/ 22 August 2024

Data centres are catalysts for accelerating Africa’s digital growth

Data Centre Control Room.
Companies must focus on reducing their carbon footprint and run their data centres on renewable energy. (Photo by Tom Lee/Construction Photography/Avalon/Getty Images)

Africa’s digital transformation is progressing steadily, but there is significant room for growth, especially in the data centre (DC) market. The global market for DCs is projected to reach $517.2bn by 2030, with Africa contributing less than 2% of the global colocation supply. South Africa dominates this market, yet there is a pressing need to expand beyond its borders. Cloud-based services and modular solutions are particularly attractive to SMEs and government agencies, and it is anticipated that by 2025, over 70% of African organisations will adopt cloud technologies.

The current DC infrastructure in Africa consists of approximately 140 000 square metres across 100 facilities, comparable to Switzerland’s DC capacity. Rapid digitalisation and the expansion of 4G/5G networks are expected to increase this capacity by 50% from 2021 to 2026. Nairobi, with its green energy sources, is emerging as a regional data centre hub. However, to match South Africa’s capacity density, the continent needs an additional 1000 MW and 700 facilities, highlighting the urgent need for significant infrastructure investment.

The demographic dynamics in Africa offer a substantial growth opportunity for the DC market. The population of sub-Saharan Africa is expected to double by 2050, reaching 2.5 bn. This demographic surge, coupled with an 11% increase in internet access over the next decade, will result in Africa contributing around 16% of the global internet user base. The internet economy in Africa is projected to be worth $180bn by 2025 and could reach $712bn by 2050. This growth is supported by the implementation of data-sovereignty regulations, such as those in Senegal, which attract major cloud service providers like AWS, Google, Huawei, and Microsoft.

Legislation plays a crucial role in Africa’s digital transformation. Inspired by the EU’s General Data Protection Regulation (GDPR), many African countries are enacting data sovereignty laws. The 2014 Malabo Convention on Cyber Security and Personal Data Protection, signed by 16 countries and ratified by 13, underscores this commitment. Kenya, South Africa, and Nigeria have implemented data protection laws in line with GDPR standards. Tanzania now requires banks to store customer data locally, and Zambia mandates consent for cross-border data transfers. Harmonising regulations across the continent will foster trust and facilitate smoother data flows.

Contributing to this initiative is the African Continental Free Trade Area (AfCFTA), which aims to boost intra-African trade beyond its 18% in 2023. AfCFTA’s goal of creating a single market and continent-wide customs union will significantly enhance DC investment opportunities. By reducing the costs of importing and accessing communication and network security equipment, AfCFTA can encourage businesses to establish or expand operations in Africa, thereby driving DC demand.

Deepening cloud adoption in Africa is equally pivotal, with about 45% of workloads in public cloud environments. This trend is particularly strong in the banking, telecommunications, and oil and gas sectors. However, challenges such as variations in language, culture, currency, and regulatory environments persist. Moreover, limited infrastructure and a shortage of colocation DCs hinder cloud programmes. Despite these challenges, major cloud providers like Google and Amazon have established DCs in Africa, improving regional connectivity. Upcoming hyperscale-ready data centres are expected to enhance cost-competitiveness for African businesses, reducing data transfer distances and promoting local cloud computing.

The mobile market is also driving data consumption in Africa. Ericsson forecasts a 33% compound annual growth rate (CAGR) in mobile data traffic between 2023 and 2029, with average smartphone data usage expected to reach 23 GB per device by 2029, up from 6.7 GB in 2023. Currently, approximately 26% of sub-Saharan Africa’s population, or around 270m people, actively use mobile internet. However, 50% of the population has coverage but does not connect, and 25% remain unserved due to issues like mobile literacy, expensive handsets, and data costs. Smartphone adoption, which has grown at a 28% CAGR since 2015, is expected to reach 65% by 2025, driven by operators’ planned $52bn investment in network infrastructure.

Achieving universal broadband connectivity by 2030 will require an estimated $100bn investment in infrastructure, skills training, and maintenance. Furthermore, Africa’s operational fibre-optic network has expanded to 1 184 028 km as of June 2022, with an additional 119,062 km under construction.

Africa’s digital transformation hinges on strategic investments in DC infrastructure, regulatory coherence, and the successful implementation of initiatives like AfCFTA. By addressing these areas, Africa can significantly enhance its data centre capacity, foster innovation, and drive economic growth, ensuring a robust digital future for the continent.

Chudi Okoye is the Deputy Regional Editor at Africa Oxford Business Group