South Africa’s booming data centre market

South Africa’s data centre market is booming, with major players like Teraco, Africa Data Centres, Open Access Data Centres, and Vantage Data Centres heavily invested in the space.

However, they could soon face scrutiny from the Competition Commission, which has been asked to investigate anti-competitive behaviour in South Africa’s data centre market.

According to a market valuation report from Mordor Intelligence, the South African data centre market is expected to generate $471 million (R8.6 billion) in revenue in 2024.

It forecasts that the market will be worth roughly $1.1 billion (R20.2 billion) by 2029.

According to the report, Telkom’s Business Connexion (BCX), Equinix, NTT Data (formerly Dimension Data), Teraco Data Environments, and Vantage Data Centres are leaders in the South African data centre space.

“The South Africa Data Center Market is moderately consolidated, with the top five companies occupying 48.86%,” it says.

However, it notes that other significant players include Africa Data Centres, Digital Parks Africa, MTN, RSAWEB, Open Access Data Centres, and Xneelo.

South Africa’s competition watchdog could soon probe the consolidated market power of the biggest players.

In its 2024 National Policy on Data and Cloud, published on 31 May 2024, the Department of Communications and Digital Technologies (DCDT) proposed that the Competition Commission investigate the space.

It also recommended reviewing and adapting the Competition Act concerning the cloud and data market.

“The Competition Commission shall conduct studies in the data centre and cloud services markets to identify potential anti-competitive trends and behaviour, and where applicable, identify proactive preventative measures to ensure a fair and competitive market,” it said.

“The Competition Commission shall consider reviewing and potentially augmenting the Competition Act in relation to the data and cloud market, where empirical evidence indicates that the current law is inadequate to address competition issues in these markets.”

Africa Data Centres breaking ground on 12MW solar farm in the Free State

Major players in the South African data centre market have invested billions in building their facilities and other aspects, such as renewable power supplies, to reduce their demand on the national grid.

Regarding their power consumption, data centres are heavy power users. Mordor Intelligence estimates South African facilities’ combined critical IT loads amount to 434.86MW.

This is expected to grow to 828.93MW by 2029.

To reduce their carbon footprint and dependence on Eskom, players like Africa Data Centres and Teraco have moved to build solar power facilities to supply their data centres.

In April 2024, Africa Data Centres announced that it had broken ground on a 12MW solar farm in the Free State in collaboration with DPA Southern Africa.

It should be noted that the 12MW plant is only the first phase, which will provide power to its Cape Town data centre.

Further phases are planned to power its Johannesburg data centre facilities.

Africa Data Centres CEO Tesh Durvasula noted that the company had also earned an ISO50001 certification for its data centres.

“Data centres worldwide face scrutiny for their reliance on grid power and renewables, and Africa is no exception,” he said.

“Africa Data Centres is actively addressing this issue by generating renewable energy, alleviating strain on the local grid.”

A few months earlier, Teraco announced that it had secured its first grid capacity allocation from Eskom, allowing it to begin construction on a 120MW utility-scale solar power plant in the Free State.

Teraco’s DB1 data centre.

The grid allocation means Teraco can connect the solar plant to the national grid and wheel power across Eskom and municipal networks to its facilities.

Once fully operational, the plant will produce an estimated 338,000MWh of electricity each year.

Teraco CEO Jan Hnizdo said the 120MW facility is only the first phase of the company’s long-term renewable energy commitments.

He added that South Africa’s solar resources will provide a competitive advantage for data centres in the country.

Hnizdo added that South Africa’s solar resources are a source of competitive advantage for data centres in the country.

Digital Reality acquired a majority stake in Teraco in January 2022 that valued the data centre provider at $3.5 billion (then-R56 billion).

The data centre provider has been busy in recent months, announcing significant upgrades to its Cape Town 2 (CT2) data centre in November 2023.

This was just before it announced that it had completed a substantial upgrade to its Durban (DB1) facility.

The Durban upgrades effectively doubled the facility’s capacity to 2.2MW of critical power load and increased its footprint to 5,800m².

It now offers more than 700 racks for customers to deploy network equipment.

The upgrades to CT2 include a 30MW expansion of the hyperscale facility in Brackenfell, Cape Town.

Once complete, CT2 will comprise 73,000m² of building structure serviced by 90 megavolt-amperes of utility power supply.

It will also feature double the hall space and 18,000m² of deployment space. The entire facility will support an IT load of 50MW.