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Data centres are fast becoming one of Africa's most dynamic investment opportunities, underpinning the continent's digital transformation. Last month, the Herbert Smith Freehills Kramer Africa Practice hosted a panel discussion with legal and industry experts to explore the opportunities and challenges shaping this sector.
Africa is often perceived as a single, high-risk market. In reality, it comprises 54 unique jurisdictions, each offering distinct opportunities for bankable projects. While Western investors remain cautious, pioneers from India, China and the UAE are actively investing in African data centres.
Despite Africa accounting for 20% of the world's population, it hosts less than 1% of global data centre capacity. Most demand is currently met offshore, but the need for onshore facilities is growing rapidly.
The discussion highlighted five key investor profiles:
- Demand-based investors – Build or acquire centres when demand exists (e.g., hyperscalers, cloud providers)
- Data centre developers / operators – develop and operate new data centre facilities
- Real estate investors – Develop land on a PropCo/OpCo basis to maximise returns
- Private capital investors – Use YieldCo/DevCo models to fund ongoing development
- Financiers – Support projects at various stages, from development to operations.
Operators in the region recognise the demand for data centres and are focused on:
- Matching supply with demand – Operators must develop data centres ahead of demand, as construction takes around 18 months. The African market has not matured to the point where hyperscalers pre-order two years in advance. To manage this lag, operators build in phases, controlling outflows and reducing risk. Current priorities include establishing credibility with key investors
- Power generation – Data centres have growing power requirements, particularly with AI adoption driving higher cooling needs. Despite this, operators are confident about securing power. Grid connections are arranged at the start of development, supported by government backing, as data centres are considered critical infrastructure (e.g., large facilities in South Africa remain unaffected by nationwide load-shedding)
- Security – Location and infrastructure are critical. A data centre must have good road access, be safe and secure, and include back-up power systems such as generators. Facilities must meet world-class standards to remain attractive to top-tier clients, ensuring longevity and competitiveness on a global scale
- Special interest zones – Tax incentives and access to foreign currency (such as US dollars) are essential for financial viability and attracting investment
- Human capital – Brain drain remains a challenge, with high demand for skilled mechanical and electrical engineers in Western markets. Proximity to talent hubs or airports is vital to ensure easy transport of personnel and maintain operational efficiency.
Large-scale centres across all 54 jurisdictions are impractical. Leading operators are adopting a hub-and-spoke model, focusing on South Africa, Kenya, Nigeria, Morocco and Egypt. Emerging opportunities include Ethiopia, Côte d'Ivoire, Senegal and Angola - coastal nations with subsea cable landing stations, strong economies and reliable power.
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