Sub-Saharan African Data Centres January 2015

Nevertheless, the data centre market is

expanding outside of South Africa as service
providers set up data centre capabilities to
meet growing data demand from citizens,
businesses and governments. The data centre
market is growing particularly fast in countries
such as Kenya and Nigeria and thus, we expect
these countries to gain a higher share of the
African data centre market in the next decade.

Service providers in these markets are using

different models to capture opportunities in
the data centre market. Some Telcos have
partnered or acquired ISPs in order to expand.
For example, Safaricom, a leading mobile
network operator in Kenya, jumped into a
series of ISP acquisitions and integrated them
to launch Safaricom Business.

Another very recent example of the positive

developments happening in Africa is the
Djibouti Data Centre (DDC). Set up by a group
of local and international investors in
partnership with Djibouti Telecom, DDC is the
first data centre and Internet exchange in East
Africa linked to eight fibre optic cables that are
part of the main Internet route from Europe to
Figure 3. International Infrastructure Investments
Asia. Its plan is to expand into other East Africa Undersea Cables 2015
African countries through small data centres,
which would allow telecom operators, and
others to access these submarine cables via
the principal data centre in Djibouti.

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 Four Trends- Sub-Saharan African Data Centres
There has been arecentincrease in investmentfocusing on
3 international submarine cables and fibre-optic
backbonenetworks, which will furtherenhance data centre
development.
While public sector investment in Africa
has increased considerably in the last
decade, the private sector remains the
principal driver for investment and has
invested close to $50 billion in ICT in the
last 10 years.15
While the majority of investments in the ICT
sector has been directed towards mobile and
related applications, the recent focus has been
on international submarine cables and
broadband infrastructure across the continent.
Figure 4. Estimated Size of The ICT
Enterprise Services Market 2013
circa $9 billion in whole of Africa
Source: The future of Telecoms in Africa, Deloitte, 2014.
January 2015
The mobile industry is now very competitive,
with most African countries having at least
three operators. Growth in the sector is
slowing but investment opportunities remain,
especially in the field of infrastructure
outsourcing. Internet access is considerably
underdeveloped compared to the mobile
penetration; however, this is changing due to
the rollout of submarine cables along Africas
coastline. Angola, Botswana, Ethiopia,
Rwanda, Kenya and Tanzania are among the
countries that have launched plans for the
rollout of their national backbone networks
over the last years in order to provide access
to rural areas. In terms of fibre backbones,
South Africa acts as a connectivity hub for
neighbouring southern African countries, while
in West Africa, Nigeria, Ghana and Senegal act
as hubs for the region.
African governments are showing increased
interest in Smart City technology and the
advantages it can offer citizens. Connectivity
and cloud adoption are crucial to Smart City
systems, and African countries are making
good progress in both areas.
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Four Trends- Sub-Saharan African Data Centres January 2015

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Sub-Saharan Africa has the opportunity to become a
pioneer in green, energy-efficient solutions that it could use
to power its data centres.

According to the International Renewable Africa has the potential to leapfrog the carbon
Energy Agency, Sub-Saharan Africa has energy age and enter straight into renewable
immense technical potential for clean energy energy, creating opportunities for large data
projects, and if substantial investment flows centre operators to procure clean energy
into Africa, the continents renewable energy directly or to invest in their own renewable
capacity could quadruple to about 120 energy facilities.
gigawatts by 2030.16 With the cost of wind and
solar energy dropping significantly in recent Africa has already demonstrated its
years, renewable power is increasingly remarkable leapfrogging ability in the
considered a less expensive alternative to telecommunications sector by skipping
other forms of energy such as coal and gas- directly to mobile phones. African
powered plants.17 countries, most of which lack traditional
data centre infrastructure, are in a very
Many African countries already operate small-
good position to leapfrog developed
scale wind, geothermal and solar facilities that
economies in data centre solutions and
provide energy to cities and rural areas and
fast track their participation in global
South Africa is already in the global green
energy league. Among the countries we markets.
surveyed, Rwanda, Ghana, Kenya, and
Ethiopia all have large scale renewable energy
(mainly wind and solar) facilities under
development. Nigerias Renewable Energy
Master Plan (REMP) is being implemented by
the Federal Ministry of Environment with the
purpose of increasing renewable energys
contribution to 10 percent of the countrys
total energy consumption by 2025. In
addition, many African countries, including
Nigeria, are currently opening the energy
sector to independent power suppliers and
incentivising the use of renewable energy
supply in the generation mix. Several of the
African countries surveyed are also using fiscal
intervention as a means to induce the supply
of renewable energy through subsidies, grants
and rebates.

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Four Trends- Sub-Saharan African Data Centres January 2015

Appendix
Sub-Saharan Africa Data Centre Index Rating

As part of our research into the data centre market in Sub-Saharan Africa Source8
has developed the Sub-Saharan Africa Data Centre Index. The purpose of this
index is to help companies looking for data centre and co-location facilities in
Africa make an evidence-based and educated investment decision about where to
co-locate. The Data Centre Index ranks 17 countries based upon the attractiveness
of their data centre market.

This is evaluated based on criteria considered most likely to affect a data centres
operations (energy, security, electricity cost, water availability, network readiness,
total international bandwidth, number of data centres, number of submarine fibre
optic cable systems, political stability, quality of education system, prevalence of
natural disasters, ease of doing business, among other factors). The weighting
used in our scoring model is flexible and can be adjusted based on the clients
priorities, such as the need to establish presence or upgrade operations in a
particular country/region, as well as the risk approach. Risks posed by some of the
macro indicators analysed are easier to mitigate or manage than others.
Source8 would be delighted to discuss the Data Centre Index and provide in-
depth country analysis upon request.

Map on following page

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Four Trends- Sub-Saharan African Data Centres January 2015

Figure 5. Sub-Saharan Africa Data Centre Index Ranking Map

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Four Trends- Sub-Saharan African Data Centres January 2015

Source8 is the worlds leading advisor on the implementation of Real

Estate, Technology and Risk Management infrastructure and services.

Our three core competencies combined with our unique ability to operate
securely in both stable and fragile markets enable us to deliver sector
specific, fully integrated infrastructure solutions anywhere in the world.

Source8 is able to offer a full suite of Consulting & Analysis Services

including Market Entry Analysis, Data Centre Location Studies, Portfolio
Optimisation, M&A Integration Due Diligence, Workplace Technology
Solutions, and Utilisation Studies. Source8 additionally offer Real Estate
solutions including Transaction Management, Project Management, Risk
Management and Technology and Strategic & Tactical services.

Source8 was acquired by Mitie in 2014. Mitie is an FTSE 250 company

that provides infrastructure consultancy, facilities management and a
range of energy management services.

Source8 Head Office:

5 Hobart Place, Belgravia
London
SW1W 0HU

Source8 Offices in Africa:

Source8 Ghana Source8 Kenya Source8 Nigeria

2nd Floor, Opeibea House Deloitte Place 235 Ikorodu Rd
37 Liberation Road Waiyaki Way, Ilupeju
P. O. Box CT 9347 Muthangari, Lagos, Nigeria
Cantonments P O Box 40092
Accra, Ghana Nairobi
GPO 00100

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Four Trends- Sub-Saharan African Data Centres January 2015

For further information please contact:

Anser Rizvi
E-mail: Anser.Rizvi@Source8.com
Tel: +44 (0) 207 752 0700
Mobile: +44 (0) 7974 144164

Armela Kokona
E-mail: Armela.Kokona@Source8.com
Tel: +44 (0) 20 7752 0706
Mobile: +44 (0) 77 3059 8347

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