22 August 2024 – Johannesburg: The Nedbank sponsored Digital Infrastructure Investment Summit was convened today as a broad discussion platform for issues affecting digital investments and infrastructure builds in Southern Africa.
State of the Markets:
Bora Varliyagci – Digital Things & Preshan Odayar – Nedbank Corporate & investment banking
Bora Varliyagci of Digital Things provided an overview of the market commenting “Initially we saw issues like the delayed spectrum auctions and power outages that created backlogs for digital infrastructure development”. Today those issues are no longer in play, however there are new challenges that the industry faces. Sufficient power supply and other issues such as land parcel allocations at regional level are some of the new concerns facing infrastructure developers and investors. Things such as import taxation is also stifling investments, making acquiring digital infrastructure equipment a lot less appealing to investors and Tech Entrepreneurs.
Andile Ngcaba – President DCA, highlights that regulation also becomes a key issue when developing a complex digital systems comprising of various interconnected systems – Terrestrial, Low orbit, Fibre, Mobile, data centres, power infrastructure and more.
Where should investment be targeted?
With only 30% of African population connected this creates an enormous challenge as tech industries cannot bring other services such as cloud computing & cloud storage into play without broadband connectivity. Currently the majority of data services available in Africa still limited to 2G & 3G services and are still being rolled out – 4G would then be the next step and only then can the industry look at more sophisticated network connectivity. Fibre is way under represented
Apart from SA, Morocco, Kenya, Nigeria & Egypt the balance of Africa is way behind the curve with data mb per capita incredibly low.
Angola, DRC and a few others are seeing investments but will take time for these to be fully developed with wider access to broadband networks. Also need much more investments in data centres & cloud services.
Africa currently have enough data sea cables to supply sufficient bandwidth and only when there is a cable issue does this become a problem.
In South Africa around a 3rd of SA homes or 5 million homes out of 17 million, currently have fibre access, leaving a large opportunity for investments in this area. For this to happen bandwidth spectrums need to be distributed to more areas particularly in rural areas.
JHB & Cape Town have sufficient data centres with enough recent investment to cover development going forwards.
A key theme raised by speakers was that there are massive population groups sitting in the middle of the continent that need to be connected and that this only happen if the terrestrial infrastructure development happens. Terrestrial network development should therefore remain a key target for further digital investments.
Evolving Business models
Kyle Stanton – COO: Myriad Capital believes that digital infrastructure Investments are looking less attractive raising the cost of capital. Kyle says that “The industry is at an Inflection point and players need to decide, are you an infrastructure provider, or end consumer provider “.
Kyle believes that there are three distinctive investment opportunities in the industry:
Opportunity 1: An Asset Light approach – focussing more on customer acquisition than owning infrastructure. – e.g. the Afrihost – largest ISP in SA using product & service bundling to end users to create additional income at better margins
Opportunity 2: consolidations & optimizing – sharing of infrastructure will lead to a scaled wholesale infrastructure platform – if your margins are right – will get capital. Capital needs to be spent in a disciplined way to ensure that the right infrastructure is developed in the right areas linked to your development strategies
Opportunity 3: Cloudification of the network which offers broader benefits and opportunities by extending new network consumption models.
Broader consolidation in ICT infrastructure: Given the number of players in the market in SA the view of the panellists was that consolidation is inevitable as it is a matter of scale and that can only be achieved with greater efficiencies through consolidation.
Whatever the way forward is it is clear that there will need to be clear regulatory and infrastructure development policies across Africa for investment to grow and for the large potential of a connected Africa to become a reality
