Introduction
Data centres are dedicated spaces that house IT equipment used to store, process, and manage large volumes of data. They vary in scale, with the architecture and operation of hyperscale data centres setting them apart from enterprise (medium) data centres. Hyperscale data centres are significantly larger require substantial investments, and are usually the playground of big IT giants like Oracle, IBM, Microsoft, Google, Amazon Web Services, Huawei, Meta and Apple, to mention but a few. Hyperscale data centres are, therefore, designed to support the demands of cloud computing, big data and other high-volume computing tasks with the capacity to support the operations of cloud service providers and to power popular social media platforms and e-commerce platforms.
According to Research and Markets, the African data centre market by investment was valued at USD 2 Billion in 2020 and is expected to reach USD 5 Billion by 2026, growing at a compounded annual growth rate of 15% Kenya has made significant strides in its digital infrastructure, including development of a number of enterprise data centres like the Nairobi Data Centre, the Konza National Data Centre and iXAfrica to support the growing tech industry and digital economy. However, there are no hyperscale data centres in Kenya and currently, only South Africa has an operational hyperscale data centre in Africa.
Legal and regulatory framework
Under the National Information Communications and Technology (ICT) Policy Guidelines of 2020, the Kenyan government undertook to develop guidelines for current and future data centres. However, no such guidelines have been developed to date.
Despite this, the Kenya Information and Communications Act, 1998 (KICA) contains provisions that may be relevant to the establishment of data centres. KICA defines a telecommunications system as “a system for the conveyance, through the agency of electric, magnetic, electro-magnetic, electro-chemical or electro-mechanical energy, of (i) speech, music and other sounds; (ii) visual images; (iii) data; (iv) signals serving for the impartation (whether as between persons and persons, things and things or persons and things) of any matter otherwise than in the form of sound, visual images or data; and (v) signals serving for the activation or control of machinery or apparatus and includes any cable for the distribution of anything falling within I to iv above”.
This definition is broad and may be interpreted to include data centres. Consequently, developers looking to invest in data centres would be required to obtain a licence from the Communications Authority of Kenya.
Kenya market dynamics and perspectives
Kenya's position as an emerging tech hub in Africa, coupled with the increasing demand for digital services and the expanding e-commerce industry, could potentially drive demand for a hyperscale data centre. The case for Kenya is primarily driven by several factors, including an abundance of subsea cable landing stations, access to renewable energy, and the government’s proactive step to drive the digital agenda.
Kenya currently serves as a landing station for six submarine internet cables, which connect the country to several other countries. These include the 17,000 km, 1.5Tb/s SEACOM cable connecting to South Africa, Tanzania, France and India and the 15,000 km PEACE cable connecting it to countries like Pakistan, Singapore, Egypt and Cyprus. Submarine cables are essential for data centres as they ensure diversity and redundancy for data centres located near these landing stations. Kenya’s connection to international subsea internet cables, its terrestrial infrastructure and the increased digital connectivity in the markets work to attract investments into data centres by companies looking to leverage higher data centre connectivity, higher internet speeds and the ability to develop multi-country data centres.
In addition, Kenya’s access to renewable energy sources, which according to the Kleinman Centre for Energy Policy, generate over 80% of the country’s electricity, is another significant pull factor for hyperscale data centre developers who are consistently looking for ways to reduce their carbon footprint. The launch of the Olkaria EcoCloud Data Centre in 2023 (a data centre running purely on geothermal and solar power), for example, attracted various major cloud service providers like Google, Amazon Web Services and Oracle. Further, Kenya’s President, on 24 th April 2024, announced the development of a 1 Gigawatt data centre in Naivasha. The data centre, which will also be powered by renewable energy, will be developed through a partnership with Microsoft, EcoCloud and the G42 Investment Group. With ESG at the forefront of financiers’ and developers’ minds, Kenya’s focus on sustainability should safeguard its position as Africa’s next hyperscale market.
Kenya’s attractiveness is further bolstered by the Government’s active role in driving the digital agenda. ICT and the development of a digital economy have been identified as enablers to the five pillars of the government’s Bottom-up Economic Transformation Agenda. In line with this, the Ministry of Information, Communications and the Digital Economy published its strategic plan for the years 2023 through 2027 (the ICT Strategic Plan). One of the identified Key Result Areas under the ICT Strategic Plan is the development of a reliable ICT and telecom infrastructure, which the government aims to achieve through various strategies including the construction of 100,000 km of Fibre, installation of free public Wi-Fi stations across the country and the establishment of green data centres at Konza and Olkaria.
Other factors playing in favour of Kenya as a data centre hub include the country’s political stability, corporate markets and a predictable legal and regulatory framework.
Conclusion
The recent interest in Kenya as a data centre hub underscores the projections indicating that Kenya is poised to become one of Africa’s next hyperscale markets. Consequently, the government should implement the ICT Strategic Plan, develop standards and regulations for data centres and continue to build infrastructure to attract investors into the space.
Please note that this is not legal advice and is intended primarily for information purposes. If you require tailored advice or further information, please contact us on sarinke@mckayadvocates.com.