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How a targeted FDI attraction strategy can draw data center investments into emerging economies

Emerging economies with fast-rising internet penetration rates can attract foreign direct investment in data centers to power their rapid digitalisation. An additional 1 billion internet users by 2027, primarily from the world’s least developed countries, will redraw the current global connectivity map. Countries with a targeted foreign direct investment attraction strategy, based on the liberalisation of the telecommunications sector and a robust data protection regime, will be the first to reap the benefits of the wave of data infrastructure investments in the emerging world.

Africa offers a glimpse into the opportunities for emerging economies to attract data center investments

Increasing from 1% in 2000 to 30% today, Sub-Saharan Africa has the world’s highest growth in Internet penetration. In addition, under the pressures of the COVID-19 pandemic, Internet use on the continent increased by 23% between 2019 and 2021 alone. Nevertheless, a coverage gap of over 840 million people remains.

Most of Africa’s data is stored in data centers elsewhere, such as in Europe, resulting in a 180-millisecond delay for information to reach the European continent and back. However, a new wave of investments in data centers is bringing the internet closer to African users and laying the foundations for a booming digital economy.

Data infrastructure is coming to Africa

According to Research and Markets, the African data center market saw investments of USD 2.6 billion in 2021 and it is projected to more than double to USD 5.4 billion by 2027. South Africa, Kenya, Egypt, Nigeria, and Ethiopia are set to receive the lion’s share of data center investments coming to Africa.

In the fourth quarter of 2020, Teraco opened doors to its 60,000 sqm facility—Africa’s largest stand-alone data centre – in Johannesburg, South Africa. Since 2021, Africa Data Centres has been strategically expanding its capacity in Johannesburg to reach 100MW of IT load. Equinix plans to augment its current footprint on the African continent with a USD 160 million investment in a new data center facility in Johannesburg. Equinix is already present in Nigeria, Ghana and Côte d’Ivoire.

In January 2021, Vodafone-owned Safaricom announced a $100 million investment in its first data center in Addis Ababa, Ethiopia as part of a larger effort to expand its operations in the country. Djibouti’s Wingu Africa, America’s Raxio, and Cambodia’s RedFox have also announced plans to build and operate data center in Addis Ababa.

Data center investments are booming in Africa due to the continent’s rapid growth in Internet penetration and digital economy. But the ability of countries to attract foreign direct investment in data centers is determined by three key drivers.

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