Africa’s power shortages threaten the development of data centres and the cost of running base stations
All this rolling out of complex mobile Internet services requires powerful local data centres to make it all work. Effective data centres need reliable power at predictable prices. There is a staggering power shortfall across the continent and prices will go up to cover future investment. With the one-year forecasts for oil putting it at over US$100 per barrel, the cost of servicing remote base stations will get significantly higher. Russell Southwood looks at the obstacles power sourcing is creating for the current round of telecoms and Internet investment and the findings of Balancing Act’s latest report, Data Centre Markets in Africa.
The upsurge in the launch of new data centres in Africa has come from three main directions. Large corporates (particularly banks) are understanding that the cost of business continuity and offsite operations is increasingly expensive and/or is not part of their core business. South Africa’s Standard Bank was openly saying out loud maybe it would look to attract other customers into data centre which tells its own story. Telecoms operators looking for new revenue streams want to be able to offer a menu of cloud services to corporates that has to have data centre to deliver it. These services include: virtualization (e.g., server, storage and desktop), software as a service (SaaS) and dynamic infrastructure services.
ARPU and margins on current voice services are decreasing, so mobile operators have started to launch services that require Internet connectivity. These services require data transfer via broadband access and large storage capacity, secured data hosting, fast access to hosted data, recovery and back up. Over the next five years, the ability to offer customers some unique value added service and increase speed to market using local storage capabilities will make a difference between winners and losers.
Lastly, in a competitive market there are many players and they all have to interconnect somewhere. Local IXPs pioneered the trail but everybody needs data “meet points” to simplify interconnection. If you have 50-100 players, they all need to be able to go to common “meet points” to be able to deliver traffic to each other without setting up that number of individual connections between each other.
So what’s not to like? Well, data centres are power hungry beasts and you do not want to be running them on “gen sets” for any length of time. Anyone who knows Africa knows that power unreliability is a constant feature and that even South Africa now has rolling “black-outs” (or should that read “load-shedding”, which is the current weasily, euphemism?).
The entire generation capacity (expressed in megawatts) of 48 countries in Sub-Saharan Africa is no more than that of Spain. A World Bank study identified that power outages in Africa are on average 56 days a year: imagine being in the country that is above that average. A significant amount of generating capacity is not in a suitable and usable condition and results in many firms having to operate their own diesel generators – at extremely high cost.
Around 20% of Africa’s installed power generation capacity is now emergency generation. Even to meet fairly modest energy generation targets, the continent needs to add a further 3,000 megawatts of generation capacity and this estimate predates the requirements of data centres. What’s worse is that if you take the example of one of the continent’s key economies, Nigeria, there is an estimated generated capacity deficit of 5,750 megawatts.
As one insider told us:” Electricity in Nigeria is in its worst ever shape. All around the country, the story is of low reliability and poor access to electricity. Diesel generators are the main source of power and analysts estimate that up to $8billion is spent annually by corporations and individuals on alternative sources of electricity.”
Worse still, the transmission networks are also all in poor shape and this affects the operating cost base of those mobile operators that have significant numbers of off-grid base stations. One of East Africa’s larger mobile operators has 2,500 base stations in one country and 500 of these are off-grid. That’s a staggering US$30 million cost line every year and it’s not just the cost, there’s also all the management attention that goes into making sure all those base stations are fully fuelled and that the generators are maintained and operational. In places like Sudan, they fly diesel into some off-grid base station locations and in Liberia, diesel goes by boat and hand cart to some locations. And there are probably 500 off-grid base stations in each country in this situation.
The latest report from Balancing Act – Data Centre Markets in Africa - covers the whole continent but has detailed country profiles for the main 11 data centre markets: South Africa, Egypt, Tunisia, Morocco. Algeria, Kenya, Mauritius, Nigeria, Ghana, Senegal and Angola. It is the product of seven months work by three researchers, including international data centre expert Pablo Diantina. It analyses the current environment, key trends, business issues, opportunities and future developments in the market.
It assesses the "shared" data centre landscape by country and by facility type. Altogether, the reports highlights 108 "shared" data center facilities in 11 African countries. The report also answers the question "where to build new data centres in Africa?" by reviewing ideal data centre locations, their economic and political status, available power grid and access to bandwidth from an investors' perspective. This includes analysis for each selected country with relevant market segmentation, locations' strengths and weaknesses, key builds and major new planned builds in 2011.
A chapter dedicated to pricing and another one focused on market drivers bring extra ammunitions to potential investors. The study also provides an African Data Center contact directory, a directory of companies engaged in selling services into the African data centre sector, 66 tables packed with detailed market indicators.
The report is 122 pages long and has over 100 charts, tables and maps plus two excel spreadsheet contact directories. To get more details, click here:
There is a link to a full contents listing at the bottom of this page.
There is also a forthcoming report on a related topic in terms of power supply. In February, Balancing Act will publish the long-awaited Energy for Cellular Base Stations. To get more details, go to:
Balancing Act’s Web TV Channel presents:
* Jeremy George, COO, ForgetMeNot Africa on its SMS to e-mail service.
* Herman Heunis on social networking with MXit.
* Christophe Fichet of Faskin Martineau on the state of regulation in Africa (in French).
* Reg Swart, Fundamo on M-Money in Africa.
* Franck Salin of Afrik.com on its web strategy (in French).
There are 69 clips in both English and French that contain news and information that does not appear in our e-letter or on our web site.