Platform Africa 2023: Our take-aways
Norton Rose Fulbright recently attended the Platform Africa 2023 conference in Marrakesh. The event was well-attended by operators, investors, energy providers, suppliers and other industry experts, all assembled to discuss the African data centre and digital infrastructure sector.
Given we have a leading digital infrastructure practice, and having advised on many transactions across the African continent (and globally) in the data centre, towers, fibre and marine cable space, we were particularly keen to glean insights from key stakeholders as to the future direction of the industry. Here we outline a few the key themes arising out of the conference.
Growth potential
Panellists were optimistic about the potential for Africa as a key data centre market, with scope to be the fastest growing market in the world, and the potential for key colocation and technology hubs.
It was noted that data centres produced US$73bn in revenue globally, but that only US$2.44bn of this came from countries in Africa. It was reported that the continent has more consumers than the USA, but currently only as much data centre capacity as Switzerland. It is therefore thought to be a hugely underserved market, despite having the fastest growing and youngest population in the world (which will create unparalleled demand for data).
Of course, significant investment is needed (an estimated US$10m - US$12m per megawatt) to support such development and the supporting infrastructure (including grid and fibre), but the view among panellists was that there is sufficient demand.
Power / renewables
While there are problems with the current energy infrastructure and reliability in many African countries, we thought that there was a general consensus at the conference that Africa has the opportunity to leapfrog other regions due to its capacity for power generation.
While many regions in Europe are struggling to maintain sufficient power for their existing and planned data centres, a number of countries in Africa have the potential to create enough green energy (such as hydro power) to support a vibrant data centre sector. Moreover, we are already seeing a number of energy service companies (ESCOs) in various African markets who can support the provision of power by offering long-term fixed energy prices and sustainable sources.
International investment
There was hope at the conference that, once inflation and interest rates settle in Europe and the US, and with increased competition for viable digital infrastructure investments in such markets, we will see renewed interest in the continent and sector for international capital. For example, a number of high-profile investments (such as Equinix’s acquisition of MainOne and Digital Realty’s acquisition of Teraco and investment in iColo) already demonstrate that there is appetite from international investors.
Clearly a number of countries in Africa still present a currency risk for investors, but such risks are mitigated in a number of the francophone jurisdictions due to Euro pegging, and for those operators who have significant dollar or euro-based revenue (for example, those with hyperscale customers).
Digital infrastructure investments on the continent have not been immune from the same challenges faced elsewhere in the world (such as the mismatch in valuations and investor expectations, availability of capital, etc.), but - as with any jurisdiction - there are ways to structure transactions to bridge these issues, and many African countries do not face the oversupply issues seen elsewhere.
The North African countries face competition from southern European data centre hubs (such as Marseille), but the view at the conference was that recent trends in data sovereignty and the desire of government and enterprise customers to keep data on-shore are likely to encourage further investment into “local” data centres.
Regulation
Many commentators at the conference took the view that governments could be doing more to promote the growth of the sector in their countries. While we have seen telecoms regulations in a number of countries open up to allow for an active and competitive telecoms market, the same is needed for digital infrastructure and fibre.
Governments can also do more to make locating and constructing data centres quicker and more efficient, according to some at the conference:
- Due to complex land rights and local bureaucracies, there is often a significant delay in obtaining sufficient land rights and permits for the construction of data centres.
- One panellist spoke of a three-year delay to construction timelines due to disputes over land title.
Such issues can create a significant lag between customer demand and capacity supply, which is problematic for customers and operators alike. Those at the conference observed that governments that have done more to address these issues (such as creating free zones with simpler and transparent real estate rights) have seen an increase in data centre investment.
Hyperscale opportunities
It was noted at the conference that there is likely to be an increase in hyperscale presence in the continent, particularly due to Google’s Equiano cable and Meta’s 2Africa.
Significant activity is expected in coastal countries with cable branches, as the hyperscalers require their own capacity and will attract other enterprise and collocation customers. This in turn, it was said, will create opportunities for fibre deployment as connectivity and capacity is then extended further inland to other countries.
Some panellists at the conference questioned whether the hyperscale model can work on the continent in quite the same way as it has in the USA and Europe, but we are seeing other successful models, such as hyperscale colocation alongside carrier neutral enterprise and colocation services.
ESG
The ESG picture is the same in Africa as it is in all other jurisdictions, according to those at the conference. Data centres present significant opportunities for customers to improve their ESG footprints, as they benefit from economies of scale, with more efficient methods of power and cooling available than customers are likely to have access to if they house their own servers.
Data centres, it was observed, play a vital role in the continent’s digital future, and the importance of internet connectivity for social inclusion is clear.
Those at the conference were clear that operators must do more to move to more sustainable energy sources and improve efficiency in their data centres, and there is clearly a conscious effort to do so. As mentioned above, many African countries present opportunities for operators and ESCOs in this respect, due to the availability of clean energy. Technologies and know-how, such as the Open Compute Project’s open-source liquid cooling solutions, can help equip operators with the know-how needed to improve the ESG story.
It was noted at the conference that power consumption is only one part of the picture, and water consumption must also be considered, but again, this is not unique to the continent and similar issues are faced in other countries.
Final observations
The message at the conference was one of optimism and opportunity. There are clear challenges for the sector, particularly with respect to availability of capital, macro-economic risk and international investment, but speakers focused on the positives, and in particular, the level of demand for data centres on the continent, which is only likely to grow.
As more data centres are built, it is anticipated that this will have knock-on positive effects for the overall digital infrastructure of the continent (and investment opportunities), with the roll-out of more fibre, improved power supplies and improved cloud, SaaS, PaaS and NaaS sectors.
For more information on data centres and related financing, see the following Norton Rose Fulbright publications: