Berkshire-Backed Teraco Plans $250M Africa Data Center

Loni Prinsloo (Bloomberg) -- Teraco Data Environments Pty Ltd., a data center provider backed by Berkshire Partners, is investing $250 million to build Africa’s largest facility on a single site, its Chief Executive Officer Jan Hnizdo said in an interview Monday.

The continent’s biggest data center operator is starting construction on the facility in South Africa’s economic hub, Johannesburg, as it prepares to capitalize on the growing demand for internet and cloud-based services in the region. The development will be built in two phases through funding support from shareholders and its main lenders.

“We are building this latest data center to hyper-scale, as we expect additional large cloud providers will want to deploy here to ensure a good user experience for the growing African market,” Hnizdo said.

Global technology giants are competing to establish affordable and efficient ways to extend high-speed internet and data storage across the continent, where demand is picking up as hundreds of millions of people start gaining access to web services.

Amazon.com Inc., Huawei Technologies Co. and Microsoft Corp. have been among companies investing in data center capacity in African countries in recent years. Other firms investing include Liquid Telecom that raised more than $300 million recently for data centers, and Actis that will invest $250 million in the sector.

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Although Africa’s data center capacity has doubled in the past three years, it still accounts for less than 1% of the global total, according to data from Xalam Analytics. The research firm expects demand for African data centers to grow three times faster than supply.

Teraco is investing at a time when the outbreak of Covid-19 is accelerating digital take-up, as companies switch to remote working and content streaming amid government lockdowns to contain the pandemic.

The new facility will be the seventh data center development by Teraco, that also operates in the coastal cities Cape Town and Durban.

“South Africa is strategically located at the tip of the African continent and as a result, is positioned as a technology and data center hub for sub-Saharan Africa. This is further underpinned by growing undersea and fiber connectivity to the rest of Africa,” Hnizdo said.