Teraco bets on cloud services growth in Africa

Africa’s largest vendor-neutral data centre provider, Teraco, has started work on a hyperscale data centre in Ekurhuleni, east of Johannesburg.

Teraco CEO Jan Hnizdo spoke to Business Day about progress on the facility, known as JB4, which is scheduled for completion in the first quarter of 2022.

How big is the new site?

The new site is just past Serengeti Estate on the R21, close to our Bredell facility. If you take our campus in Isando, we’ve got about 39MW across two properties. This new one will be the biggest in Africa as a stand-alone data centre. Powerwise, what’s taken us 10 years to build in Isando, this one building will be as big as that.

How much is the new development worth?

It’s about $250m, or R4bn. We typically do it in two phases. It’s a lot of money to invest in one go. First we’ll build the offices and about half the halls. Then as we fill out, we’ll build the other half.

Have you got customers yet for the new facility?

This is big investment, so we’re taking a long-term view. We’ve got various clients but this is not for the demand we see just around the corner but three to five years down the road. Our Bredell facility is almost sold out, so this is an expansion to that.

How has growth in cloud impacted Teraco?

We see more cloud providers coming into the market. So strategically it works. Imagine if you had to draw a line between Lagos and Nairobi. Data that travels through fibre, even though it travels at the speed of light, takes time. The latency from SA to Europe is about 180 milliseconds. For large SA businesses to access cloud services in Europe or America, even at that speed, it’s too slow. If you want real-time access to a stock system — as a retailer for example — clouds based in Europe are just too far away.

If you’re in Lagos, accessing cloud services in Europe or SA is about the same, so it’s breakeven. Everywhere else in Africa below that [Nigeria], it makes sense to service from SA because the latency is less.

In the past year, there has been a rapid development of undersea cable and terrestrial fibre servicing Sub-Saharan

Africa, which works well for cloud services in the region. A lot of cloud providers are therefore able to service their clients in Africa from SA.

SA is probably the 35th biggest economy in the world, but if you aggregate it with the other economies on the continent, it can become an attractive region that the cloud providers want to access.

Who are your investors and where does the money come from?

We’ve got very supportive shareholders. They’ve never taken funds out of the business in dividends. They always reinvest in the business.

Then we’ve got very supportive funders. Absa is our primary funder. Our two biggest shareholders are Primera, a European-based private equity fund. They have roughly a 30% interest.

Then there’s a company called Berkshire Partners — not to be confused with Warren Buffett’s Berkshire Hathaway. They are a US-based private equity firm and they hold about 60% of Teraco. The balance is held by management and Teraco Connect Foundation, our BEE shareholder.

Do you see Microsoft and Amazon as competition?

A lot of it is complementary. Most of the demand for our services comes from enterprises. Many of them have data in Amazon or

Microsoft’s cloud, but some of their core systems still run through our facilities, through an arrangement called hybrid cloud.

Are all your clients from SA?

Probably 70% of our clients are local and 30% are African and international.

Does Teraco have competition as a vendorneutral provider?

We don’t really. A lot of our competitors are actually telecom companies — MTN, Vodacom, Telkom and Liquid Telecoms. Vendor neutral means we’re like an openaccess platform.

We have an amazing ecosystem. If someone deploys at Teraco we have an ecosystem of about 250 carriers, 50 financial services companies, 50 outsourcers and about 50 content providers.

Someone who deploys at Teraco can interconnect with whoever they wish. So you can get connectivity, cloud services and outsourced services from enterprises that are in our facility. Whereas if you’re in a carrier facility, it will be difficult to buy services from Vodacom, MTN or any other carrier because they’re probably trying to promote their own services.

That’s what vendor neutral is about. We connect our clients to one another.