Biggest challenges for South African hosting companies

Absolute Hosting says the biggest challenges it faces in South Africa are overall power costs, associated costs to ensure no power interruptions, and connectivity interruptions.

Despite the extensive load-shedding suspension in 2024, many areas of the country are still subject to load reduction. This, combined with unplanned power outages, means backup power costs significantly impact hosting providers’ operating costs.

MyBroadband asked several hosting companies about the biggest challenges they face regarding their operations.

Absolute Hosting managing director Jade Benson highlighted power costs as a significant obstacle hosting providers must overcome.

“Power costs are the biggest challenge affecting Hosting providers in South Africa, particularly as our business model requires 24/7 uninterrupted power,” said Benson.

“Unlike traditional brick-and-mortar businesses, which operate during set business hours, we don’t have the luxury of closing shop after hours.”

The costs associated with backup power increase rapidly with demand reduction mechanisms like load-shedding and load reduction.

“Data centre providers are expected and required to increase capacity to cater for these outages,” said Benson.

He added that hosting providers like Absolute Hosting must either absorb these costs or push price increases to customers.

To this end, Benson said Absolute Hosting tries its best to absorb the costs.

He also highlighted interruptions to connectivity services as a significant concern for hosting providers.

“These interruptions have a direct impact on the cost of operation as we have to plan for and anticipate failures directly relating to connectivity outages,” said Benson.

He said fibre outages are relatively common, most of which are attributed to damage linked to construction and sabotage.

“Because of this, we have had to design our network with multiple layers of redundancy to ensure that we remain online all the time,” he added.

Undersea cable breaks also directly impact international connectivity and, by extension, the operations of South African hosting providers.

MyBroadband also asked Afrihost and 1-Grid about the challenges they face, but they hadn’t answered our questions by publication.

The power challenges Benson highlighted were a contributing factor to the government’s decision to abandon its data centre plans.

The Department of Communications and Digital Technologies (DCDT) published its National Policy on Data and Cloud in May 2023.

It highlighted several key aspects that the DCDT believes would hinder its entrance into the cloud and data centre space, noting that the country is already home to data centre investors and cloud providers with global reach and experience.

South Africa’s data centre industry is booming, and the DCDT said the government has limited resources and must balance its finite financial resources.

“The prohibitive costs associated with building, running, and maintaining these facilities could render them unsustainable and impractical, potentially becoming white elephants in a few years,” it said.

Moreover, the cost of installing backup power solutions to prevent disruptions resulting from the country’s electricity supply challenges was high.

“Given that data centres operate 24 hours a day and consume vast amounts of electricity, reliance solely on the national grid may be insufficient,” the department said.

The policy document also highlighted the challenge of the DCDT competing with established data centre and hosting providers for technical skills with its limited budget.

The new policy represented a complete about-face from the DCDT’s initial plans.

In April 2021, former communications minister Stella Ndabeni-Abrahams published a proposed National Data and Cloud policy, calling for the country to establish a High-Performance Computing and Data Processing Centre (HPCDPC).

The policy proposed that the HPCDPC would consolidate existing publicly funded data centres.

“The HPCDPC will leverage the existing computing capacity and technical capabilities of the CSIR and SITA, and will operate in conformance with international best practice,” it said.

“The HPCDPC shall have access to the excess capacity of publicly funded data centres of entities such as Sentech and Broadband Infraco, Eskom and Transnet.”

The document outlined the HPCDPC’s roles, including providing cloud services for state entities, national departments, provinces, municipalities, metros, state-owned companies, universities, and research centres.

All government data would be stored in the facility.

After a period of public consultation, the DCDT abandoned its plans to become a player in the cloud market and instead focused on how it could partner with established providers.