At BII we support digital transformation by making investments in critical digital infrastructure as well as providing capital to innovative digital businesses. Expanding digital infrastructure has the potential to improve access, quality, and affordability of internet services in markets with limited existing infrastructure. Internet access in turn has the potential to help businesses grow and strengthen local economies, but requires digital infrastructure such as data centres to be in place. Improved internet access also means better access to information and services, potentially enhancing social outcomes in a range of development areas such as financial services, agriculture, civil engagement, health and education.
Liquid Intelligent Technologies is the largest independent fibre and cloud provider in Africa. It has built Africa’s largest independent fibre network covering over 100,000 km. It also operates state-of-the-art data centres in Johannesburg, Cape Town and Nairobi, and is a leading provider of cloud-based services across Africa including cloud computing services. Following an initial investment in 2018 focused on improving access to affordable and quality connectivity in Africa, in 2020 BII made a follow-on $40 million investment to support the development of a new Liquid data centre in South Africa.
This study examines the effects of local data centres on the use of cloud services and productivity for Liquid business clients in four markets (Kenya, Zambia, Zimbabwe, and South Africa) that have access to Liquid’s data centre in South Africa. It provides insights on how access to a local data centre can support productivity and growth opportunities for businesses by improving internet connectivity.
What did we find?
- The local data centre has improved the latency and reliability of cloud services for Liquid customers.
- While data reliability was not the main driver of companies’ cloud service use, the results suggest that improved data reliability (associated with the local data centre) has supported their increased use of cloud services, particularly for digital native companies that are most likely to benefit from improved access and quality of cloud services.
- The survey findings highlight how cloud service use supports the productivity of Liquid client companies, including through helping to launch new products and services, expand in new markets and offer existing services and products faster or at a lower cost. Given these benefits and the remaining need for more digital infrastructure in Africa to meet growing demand, further investment in local data centres is key to support business productivity, particularly in markets with lower data reliability and latency.
- Cost and quality were identified among the barriers to greater cloud service use. This suggests that additional investment to improve affordability and reliability could further unlock the benefits of cloud service use for businesses, particularly among digital native and small companies.
- Beyond access to reliable cloud services, a barrier to growth highlighted by Liquid customers is the availability of affordable and reliable electricity. DFIs and private sector investment in renewable energy can help address these challenges and facilitate further data-related infrastructure investment, while staying aligned with energy transition goals.
How can DFIs continue to support the digital transformation of economies through investment?
Despite increased adoption of digital technologies, most African businesses do not intensively use them for business purposes. Even digitally enabled businesses often do not adopt digital technologies for tasks such as business administration, planning, sales and payment. The study findings point to opportunities for BII and other investors to further support the digital transformation of African economies through investment in data infrastructure in markets with lower data reliability and higher latency, renewable energy to sustainably power this data infrastructure, and companies that support the fuller use of cloud and digital technologies by African businesses.
We hope this research provides useful insights to other investors into the challenges and opportunities of supporting the productivity and growth of businesses through digital infrastructure investments.
