Stephane Duproz, CEO of Africa Data Centres (ADC), has a statistic that shows the challenge faced by much of Africa and its data centre and telecoms operators. “Africa represents 15% of the world’s population and half of them are under 20 years of age,” he says. “They are extreme users of digital tools.” Alan Burkitt-Gray finds out more.
Yet, “the data infrastructure represents only 1% of the global total. We have a huge continent and a huge demand – and all its data is kept somewhere else.”
Not quite all, or he wouldn’t have a business. Africa Data Centres, part of the Liquid Telecom Group, has “the largest data centre in Cape Town”, he says, plus “one of two largest in Johannesburg – and, in Nairobi, the largest by far.”
ADC already has edge data centres in Kigali and Harare. “That’s five cities and we expect this number to be 12-15 in the coming 12 months,” says Duproz. Lagos and Accra are on the list “and we expect to have Dakar, Abidjan and Lomé”, he adds.
ADC won a tender to build the Togolese data centre in Lomé from a consortium of the World Bank and the government of Togo. “It will be an open data centre where the government will put its IT. The Togo government wants its data centre to be open and dynamic.”
He continues. “In east Africa, we’ve started a project for a data centre in Mombasa.” In the north, “we are now working on getting into the Egyptian and Moroccan markets”.
Rahiel Nasir is an analyst for S&P Global Market Intelligence – it was 451 Research until S&P Global bought it in December 2019. The 451 Group, which owns the Uptime Institute, remained separate.
“I hate to talk about Africa as a single market,” says Nasir. “You can’t come in with a European or North American mindset – it’s a slow burner, a different culture.”
But he agrees that “there’s a digital boom” in Africa. “We all know that. You’ve got the fibre, you’ve got mobile, and what do you do with that?” he asks. “It’s important that African data should be kept in Africa.”
That’s also an issue faced in the Middle East, which we’ll come to later.
At the moment, says Nasir, “you can connect to cloud services, but if they’re in Europe or North America, then transport services have to be taken into account.” If your data is travelling thousands of kilometres “that will put you at a huge disadvantage”, he warns. “Data centre providers are beginning to see interest from outside the continent – money is coming in from Europe.”
However, “there’s a lot of difference between spending millions on creating a data centre platform in Africa and actually doing it”.
There’s a lot of competition in South Africa already, and operators are focusing on what Nasir calls “secondary and tertiary markets”. In east Africa, Kenya is the leader, but he notes interest in Uganda, and also in Ethiopia where the government has started to privatise telecoms. Plus Sudan and South Sudan, as well as Djibouti.
In the north, “Morocco is a small market”, but he’s also excited about “Egypt and the New Cairo project”. This is a plan to build a new city, New Cairo, 45km east of old Cairo, and half-way to the Suez Canal. This will house 6.5 million people – compared with old Cairo’s 20 million – on a 700sq km site.
But he warns that this is a rapidly changing environment and that “things change at the drop of a hat”, in Egypt. “Governments change their minds. That’s the way of doing business.”
If Egypt wants to make New Cairo the heart of a digital economy, it will have to compete with Bahrain, where Areije Al Shakar is director of the Al Waha Venture Capital Fund of Funds, as well as being senior vice president at the Bahrain Development Bank.
“For us in Bahrain we’ve been focused on building out a digital economy,” she says. “The ecosystem has been being built over five to six years with start-ups. We as a government are not directly investing [in projects] but investing in experts with an affinity for the region or a focus on the region.”
Data centres are clearly at the heart of the plan, “and creating the infrastructure”, she says. “Investing in the capacity and the infrastructure is the missing piece of the puzzle.”
Bahrain “is a gateway to the Gulf”, says Al Shakar. “It’s a great springboard. Ultimately will expand across different jurisdictions.” Her aim is to expand the project into the countries of the Gulf Cooperation Council (GCC) and right across the Middle East and North Africa.
As a fund of funds, Al Waha is connected to the central bank, the economic board of Bahrain, and the Ministry of Industry and Commerce. “Ultimately we can help serve those companies in the Gulf.”
Her vision is to have “regulation that’s progressive and open before it is extended to wider markets – to test out the technology”, she says.
“We try to partner with venture fund managers,” and the aim is to create a governance structure. It’s very early days compared with the West. Data centres and other technology are “a newer asset class”, she says. “Investors want to back companies with a level of governance,” knowing that the technology can be licensed, and that the ventures can grow. “Investors want them to grow.”
Data centre regulation is central. “We need regulatory background to store data, and we need data protection, and we need to have access to funding. It’s vital that these pieces of the puzzle come together. This is a road map.”
One of the projects she’s proudest of is the Tarabut Gateway, an open banking platform that provides access to a global network of banks and fintech – financial technology – companies through a universal application programming interface (API).
It was developed in a sandbox, she notes. “This is the first fintech company from the sandbox. The head of fintech and innovation at the Central Bank of Bahrain is Yasmeen Al Sharaf, and “she has created an environment where fintech companies can approach the central bank without being intimidated”, says her colleague Al Shakar.
“Bahrain aims to be supportive and helpful. Start-ups can access decision makers, and sometimes regulation follows innovation.” The Tarabut Gateway is a demonstration of how an entrepreneur can help legislate around open banking. Since it emerged from the sandbox the Tarabut team “has signed up banks in Bahrain and across the GCC. It is the first fintech company from the sandbox. We’ve seen others come out of the sandbox in such a manner.”
Of course, there is a huge variation in conditions across the region, from South Africa to the Gulf. “It’s a big place and there are a lot of variations,” says Guy Zibi, founder and managing director of Xalam Analytics. “We focus on frontier and emerging markets, mainly in Africa and the Middle East. In Africa there is an increasing demand for connectivity, with a broadband base that has been expanded over five to 10 years. Now there are 300-400 million broadband connections, double what it was three or four years ago.”
There has been “an expansion of 4G and last-mile fibre that generates more traffic”.
But Zibi warns that raw numbers are not all. Less than 10% of 4G customers get more than 10Mbps, he says. “And in some markets it is less than 5%. So even if you had a broadband connection, you aren’t able to do Zoom calls. There is a substantial divide, even when 4G is available.”
Expanding coverage “is definitely a challenge”, says Zibi. “You need to have a business model that makes sure people can afford the service. In some places they just can’t afford it. You need business models for the bottom of the pyramid. I don’t want to blame operators. This is a tough market. People need to pay less than $1 a day.”
He points with approval to Reliance Jio, which came into the Indian market a few years ago with a new technological and economic model, installing a brand new 4G network and charging low prices for services. Africa “needs a player like Jio to give capacity to the people and make money”, says Zibi. “It’s a learning curve.”
One of the key differences between individual markets is the number of companies competing. “It’s amazing just how many had monopolies or duopolies just a few years ago.” And even when there are four or five mobile operators in a country, they may be connected to the rest of the world through one subsea fibre. “That has constrained markets.”
That’s one of the reasons why South Africa stands out. “It’s not just the size of the country, but the market has been liberal. It’s a very dynamic market. And Nigeria and Kenya have also been very dynamic,” says Zibi.
In three years from 2016 to 2019, data centre capacity has doubled, he says: “It will double again over the next three years.”
In Africa at first the telcos were the builders of data centres, but now companies such as ADC “are building world-class technology. It’s becoming a business of specialists, and when things go well confidence rises.”
He adds: “Now broadband is usage increasing, and international content players want to reach people, and get content closer to the customers.”
Last word, then, to a telecoms executive, Mark Daley, who is director of digital strategy and business development at Epsilon Telecommunications.
“Africa for us is interesting and very exciting,” he says. “South Africa and southern Africa are technologically moving ahead by leaps and bounds in cloud and digital services. South Africa has changed over the past five years.”
There are challenges on connectivity, but South Africa has a lot of fibre, notes Daley. “It wants to be leaner and meaner and faster – and cloud is part of that. Epsilon has invested in Cape Town and Johannesburg.” That’s where you find the drivers of digital business, he notes.
“Investing in networks, in network infrastructure and cloud infrastructure, bring a massive symbiotic benefit – it’s not just 20 people in the data centre, but the power infrastructure, the ecosystem, the power, the networking – that’s good for local telcos,” he says.
And that also seems to be happening in the Middle East now, Daley adds. “Many countries in the region are investing in smart city technology or are just doing it. Wireless and cloud are the drivers.”
Africa can learn from the Middle East, he suggests. “The more countries that can make that available, the faster Africa can grow and evolve.”