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SA a priority market for Amazon

An Economic Impact Study released by AWS last week shows an R80bn contribution to South Africa’s GDP, writes ARTHUR GOLDSTUCK.

A long-awaited Economic Impact Study released by Amazon Web Services (AWS) during the SA Investment Conference on Thursday reveals the company will have contributed R80-billion to the local economy in the 11 years up to 2029. It’s direct planned investment over this period will totals R46-billion, 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 key priority market for us,” she told Business Times. “We’re continuing to invest, and beyond the conference we will continue to support our customers and partners as well and listen to the opportunities that are surfacing.”

“The R46-billion is our commitment in terms of our investments and R15.6-billion of that has already been invested to date. We still have our commitment to continue to invest the R30.4-billion around the market that we’re operating in. The R80-billion 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 built 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 rest of the work that we’ve done globally as AWS.”

The cloud eventually came home again in April 2020, when the first AWS data centres on the African continent were built in Cape Town, creating what it calls 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 physical location comprising multiple, isolated, and physically separate Availability Zones, which in turn 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 that could affect their data centres.”

The Cape Town region includes three Availability Zones, or data centres, each with independent power, cooling, and physical security, and 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 loadshedding.

According to the Economic Impact Study (EIS), “The Region serves developers, start-ups, and enterprises, as well as government, education, and non-profits from across Africa, bringing the innovation and digital growth benefits of AWS’s technology to the continent.”

The study draws from financial projections by Amazon, an “input-output” methodology used by AWS, and statistical tables published by the Organisation for Economic Co-operation and Development (OECD).

It shows that the R46-billion investment comprises capital and operating expenditures associated with constructing, connecting, operating, and maintaining the Cape Town Region. The R15.6-billion invested from 2018 to 2022 includes the imports of highly specialised and proprietary equipment and software, and in-country spending on construction and data centre operations. This investment in turn 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 R12-billion 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 that 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 center supply chain. It states: “The FTE jobs are being supported throughout many sectors across the data centre supply chain, such as telecommunications, non-residential construction, electricity generation, facilities maintenance, and data centre operations.”

The report highlights the little-reported contribution Amazon has made to solar power generation in South Africa. Last year it launched a 10 megawatt (MW) solar plant in the Northern Cape, and expects it to generate up to 28,000 megawatt-hours (MWh) of renewable energy per year. That is the equivalent of the annual electricity consumption of over 8,000 average South African homes. It will also reduce carbon emissions by an estimated 25,000 tons annually, or the equivalent of removing 5,400 cars from the roads of South Africa.

The solar plant, majority-owned by Black women and operated by a South African–owned company, will contribute to AWS meeting Amazon’s company-wide goal of using 100% renewable energy by 2025.

“The company is committed to building sustainable business operations for its customers, communities, and the world through industry-leading renewable energy and water initiatives in South Africa,” says the EIS.

A fascinating aspect of the report is the motivation it reveals for AWS’s support of startups.

“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 that AWS lowers the cost of starting new businesses by 15% to 27%.”

According to their paper, entitled “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.”

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