Despite being the world's second-largest continent, as well as its second-most-populous, Africa is currently only served by about 150 multi-tenant datacenters. However, things are beginning to change: Africa now has more network connectivity options, with fiber networks, in particular, growing by the day as they stretch across cities and the continent. All this represents a huge opportunity for datacenter specialists – Africa's datacenter services market should be worth almost a billion dollars in the next two years. Plus, there's a promise of much more to come as both enterprise and state-led digital transformation projects evolve and user demand switches from a Cloud 1.0 to a Cloud 2.0 model.
The 451 Take
Cloud became a hot topic in Africa in 2017, with Microsoft becoming the first of the major cloud providers to actively target the continent with its products. What's more, a steady increase in the number of datacenters on the continent, combined with ever-improving connectivity infrastructure, is boosting confidence in cloud. Establishing datacenters in African capitals also resolves the issue of latency, with data traffic delays of just a few minutes as opposed to much longer when cloud services are hosted outside of the continent. This also keeps African data in Africa. Despite the opportunities, major global datacenter players have so far shied away from the continent, preferring instead to remain focused on their established markets in the developed world, or choosing Asia or Latin America as their developing-region targets. They are missing out. Yes, there are challenges, but Africa is still a land of opportunities. The continent has been able to find solutions to its unique challenges by leapfrogging technologies and landing at the digital cutting edge.
Bridging the Datacenter Divide
But a gap still exists between demand and supply. Despite being the world's second-largest continent, as well as its second-most-populous (currently 1.29 billion), Africa is currently only served by about 70 colocation centers and 150 multi-tenant datacenters. While that figure is low, it does represent a significant increase from 2011, when there were fewer than 20 colocation and multi-tenant facilities across the entire continent. Progress is starting to ramp up – Africa now has more network connectivity options, particularly with fiber networks growing by the day. This is whetting appetites, both from domestic consumers and enterprise users, for more digital services.
So far, however, none of the world's biggest datacenter players has taken the bait. For example, the global footprint maps of operators such as Equinix, Digital Realty and Cyxtera reveal zero deployments to Africa. As a result, the continent's datacenter market has been left to the mobile network operators (MNOs) and homegrown companies. While it would be wrong to view Africa as a single homogeneous market, it would be fair to describe it as a mobile-first continent. Since the arrival of cellular technologies in the 1990s, there are now roughly 1.1 billion unique mobile subscribers across the region. And as operators continue to roll out mobile broadband networks using 3G and 4G cellular technologies, the number of digital citizens demanding data services continues to skyrocket. However, with dwindling ARPU from domestic subscribers, pan-African MNOs such as Millicom, MTN, Orange and Vodafone/Vodacom have sought to capitalize on the opportunity to lock in their enterprise customers with dedicated services provided through their own purpose-built datacenters. MNOs are by their very nature cloud platform providers, so it seems logical, at least in theory, for them to also provide the facilities needed to launch dedicated enterprise services.
However, MNOs are responsible for building and running mobile networks, not datacenters, which is a step away from their core business. In fact, operating a datacenter pushes the MNO back to square one – since the mid-2000s, many of the large operators in Africa have outsourced their network management in an effort to focus on being service providers rather than infrastructure managers. But by building their own datacenters, they take on the additional responsibility of hosting mission-critical data for customers, and that has far-ranging implications for an MNO's infrastructure, resources and organization. For instance, it may not have staff with the specific IT skills needed to run a successful datacenter, such as network operation center engineers, solution architects, and network and IT security specialists. Experts in cloud and virtualization are also required by those that want to offer more than just colocation services.
Furthermore, African mobile operators have so far not built datacenters in countries where they do not run networks, and where they do exist they have largely ended up being self-serving. For example, in 2017 Luxembourg-based Millicom (which runs networks in Latin America and Africa under the Tigo brand) spent $6m on building Chad's first datacenter. While the 126-rack facility offers 374 square meters of floorspace for telecoms and colocation services, its main function is to support all of Tigo Chad's data and hosting requirements. Similarly, MTN has built datacenters to support its mobile business in the Ivory Coast, Vodacom has its own facilities in Mozambique and South Africa, and TelOne launched Zimbabwe's first two datacenters in 2017 following a $4m buildout.
The Homegrown Specialists
Aside from the MNOs, homegrown colocation companies have also begun to emerge in Africa, such as Kuba and Icolo in Kenya, and Ngoya in Ghana. The continent's two biggest markets for datacenters and services are South Africa and Nigeria. In South Africa, Teraco runs three vendor-neutral facilities and is home to NAPAfrica, Africa's largest carrier-neutral internet exchange point (IXP). In 2017, Teraco received funding from Absa Bank to help build the continent's largest commercial datacenter. It will use the ZAR1.2bn ($87.2m) loan to expand its Isando campus in Johannesburg, which has been established as the connectivity gateway into South and sub-Saharan Africa. The company has also purchased land adjacent to the existing site, allowing for further expansion. Additionally, a component of the funding has been earmarked for the construction of Teraco's new datacenter in Bredell, just outside Johannesburg. In January, Berkshire Partners bought a majority stake in the company and announced plans to double its installed power.
A Fiber and Cloud Future
Up until now, a lack of basic infrastructure has hindered the development of datacenters in Africa. While much still needs to be done, things are beginning to change, particularly with the deployment of fiber. During 2017, an average of 153km of new fiber entered service per day across the continent, bringing an average of 145,444 more people within reach of an operational fiber network for the first time. Africa's inventory of terrestrial operational fiber has roughly doubled since 2012, and by December 2017 it had reached 845,755km. The biggest fiber network on the continent is the East Africa Ring built by Liquid Telecom. Completed in 2014, this 50,000km cross-border network now links Kenya, Uganda, Rwanda and Tanzania, with onward connectivity to Liquid Telecom's fiber networks in Burundi and eastern DRC. It also offers direct access to international subsea cables. As well as operating fiber- and satellite-based networks in Africa, Liquid Telecom owns the East Africa Data Centre in Nairobi, and Tier III datacenters in Johannesburg and Cape Town, which were acquired following its ZAR6.55bn ($430m) takeover of South Africa's Neotel in 2017. The three centers offer a combined rack space of 6,800 square meters.
While South Africa and Nigeria currently represent Africa's biggest cloud hotspots, Kenya, Egypt, Botswana, Mauritius and (to a lesser degree) Tanzania are all up-and-coming. They have proved attractive enough for the likes of Microsoft, Oracle and SAP to launch cloud-based services and applications to support the digital economies in those countries.
In 2017, Microsoft unveiled plans to deliver its complete range of cloud services for the first time from African datacenters. The company has now started offering products such as Azure, Office 365 and Dynamics 365 from its own facilities in Johannesburg and Cape Town. Microsoft has also joined forces with Liquid Telecom to further accelerate the use of such services, combining Liquid's fiber network reach with its business solutions to bring the cloud closer to the end user. This is crucial – many local companies currently rely on cloud services being delivered from outside of the continent and suffer latency as a result.
In 2017, South African MNO Vodacom became the country's first to offer cloud-managed enterprise services such as IaaS and SAP-certified PaaS. It is hosting a fully redundant IBM CMS cloud delivery center for Africa in its Midrand and Roslyn datacenters. This is the first IBM cloud center to be rolled out in the MEA region. The service is linked via Vodafone's global IP VPN network to IBM's CMS platform in multiple locations in Europe.
Africa's cloud market is already beginning to evolve. Where Cloud 1.0 enabled organizations to focus less on infrastructure, Cloud 2.0 eliminates the need to focus on virtualization, automation and software – instead, the emphasis is purely on data and applications. With cloud adoption rates on the rise and service providers rapidly moving from a cloud-first to a cloud-only approach, the need for managed services and datacenter providers becomes an imperative.
Rahiel Nasir is a member of the Multi-Tenant Datacenter (MTDC) and Services analyst team based in London. He covers MTDC service providers in the EMEA region, providing insights into the colocation, connectivity, cloud and managed services markets.
Jean Atelsek is an analyst for 451 Research’s Digital Economics Unit, focusing on cloud pricing in the US and Europe.
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