Equinix halts IX Africa data center investment
Leading data center company Equinix has reportedly halted its plans to invest in IXAfrica Data Center, an operator based in Africa. The proposed investment, valued between $150 million and $200 million, included an option for Equinix to later acquire the East African business, according to a report by The Tech Capital.
The investment was intended to support the development of a second IXAfrica campus, which would have added an additional 50 MW of capacity.
However, recent discussions have been dropped.
The 19MW East African hyperscale data center
Currently under construction, IXAfrica’s campus spans a 17,300 square meter plot along the Nairobi-Mombasa road and consists of three data center buildings. Upon completion, it will provide nearly 19 MW of capacity across 3,564 racks, with a total white space of 6,621 square meters.
IXAfrica’s Tier 3+ facility is reportedly “hyperscaler ready,” meeting stringent specifications from major tech companies like AWS, Google, Microsoft, and Oracle, with an uptime of 99.999%. IXAfrica has partnered with Schneider Electric, which announced its involvement in the project and plans to build the first hyperscale data center in Africa.
Founded in 2021 by Guy Willner and Clement Martineau, IXAfrica has secured a $50 million investment from Helios Investment Partners. Willner, the group’s chairman, has a successful history in the data center sector, notably selling IXEurope to Equinix for $555 million in 2007.
Equinix remains committed to Africa
Despite Equinix’s withdrawal from this specific project, it remains committed to Africa. The company has been actively expanding its presence in Africa, announcing a $160 million investment in Johannesburg in December 2022 and acquiring West African data center provider MainOne for $320 million earlier that year. Bloomberg reported that Equinix plans to invest $390 million in Africa to build new data centers in South Africa and West Africa, aligning with its global strategy to enhance digital infrastructure in key markets. Africa is recognized as a strategic hub for digital networks, and Equinix’s acquisitions and investments in the region are poised to enhance local businesses’ ability to adopt hybrid multi-cloud architectures while connecting to Equinix’s extensive global network of over 10,000 customers.
Data center growth for Africa
Africa’s data center market shows significant growth potential. Revenue is projected to grow at a compound annual growth rate (CAGR) of 12% from 2019 to 2025, reaching $3 billion. The Africa Data Centre Association (ADCA) anticipates data center investments in Africa to rise from $2 billion in 2020 to $5 billion by 2026. The African data center construction market, valued at $763.7 million in 2022, is expected to reach $1.4 billion by 2028, with a CAGR of 10.7%.
Long term optimism
At the recent Hyperscalers Convergence Africa conference, speakers emphasized how the global growth of colocation hyperscalers is beneficial for Africa, driving significant investment in advanced data center infrastructure. As these large-scale operators expand globally, they often choose regions with increasing digital needs. For Africa, this translates into more investment in cutting-edge data center infrastructure, which can enhance local internet services, connectivity, and overall technological capabilities.
While the long-term growth potential is evident, Africa’s digital infrastructure faces operational challenges that could complicate investments. Increased fuel and power costs have strained operational budgets, making it harder for data center operators to maintain competitive pricing. Additionally, foreign exchange (FX) fluctuations create hurdles for international investors, complicating financial planning and cost management.
Countries like Nigeria are grappling with rising fuel costs alongside FX constraints. The Naira has weakened to around 1670/$1 from 461/$1 a year ago, while petrol prices have surged to N860 at subsidized government-owned stations, with some vendors selling for up to N1000 per liter. Diesel and petrol-powered electricity costs have also increased, nearing N500/kWh from N300/kWh and N200/kWh a year ago. Meanwhile, Ghana is experiencing a 3.02% increase in electricity tariffs and a 1.86% hike in water tariffs for the third quarter of 2024, according to Tsonam Akpeloo, the Greater Accra Regional Chairman of the Association of Ghana Industries (AGI).
Creating enabling environments
This platform will continue to emphasize the importance of creating enabling environments for capital, whether foreign or local. The gaps in digital infrastructure in Africa present unique opportunities for operators, investors, and regulators. Key lessons for Africa include the importance of strong governmental support, investment in education and skills development, and fostering collaboration and innovation among industry stakeholders to harness technology’s potential for economic growth. The work remains in addressing these operational concerns, to sustain growth and attract investment in Africa’s digital infrastructure.
