An economic impact study released by Amazon Web Services (AWS) during the South African Investment Conference on Thursday shows the company will have contributed R80bn to the local economy in the 11 years up to 2029.
Its direct planned investment over this period will total R46bn, focused on its Cape Town data centre infrastructure.
Despite Amazon not yet announcing its anticipated e-commerce roll-out in the country, it has gone “all-in” on its cloud presence, says Amrote Abdella, AWS general manager for Sub-Saharan Africa.
“South Africa is a priority market for us. We're continuing to invest.
“The R46bn is our commitment in terms of our investments and R15.6bn of that has already been invested. We still have our commitment to continue to invest the R30.4bn around the market that we're operating in.
“The R80bn in terms of GDP is the impact that investment makes in South Africa, building off the back of the Cape Town (data centre) region.”
In a sense, the foundations for the global cloud computing industry were set up in Cape Town, where engineers built the original Amazon Elastic Compute Cloud (Amazon EC2) in 2006, which kicked off the cloud computing revolution.
Says Abdella: “We're also very proud of our history in South Africa because it has allowed us to have distinguished engineers working out of South Africa to focus the work we've done globally as AWS.”
What Amazon has committed to spend in South Africa, of which R15.6bn has already been invested.
— IN NUMBERS: R46bn
AWS's first data centre in this country is in Cape Town. It opened in 2020 to create the AWS Africa (Cape Town) Region.
The GDP contribution estimated by AWS is in effect the knock-on contribution made by the presence of an AWS Region in South Africa and its plans to expand related infrastructure and operations through to 2029.
An AWS Region is defined as a location of multiple, isolated and physically separate Availability Zones that form clusters of logically connected data centre infrastructure. Availability Zones may be located up to 100km apart to protect against natural and man-made disasters.
The Cape Town region includes three Availability Zones, or data centres, each with independent power, cooling and physical security, connected by redundant, ultra-low latency networking.
As with AWS Regions in the rest of the world, the Availability Zones in the Cape Town Region have backup power to keep operating in the event of electrical failures and load-shedding.
This region serves developers, start-ups, and enterprises, as well as government, education and non-profits from across Africa, the Economic Impact Study (EIS) says.
It draws from financial projections by Amazon, an “input-output” methodology used by AWS and Organisation for Economic Co-operation and Development (OECD) data.
The socio-economic influence is even more significant than the mentioned 5,700 jobs, considering that each job typically sustains three to five people in a South African household
— Keoikantse Marungwana, analyst, International Data Corporation
It shows the R46bn investment comprises capital and operating expenditures associated with constructing, connecting, operating and maintaining the Cape Town Region.
The R15.6bn invested from 2018 to 2022 includes the import of highly specialised and proprietary equipment and software, and in-country spending on construction and data centre operations.
This investment generates revenue across industries, including construction, engineering, energy consulting, plumbing, maintenance and security, mostly through local businesses.
By the end of 2022, the EIS shows, the AWS investment in Cape Town had generated R12bn in domestic GDP, including the value added to South Africa’s information technology (IT) sector and in-country spending on goods and services related to the construction and operation of AWS’s data centres.
Abdella describes this as the supply chain that goes with the creation of an AWS Region.
“More importantly, looking at employment, we've created about 5,700 jobs,” she says. “This is something we look at in holistically understanding what else we can do to drive additional impact around the ecosystem.”
The EIS defines these as “full-time equivalent” or FTE jobs, all created at local vendors in the South African data centre supply chain that includes telecommunications, construction, electricity generation, facilities maintenance and data centre operations.
Analyst Keoikantse Marungwana, senior research and consulting manager at the International Data Corporation, says “the socioeconomic influence is even more significant than the mentioned 5,700 jobs, considering that each job typically sustains three to five people in a South African household.
“Furthermore, when we talk about the presence of data centre giants like AWS, Huawei, Oracle and Microsoft in South Africa, it's important to recognise the countless benefits local enterprises enjoy when they migrate to cloud services. Thanks to secure, reliable and low-latency cloud offerings, businesses can streamline their operations, cut costs and scale with ease. In the long run, this paves the way for innovation and the growth of our own ICT sector.
“As more companies pour investments into data centre infrastructure and cloud services, we can anticipate a positive domino effect on the South African economy, with fresh opportunities for businesses, job creation and overall socioeconomic progress.”
The report also highlighted the benefits for start-ups.
“AWS helps customers launch and grow their businesses,” it says. “Access to cloud computing lowers the cost of starting new businesses, encourages innovation and spurs development of new technologies. It also attracts more funding for start-ups, which generates further economic growth.
Researchers from Harvard University and Massachusetts Institute of Technology (MIT) found AWS lowers the cost of starting new businesses by 15% to 27%.
According to their paper, “Cost of Experimentation and the Evolution of Venture Capital”, published by the National Bureau of Economic Research in 2018, “many practitioners see the introduction of cloud computing services by Amazon as a defining moment that dramatically lowered the initial cost of starting internet and web-based start-ups”.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.