Cloud technology in Africa: who is doing what, where? Teraco, Raxio, Rack Centre…

By Quentin Velluet
Posted on Monday, 26 July 2021 08:40

A computer technician works among servers.e © Getty

As bandwidth doubles in just a few years on the continent, companies and governments are increasingly able to rely on cloud computing to cut costs. A new wave of investment - originally centred on South Africa and now spreading across the continent - is seeing domestic African players compete with global heavyweights.

Storing company data outside company walls is not yet seen as a natural or easily accessible choice by African decision-makers.

This is the conclusion of a study conducted by the international consulting firm EY on dematerializing (or cloud computing) in Africa between September 2020 and March 2021. The study examined 89 companies that made a minimum turnover of €10m. Although 75% of the panel surveyed confirmed that they use the cloud, users are generally satisfied with just employing the basic aspects of this technology.

Office tools rather than data hosting

Using software as a service (SaaS) – such as Microsoft 365, which specialises in office tools, or the SAP customer management software – is more common than remote data hosting, which requires defining real-long term strategies. In this respect, private companies are more advanced than public administrations.

According to the document produced by EY, there are several reasons why cloud solutions are not being readily adopted. “The first challenge facing companies in adopting the cloud is actually an external factor: regulation,” say Moez Braham, Oussama Chibani, Jean-Pierre Mendy and Trésor Nkanga, the four EY consultants who authored the study.

For 58% of the companies surveyed, either unclear or non-existent regulations are the main obstacle to cloud adoption, ahead of data security and inadequately robust network infrastructure.

An accelerating cloud market

In Africa, bandwidth capacity doubled between 2017 and 2020, according to data provided in 2020 by the specialist firm Xalam Analytics for the Africa Data Centres Association (ADCA). According to the same source, which believes that the market has “entered a phase of accelerated growth”, 85 companies operate in this sector and manage a total of 80 data centres across the continent. Most of them are located in South Africa, which currently accounts for 70% of the continental market.

Although companies remain hesitant about using cloud services, international investors are nevertheless enthralled by its wide range of functions and the internet’s growing influence. As such, they are betting on widespread adoption in the medium term and are no longer hesitant to invest hundreds of millions of dollars in major infrastructure players such as Africa Data Centres, Rack Centre or PAIX.

Large investment funds at the helm

The first of these is the sector’s pioneer, South Africa’s Teraco. Its three major data centres in Durban, Johannesburg and Cape Town were recently hooked up to the ACE undersea cable, to improve access to European markets.

Africa Data Centres is majority-owned by the operator Econet, which is owned by Zimbabwean billionaire Strive Masiyiwa. It raised more than $300m in December 2020 from institutional investors such as the IFC and the UK’s CDC.

At the same time, the British fund Actis took control of Nigeria’s Rack Centre by injecting $250m into the company, which currently has one data centre in Lagos. The company led by Ayotunde Coker has just announced plans to double the capacity of its infrastructure in Lagos. The project is expected to cost $100m and be completed by 2022.

Raxio Group, which received $48m in funding from asset manager Meridiam at the end of March, announced in early July that it would be establishing a data centre in Mozambique. The group is also present in Uganda, Ethiopia and the DRC.

In Kinshasa, the infrastructure of 400 server racks will be inaugurated in June 2022. The first Tier III data centre (one of the highest international standards) near Maputo, the Mozambican capital, is also expected to be operational by 2022. The US company led by Robert Mullins has also stated that it will soon be investing in Côte d’Ivoire and Tanzania.

Serious challengers

New operators are emerging alongside them. Some are from the telecoms sector, such as Sonatel in West Africa, TelOne in Zimbabwe and Angola Cables. In addition to managing submarine internet cables, the latter also operates a Tier I data centre in Luanda.

Others, such as Côte d’Ivoire’s West Africa Data Bridge – also present in Benin -, Egypt’s GPX, Morocco’s N+One and Nigeria’s Galaxy Backbone were created from scratch. Finally, some players are offshoots of diversified groups. This is the case for Tunisia’s Dataxion, which was created by Unipack, itself a branch of the Poulina conglomerate, and founded in 1967 by Abdelwahab Ben Ayed.

The latest sign that the African cloud craze is finally taking hold is in South Africa. Amazon Web Services (AWS), which already has offices in Cape Town dedicated to developing new cloud services, announced in April that Amazon would be setting up its African headquarters on a 70,000 square metre site at a cost of 4bn Rand (over €230m). The project is being challenged locally, even though it is expected that it will create more than 5,000 direct jobs.

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