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The US development corp is betting $300 million on Africa’s rising demand for data storage

REUTERS/Sigtryggur Ari
Servers for data storage
Published

The US International Development Finance Corporation has joined a push into Africa’s rapidly growing data storage market with a $300 million investment in the expansion of Africa Data Centres, the data storage arm of Johannesburg-based Liquid Telecom.

Zimbabwean telecoms billionaire Strive Masiyiwa, whose Econet Group controls Liquid, has already staked the potential of investment into data centers in South Africa, Kenya, and Nigeria. The African region’s data center market, which currently accounts for just 1% of global available capacity, is expected to grow to $3 billion by 2025, building on a robust growth rate of more than 12% per year.

The DFC now wants its $300 million investment to go into “acquisition and expansion of existing data center assets” in Kenya and South Africa as well as to facilitate ADC’s “entry into new markets” in the region. This will be through development, construction and operation of data centers.

Earlier this year, Masiyiwa confirmed Liquid and ADC had already “secured land to build the largest data centers in Ghana and Nigeria,” making the West African region a focus area for data center investment and expansion.

Africa Data Centres
Africa Data Centres’ recently acquired Samrand data centre facility in Johannesburg, South Africa

The Trump administration set up the DFC in 2018 to replace the four-decade old OPIC. One of the biggest changes with DFC was that it is allowed to make equity investments for the first time rather than just grants or aid. This year DFC has made several e-commerce and telecoms investments. This latest ADC investment is part of a wider $2.1 billion outlay for the quarter in various developing countries.

Many observers believe DFC’s main purpose with a $60 billion budget was to counter China’s influence on the continent, even though their respective approaches to development finance are quite different.

As African countries digitize and move to adopt cloud computing as well as co-location and centralized networking, the regional data center market has become an important investment case as a crucial arm of internet infrastructure on the continent. Earlier this year, London-based private equity firm Actis put $250 million into the acquisition of a controlling stake in Nigeria-based, Rack Centre.

There is also growing localization of data centers with companies such as Absa Banking group bringing back data storage from the UK after Barclays divested from the Africa banking group.

The growing investment trends in Africa’s data center markets appear driven by its low cost structure compared to other markets, especially in light of findings in the Data Center Cost Index 2020. The index identifies Johannesburg and Nairobi among the least ranked expensive cities for construction of data centers in an index topped by Zurich, Tokyo, and Silicon Valley.

“There are four large scale data centers due to be developed in 2021 close to Johannesburg (in addition to) many feasibility studies being undertaken in Cape Town. In Nigeria, there are two large data centers scheduled for completion in 2021,” notes Turner and Townsend in the Data Center Cost Index 2020 report.

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