Data center investment on the rise in Africa

As the rush to develop artificial intelligence (AI) drives demand for data processing capacity around the world, Africa is having its own data center building boom, despite basic infrastructure challenges.  

There has been a “marked increase” in data center investment in Africa over the last three years, although not at the same level as in established markets, according to Patrick Christian, Senior Research Manager at Telegeography. 

Since 2022, at least 25 new carrier-neutral data centers have come into service and a further 15 are due to be launched in the next couple of years, he said. 

The region has attracted the largest data center operators Digital Realty and Equinix, which have each acquired local providers in recent years, as well as all the hyperscalers, which have established regions mostly in South Africa.  A host of regional players are also busy expanding their facilities, including Africa Data Centres, Raxio, Open Access Data Centers, and PAIX. 

Major building activity can be seen in Egypt, Kenya, Morocco, Nigeria, and South Africa, according to Shahin Hashim, Associate Research Director, Datacenters and Enterprise Infrastructure, (META) at IDC. This has been encouraged by efforts in these countries to improve regulatory conditions, energy infrastructure and connectivity as well as “promoting digital transformation and cloud adoption and addressing the skills gap,” he explained. 

Despite the recent activity, the continent remains far behind the rest of the world in terms of data center capacity. According to IDC’s latest data for 2023, Pan-African data center deployments are below 1 Megawatt (MW) per million capita, while the Americas have 88.5MW, Europe has 73.93MW, and Asia-Pacific has 28.68MW. 

“This highlights Africa's extreme dependence on DC facilities outside the continent for its data and content,” said Hashim.

Today, there is huge disparity in the distribution of capacity across the continent. Not only does Africa account for only less than 2% of the world’s co-location data center supply, more than half of it is located in South Africa, according to the Africa Data Centers Association. The group estimates that the continent needs up to 1,000MW and 700 facilities to match South Africa’s capacity and meet demand. Change is, however, afoot. 

Cloud moves beyond South Africa

Alibaba, Amazon Web Services, Google Cloud, Huawei, Oracle, and Microsoft all have established regions in South Africa. 

“At the moment Africa cloud services are served from South Africa and Europe. As demand grows, we will see cloud region builds in Nigeria and Kenya,” said Christian. 

This geographical shift is already evident. 

Microsoft, together with United Arab Emirates-based AI technology company G42, announced this week a $1 billion investment package for Kenya. Part of the funding will go towards building a “green” data center to run Microsoft Azure’s new East Africa Cloud Region as well as developing large language AI models in Swahili and English. 

Built by G42, the new data center will run on “renewable geothermal energy” and feature “state-of-the-art water conservation technology.” With the new cloud region, the companies hope to accelerate cloud adoption and digital transformation in Kenya and East Africa. 

In Nigeria, Airtel Africa and data center operator Nxtra by Airtel, both part of the Bharti Airtel group, began construction for its first hyperscale data center on the continent in March 2024. The 38MW facility in Lagos is due to be available in early 2026 and Nxtra reportedly has plans for a 7MW data center in Nairobi, Kenya.

In Egypt, Huawei launched a cloud region in Cairo this week, claiming a first for public cloud availability in the North Africa region. Along with the new cloud region, Huawei also unveiled its new Arabic large language model along with plans to invest US$300 million over five years to further develop the new cloud region in the country. 

Need for local data spurs growth

The significant data center demand in Africa is being driven by “the increasing need for localization of internet, content, and data along with decentralization of cloud provider’s infrastructure, and the digitalization by businesses and governments,” said IDC’s Hashim. 

He added that cloud services are “a crucial factor” and that AI-related demand for data centers will come mainly from “SaaS and PaaS providers that integrate AI capabilities into their services.” 

Demand for capacity to train AI models is less prevalent than in other parts of the world with a few exceptions of “specialized regional AI models,” he said. 

Substantial obstacles along the way

Investing in infrastructure in Africa is not for the faint of heart. Unreliable power supply is an enduring challenge across the continent that can slow infrastructure projects like data centers. 

However, Christian noted that countries are addressing energy issues.

“South Africa has a lot of difficulties with its power grid and power supply but it is by far the most developed DC market, so energy is not necessarily the major limiting factor at this point,” he said.

IDC’s Hashim said, “Other factors such as slower digital and cloud adoption, economic volatility, conflicts, and political instability in various parts of Africa create uncertainty for long-term investments and serve as major constraints.”

He also added bureaucracy and unreliable connectivity infrastructure to the list of challenges. 

At the same time, lack of sufficient power and telecom infrastructure are also drivers of data center adoption. 

“Unreliable energy supply tends to drive enterprise data center operators towards colocation and cloud, since it moves the cost and risk mitigation to a third party, and large DC operators are typically better positioned to mitigate energy risk at scale,” said Jonathan Tullett, Associate Research Director, IT Services & Cloud, Sub-Saharan Africa, at IDC.

Meanwhile, recent undersea cable outages on East and West Africa have disrupted access to offshore data centers, whether they are hyperscale cloud or colocation services, he said. 

“[Outages] are not new, and the overall infrastructure is a lot more resilient now than in previous years, but it’s still on customers’ minds, and that encourages them to consider locally based options for critical workloads,” said Tullett.