Vantage Data Centers, a US-headquartered data centre specialist, last week announced it plans to spend US$1-billion (R15-billion) to build what it claims will be the largest data centre campus in Africa.

The 80MW facility will be built in three phases — the first will have 16MW of IT load, followed by 32MW each in phases 2 and 3 — and construction has already started in Waterfall, near Midrand, near the Allandale offramp.

The investment puts Vantage in direct competition with Teraco Data Environments, which has built several data centres on Johannesburg’s East Rand and continues to invest billions of rand in new infrastructure in Gauteng and the Western Cape. It will also come up against the likes of Africa Data Centres, which is actively building and buying on the N1 corridor in Midrand, and NTT/Dimension Data, which is also building a facility in the area.

Market talk is that Microsoft will be the anchor tenant in phase 1 of the Vantage Data Centers campus, though neither Vantage nor Microsoft will comment. Microsoft is understood to operate Azure cloud services from an Africa Data Centres-built facility in Midrand, but again, neither party will confirm (or deny) that.

Vantage is a global provider of “hyperscale” (very large) data centre campuses. Its “carrier‐neutral” Johannesburg campus will include 60 000sq m of data space across three facilities once fully developed, “making it the largest on the continent”.

Antoine Boniface, president of Vantage Data Centers in Europe, the Middle East and Africa, spoke to TechCentral editor Duncan McLeod on Monday about the project and why Vantage has decided to commit to such a large investment in South Africa.

Duncan McLeod: Tell me a bit about Vantage Data Centers and the background to the company.

Antoine Boniface: The focus of the company is to deploy very big data centre campuses. Vantage was founded in 2010 in North America, focused mainly on the US. In 2017, there was a big shift when we welcomed Digital Bridge as our main shareholder. The company then decided to expand outside North America and acquired a Canadian company called 4Degrees Colocation. In 2019, the company looked at expanding into Europe and decided to acquire Etix Everywhere, a company I started 10 years ago. That happened in February 2020. We followed in July 2020 with the acquisition of Next Generation Data in Wales, which owned the largest data centre campus in Europe. We have not stopped since then, adding a lot of greenfield campuses all across Europe. In the first quarter of this year, we decided to expand into Africa, starting with South Africa. We started construction a few months ago in Midrand.

Read: US firm Vantage to build R15-billion data centre campus in Jo’burg

McLeod: That is a pretty rapid expansion in a short space of time. Who is behind Vantage Data Centers and how does the company fund the expansion of infrastructure at this sort of pace?

Boniface: We have two main shareholders. The first is DigitalBridge Group. They invest a lot in infrastructure, especially digital infrastructure. They are a dynamic and not a sleeping shareholder, and push us to expand the business as much as we can. We are also backed by PSP Investments, one of the largest pension fund managers in Canada. They are also very active when it comes to our global expansion. And then there are a few, smaller shareholders. We are not financially constrained. We are, however, very selective in our approach. To give you an example, when Vantage acquired Etix Everywhere a year and a half ago, Etix had some business in Africa – data centres in Ghana and Morocco – but they felt the assets and the kind of customer were not in line with the core business of Vantage. They decided to offload those assets.

An artist’s impression of the completed Waterfall facility

McLeod: We had violent protests and riots in South Africa, centred on Durban and KwaZulu-Natal, in July. You must have watched that as an investor thinking, am I making the right decision coming into this market? What was going through your mind at the time and why did you decide to proceed with the investment given what you’d seen on your television screen?

Boniface: It was and still is a concern. When we go into a new country, we focus on security, safety — EHS (environment, health and safety) — to make sure our customers and our colleagues are not exposed to specific risk. We have managed that pretty well so far (in the markets we have invested in). It (the riots) did cause some issues for our shareholders, who questioned if this was the right moment to invest (in South Africa). But the market is booming, and Africa will soon have two billion people, so we felt it was still the right time to invest… Also, our customer wanted us to be there (South Africa)…

McLeod: It sounds like a very big data centre investment if you consider all the phases that are going to be rolled out at the Waterfall campus. There has already been significant investment in data centre capacity in South Africa in recent years. NTT is building a data centre. Teraco Data Environments has invested in significant data centre capacity in Johannesburg and in Cape Town. Is this sort of scale of investment from Vantage premised on the Africa opportunity, more so than the South Africa opportunity? Is this scale of investment justified given economic conditions?

Read: Behind the mega data centre development coming to Jo’burg

Boniface: If you look at the market research, we need about a gigawatt of data centre capacity in Africa in the next few years, and most of that will be spread across Kenya, South Africa and Nigeria. In terms of scale, the first building or phase in Johannesburg will be 16MW, and that will be followed by two phases of 32MW each. We believe we have sized it properly in terms of what the market needs.

McLeod: When you announced this, you said a focus on green energy will be a big part of this particular data centre. We know that Eskom generates the vast majority of its electricity through coal-fired power plants. How are you going to be powering this data centre campus, if not through Eskom?

Boniface: We have committed to building a 100MVA substation on site, connected to Eskom. We also need to team up with Eskom to find a way to get reliable power and more green energy (to the site). We are working on one specific way to solve this using big solar farms. We will make an announcement about this in the next month.

McLeod: Did you say you were working with Eskom on that solar project?

Boniface: I can’t comment too much, but what we need to do is use the Eskom network to transport the power, because that is a requirement. Producing the power can be done remotely (by someone else).

Construction has already started on the first phase of the campus

McLeod: You are building this in the Waterfall/Midrand area in Johannesburg. Did you consider other sites as well?

Boniface: There are three areas we looked at in Jo’burg. We need to build an ecosystem, so it’s important the data centres are near other data centres and are interconnected. One area we looked at was Isando, where you have NAPAfrica and the Teraco data centres. Another was Midrand, next to the Africa Data Centres (which has a large facility next to the Liquid Intelligent Technologies’ South African head office). The other area was further north, in Samrand, where there are a number of other data centres.

We also met with Attacq, the developers of Waterfall, and there was very good chemistry between our two companies — and this is why we decided to build the data centre campus there. They brought us a large piece of land and we could almost start building the next day. It was relatively easy to get all our permitting in place, so I have zero regrets about this partnership. We got board approval in the first quarter of 2021, and we’re now in the fourth quarter and we are already under construction. This was a very fast process.

McLeod: When will your anchor tenant client be able to move in?

Boniface: We will deliver at the very beginning of the third quarter of next year. So far, we are ahead of schedule in terms of deliveries, so we are very confident we will be live by then.

Read: In pictures | Teraco completes massive new data centre

McLeod: When will the second and third phases be completed?

Boniface: That will depend on the commercial success of phase 1. We are not going to build phases 2 and 3 speculatively. There is no specific ratio, but when the first building gets to 50-75% of capacity, we will start on building number 2. A key requirement of our customer is that they can continue to expand (as needed, without having to wait)…

McLeod: What is the funding model of this particular development? Do you have a methodology you follow when you need to build a new data centre, like the one here in Johannesburg? Do you raise portions of the funding in equity and debt?

Boniface: We got approval to spend equity to acquire the site on a very long-term lease. We raised more equity from existing shareholders, which was a much easier process than trying to get a new investor to support us. In these projects, once the project is secured and the first customers have signed contracts, then we work with local partners to secure debt funding. For some locations, we raise 50% in debt, for other locations it can be almost 100%. The more customers we secure before we call the banks, the better it is for us in terms of leverage.

McLeod: Have you partnered with a local bank?