Africa and the infrastructure boom

Africa and the infrastructure boom

28 February 2020 | Natalie Bannerman

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It should come as no surprise that content providers like Facebook and Google have their sights set firmly on Africa over the next few years.

With a population of approximately 1.2 billion, this developing connectivity industry has the kind of addressable market that infrastructure providers dream about. 

According to report by EY, How can bold action become everyday action? EY Attractiveness Program Africa, foreign direct investment (FDI) attracted $75.5 billion in capital to the continent. Of that, telecoms, media and technology (TMT) accounted for 11.9% in 2018.

The infrastructure piece of that figure has in turn continued to grow. “Investment in telecom infrastructure – about $15 billion a year – has also grown massively, with a 33% CAGR (compound annual growth rate) from 2003 to 2008.”

The report notes: “It is probably more critical in Africa than any other region in the world, given Africa’s infrastructure deficit, and the means it provides to connecting people, thereby providing them a means to earning a living.”

Speaking to Guy Zibi, founder and principle at Xalam Analytics, he said: “The need to address under-served demand and fill out digital infrastructure gaps is driving a lot of the investment we see. Around than 70% of the population in sub-Saharan Africa is still not connected to a broadband network; 90% or so are not connected to a network with 4G speeds or above, and around half of the population is even outside the reach of a 4G network. Terrestrial fibre gaps remain significant, and there’s a critical need to continue to densify metro networks beyond the capital cities.

“Outside of South Africa, the content-hosting data centre infrastructure also needs to be boosted to round up a well-functioning internet market and enable the development of local digital services. All these factors are driving demand for additional investment in infrastructure.”  

One such area of this much needed infrastructure is submarine cables. Google’s Equiano subsea cable system that runs along the west coast of the continent marks the company fourteenth subsea investment globally. To be built by Alcatel Submarine Networks (ASN), Equiano system will deliver 20 times more capacity than its predecessor, the Dunant cable. In addition, it will become the first subsea cable to incorporate optical switching instead of traditional wavelength-level switching.

On the data centre side of things, Google has yet to invest in any infrastructure on the continent, causing industry critics to question whether or not anything is in the works for when Equiano goes live.

Similarly, Facebook has no data centres on the African continent, but it is rumoured to be developing a brand-new subsea cable system, the Simba Cable.

The soon-to-be-announced system will form a ring around the continent, connecting its eastern, western and Mediterranean coasts. Facebook is rumoured to be in development with MTN and Vodacom on this project, another sign of potential data centre investment in the region in the future.

The move comes as the continent aims to drive down its bandwidth costs and “making it easier for the social media giant to sign up more users” according to reports from the Wall Street Journal.

What Facebook has done, however, is partnered with Airtel Africa and the Bandwidth & Cloud Services Group (BCS) in 2018 for the deployment of 800km of optical fibre in north-west Uganda.

In 2019, Microsoft launched two data centre regions in South Africa, one in Cape Town and the other in Johannesburg. Though it has plenty of subsea assets in the US, Europe and Asia it has yet to build its own cable to Africa, either as a fully funded private system or as part of a consortium.

Following in Microsoft’s steps Amazon has also set its sights on South Africa with the launching of three infrastructure regions – data centres – in the country, due to go live in the first half of 2020. The news adds to the company’s existing points of presence in Cape Town and Johannesburg.

Though Amazon also has no submarine cables connecting the continent it does have one rather large differentiator in the recent announcement that it is to launch over 3,000 satellites to offer high-speed broadband services.

Though not Africa specific, these 3,236 low Earth-orbit (LEO) satellites will deliver high-speed, low-latency internet service to any point in the world, including rural areas which are often difficult to reach using subsea and terrestrial fibres.

A clear of example of this is the collaboration between the Uganda Communications Commission (UCC), Intelsat and Gilat in the IntelsatOne Mobile Reach Solar 3G project, to deliver high speed broadband via the Intelsat 37e satellite and Gilat’s SkyEdge II-c multi-application platform. The Ugandan government aims to achieve 100% coverage of its rural areas this year.

Away from the content providers, Algeria recently inaugurated its ORVAL subsea cable connecting the country to Valencia, Spain. Additionally, the DARE1 subsea system has begun installation and MainOne’s cable landed in Senegal back in August.

On the data centre side of things, Africa Data Centres announced plans to build a new facility in Johannesburg; SEACOM partnered with Raxio to launch a new carrier-neutral data centre in Uganda; while icolo expanded its data centre presence into Nairobi.

Zibi says that although all areas of telecoms infrastructure are important, the predominate need is the connectivity side of things. “African countries essentially need to build 4G (and 5G) networks and connect 200m-300m people to them over the next five years. This, in turn, will drive demand for terrestrial fibre networks, satellite, etc,” he says. “We like the data centre space as well, because the needs are enormous and the sector is just emerging. But the ultimate attractiveness from a business standpoint will depend on the nature of competition, regulation and business models in different markets, and there will be key differences across countries.”

The World Bank last year published Connecting Africa Through Broadband – A strategy for doubling connectivity by 2021 and reaching universal access by 2030. This report says that, in order to provide universal access to broadband, $100 billion investment is required.

Additionally, Africa needs 250,000 new 4G base stations and at least 250,000km of new fibre across the region, as well as satellites, Wifi and other innovations to reach an estimated population of nearly 100 million who live in remote rural areas.

Add to this the need for digital skills and local content development as well as adequate policy and regulation frameworks, and it means that the industry at large needs to come together in order to future-proof Africa for the digital future.

In response to this, Capacity Media and BroadGroup are launching Digital Infra Africa, the first and only digital infrastructure event for the continent. The goal of the event? Simple: advance projects and investments in African infrastructure by bringing together all areas of the African telecoms sector under one roof. It will feature Capacity Africa, Datacloud Pan Africa, and Subsea Africa, with the addition of inclusion and leadership forums.

Head over the Digital Infra Africa website and join us this April as Capacity and BroadGroup take on the task of #ConnectingTheContinent.