A new report by Xalam Analytics paints a promising picture of Africa’s data center market, highlighting a boom fueled by strong mobile infrastructure, surging data traffic, and growing cloud services.
In a press summary obtained exlusively by Africa Hyperscalers Media, “The State of the African Data Center Market,” Xalam Analytics identifies several key trends driving this growth. Africa boasts a robust digital infrastructure with 700 million broadband connections, a majority utilizing faster technologies like 4G, 5G, and fiber. Additionally, over 30 submarine cables connect the continent, with about 10 more planned by 2027. This strong foundation provides the perfect platform for data center expansion.
Secondly, enterprise digital transformation is accelerating across Africa, with cloud services emerging as the fastest-growing segment in the ICT market (excluding mobile money). This surge in cloud adoption reflects a growing appetite for digital solutions among businesses. The potential for AI deployment further bolsters the demand for data centers, as massive data requirements are anticipated across the continent.
However, the report acknowledges temporary setbacks caused by the COVID-19 pandemic. Data center construction slowed down, with annual growth dropping to 12% in 2023 compared to the previous average of 30%. Additionally, several macroeconomic factors pose challenges. High inflation, reaching 30% in some regions, along with 50% currency devaluation against the US dollar, threaten project costs. Power grid instability in countries like South Africa and Nigeria further hinders development. Finally, a 40% slump in foreign direct investment (FDI) since 2021, with Western multinationals scaling back or exiting some markets, adds another layer of complexity.
Despite these hurdles, the future looks bright for African data centers. The report projects a rapid increase in data center supply, with capacity growing 20% annually to bridge the current demand-supply gap. Over 60 new data centers have been built in Africa in the past five years, with a combined cost of $2.3 billion. African cloud and data center providers are expected to invest a significant $3.5 billion over the next five years to expand capacity. This new wave of data center construction will surpass all previous build-outs and extend beyond traditional hubs like South Africa, targeting next-tier markets and smaller secondary markets.
The report also highlights AI as a major growth driver for African data centers in the coming decade. However, access to abundant, cheap, and clean power remains a limiting factor, with only a few markets meeting this crucial criterion.
The report concludes with a positive outlook, forecasting a 65% growth in Africa’s data center capital expenditure (CapEx), exceeding the $1 billion mark. Overall, Africa’s data center market presents a compelling story of resilience and growth, driven by strong mobile penetration, cloud adoption, and the emerging potential of AI. While macroeconomic challenges persist, significant investments are poised to expand data center capacity and propel the continent’s digital transformation.
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