Data Centre in The Gambia

WHY THE G AMBIA?

Located in the same time zone as the UK and only around a 6 hour flight from
Europe, The Gambia is an ideal location to operate a data centre from to service the
European market. The ACE cable connection in Banjul provides excellent
connectivity to the rest of the world and an abundance of bandwidth.

This document outlines:

1. The market opportunity for a Data Centre
2. The favourable conditions available to investors
3. The support investors can expect to receive
4. The project risk and sustainability factors that need to be considered

Stable political and

The best Institutions
1 regulatory
quality in West Africa 2
environment

Only official English West Africa’s most

speaking country in the efficient labour
1 Source: British Foreign & Commonwealth
region market
Office website

1
World Economic Forum.
2
Aon political risk map.
ECONOMIC INDICATORS
GDP4 US$807mn in 2014

GDP growth4 1.5% in 2014

Country risk 2nd lower risk score among West

African countries after Ghana
4
CPI Inflation (2014) 5.4%
Exports / Imports Exports: $106mn
4
value (2013) Imports: $350mn
Labour force (2013)4 774,000
FDI stock and inflows $754mn stock / $25mn inflows
(2013)4
Currency exchange GMD/USD: 0.0239 (B) / 0.0257 (S)
Rates 2015 GMD/GBP: 0.0162 (B) / 0.0107 (S)
4
Buy (B) and Sell (S) GMD/EUR: 0.0214 (B) / 0.0230 (S)

COMPETITIVE OPERATIONAL COSTS

The Gambia has by far the most efficient labour market in West Africa 3 and average
daily wages are competitive when compared to major African competitors.
Labour cost unit US$ per year), including social security
The Egypt Kenya Tunisia Morocco South Senegal Nigeria
Gambia Africa
Unskilled 1,165 3,001 3,165 4,500 6,530 7,399 1,617 5,200
Semi-skilled 1,747 6,748 7,097 8,114 12,705 15,685 4,248 10,400
Skilled 3,106 14,052 14,780 16,647 26,759 33,384 9,716 26,000
Highly skilled 15,530 53,905 56,696 43,843 81,822 79,997 46,637 93,668

3
World Bank – World development Indicators.
Gambia Bureau of Satistics (GBOS)
 Social security rate The Gambia’s social security rate
South Africa 1% is situated in the average.
Kenya 5%
Nigeria 7.50%
The Gambia 10%
Morocco 20.10%
Egypt 26%
Tunisia 26.57%

Utility costs in the Gambia are higher compared to costs applied in the more
developed economies. However, Gambia’s utility costs are inferior to other non-oil
producer low income economies (Senegal and Kenya), with the exception of
electricity.
Utility cost (US$)
The South
Egypt Kenya Tunisia Morocco Senegal Nigeria
Gambia Africa
Electricity per kWh 0.27 0.04 0.06 0.09 0.15 0.22 0.25 0.10
Telecoms per min 0.07 0.96 0.06 0.68 0.44 0.15 0.07 0.09
3
Water per m 0.63 0.07 1.26 0.30 0.75 1.08 1.27 0.24
3
Industrial gas per m 0.71 0.09 1.90 0.01 0.36 0.47 1.60 0.22

A comparative project profile

Cost factors (sector profile properties)
Electricity (kWh) 3,723,000
Utility usage
Telecoms (mins) 220,800

Unskilled 2
Semi-skilled 2
Labour head count
Skilled 23
Highly skilled 3

Based on the sector profile properties (utility usage and Labour head count) and
applying labour and utility costs established in the tables above, the Gambia appears
as a high middle-rank location among the identified main Gambian competitors and
best ICT performers.
Labour cost overview (US$ per year), including social security
The Egypt Kenya Tunisia Morocco South Senegal Nigeria
Gambia Africa
Unskilled 2,330 6,002 6,331 9,000 13,059 14,799 3,234 2,330
Semi-skilled 3,494 13,496 14,195 16,228 25,409 31,370 8,496 3,494
Skilled 71,438 323,192 339,933 382,887 615,456 767,830 223,468 71,438
Highly skilled 46,590 161,714 170,089 131,529 245,465 239,990 139,911 46,590
TOTAL 123,852 504,404 530,547 539,645 899,390 1,053,989 375,109 123,852

Utility cost overview (US$ per year)

The Egypt Kenya Tunisia Morocco South Senegal Nigeria
Gambia Africa
Electricity 1,005,210 148,920 223,380 335,070 558,450 819,060 930,750 372,300
Telecoms 15,456 211,968 13,248 150,144 97,152 33,120 15,456 19,872
Total 1,020,666 360,888 236,628 485,214 655,602 852,180 946,206 392,172

Very low labour cost in the Gambia is more than offsetting the gap generated by high
utility cost in the country. Overall, the Gambia is 4th most attractive market for the
establishment of a data centre. In our example, operating a data centre in the
Gambia would cost 87% of what it would be if operated in Senegal.

Overall operational costs

South Africa

Morocco

Senegal

Nigeria

The Gambia

Tunisia

Egypt

Kenya

0 500,000 1,000,000 1,500,000 2,000,000

Total labor cost (US$) Total utility cost (US$)

D ATA CENTRES IN THE GAMBIA
The Gambia’s Data Centre industry is in its infancy but recent and ongoing
improvements to ICT connectivity and energy reliability are opening the country up
as an excellent location for foreign investment. Its cost-competitive, IT savvy
workforce of native English speakers as well as its location in the GMT time zone
mean it is an ideal country from which to service the UK, Irish and North American
markets.

KEY FACTS:
5.12Tbit/s ACE cable connects into Banjul, providing excellent
connectivity to the rest of the world.

The Gambia has an abundance of well-educated native English

speakers.

Number of secure internet servers/million population is 3.9. This has

increased from 2.8 in 2013 as the country places a major emphasis on
developing its ICT offer.4

The Gambia is ranked as the 10th best African country for its ICT
environment, ahead of much larger including Nigeria, Senegal, Mali
and Algeria.5

LOCATIONS
The population of The Gambia is becoming increasingly urbanised and concentrated
in and around the major cities of the Western region. The urban centres of Banjul,
Serrekunda, Bakau etc. have excellent ICT connectivity and an abundant talent pool.

4
International Telecommunication Union
5
World Economic Forum Global Information Technology Report 2014
INFRASTRUCTURE

 The ACE (Africa Coast to Europe)

submarine communications cable runs
from France to South Africa along the
West coast of Africa. It is managed by a
consortium of 17 operators, headed by
Orange. The 1st phase of the 17,000km
fibre optic cable was put into service in
December 2012 with the official
inauguration ceremony taking place in
Banjul.
 Banjul Airport has undergone a US$21
million modernisation and the
Government is continuing to upgrade
the infrastructure
Other new infrastructure / upgrades in
development:

 The Trans-Gambia bridge (completion due 2017)

 Improved cross-border trunk roads with Senegal
 Ports Expansion Programme underway – Gambia Ports Authority planning to
build a second port on the Atlantic coast
 Ongoing infrastructure upgrades at Banjul International Airport

AVAILABILITY OF INCENTIVES

ICT is one of the priority sectors for investment and a host of incentives are available
to investors in data centres. These incentives include:

 Tax Holiday: tax breaks on corporate and turnover tax, withholding tax on
dividends and for a period of 5-8 years, depending on the project’s location.

 Import Tax Incentives: Exemption from payment of import tax on direct

inputs for the project (e.g. IT hardware).

 Export Incentives: Exemptions / reductions on corporate and turnover tax,

exemption from Excise Duty and Sales Tax on goods produced or imported
 within the Export Processing Zone (EPZ) for processing and export –
depending on proportion of goods exported.

GAMBIAN OPERATING COSTS

The Gambia has by far the most efficient labour market in West Africa 6 and offers
competitive costs in key areas both regionally and globally.

Competitive rates for key utilities such as energy and water are offered to operators
in the ICT sector.

INDICATIVE KEY COSTS:

 Average daily wages for unskilled labour hover between US$2.5-4 a day7
 Average wages for ICT specialists range from around US$70-170 per
month.8
 Electricity: 9.70 GMD / kWh (commercial tariff)9
 Water: 22.48 GMD / cubic metre (commercial tariff)9
 Telecoms: From 0.73 GMD / min9
 Key taxes:
− Corporate: 31% (exemption possible)
− Income: up to 35%
− VAT: 15%

GOVERNMENT POLICY POSITION

The Gambian Government recognizes the importance of private sector participation

in the economy, both as an engine of growth and as a source of knowledge transfer.
The ICT sector has been targeted as an industry with the potential for growth and the
government are taking proactive steps toward stimulating investor interest and
growth in the sector. This includes increased liberalisation of ICT services and the
development of modern ICT legislation.

In that framework, the ICT sector has been earmarked and designated by the
Gambia Government as an Investment Priority Sector for which qualifying investors

6
World Economic Forum Global Competitiveness Report 2014-15
7
Program for Accelerated Growth and Employment 2012-15
8
Interview with Lasting Solutions
9
www.pura.gm
can be awarded Special Investment Certificates with the following attendant benefits
ranging 5-8 years:
Corporate tax holidays/tax breaks
Withholding Taxes on Dividends
Depreciation or Capital Allowances
Import VAT waivers on qualifying items

The Gambia Investment and Export Promotion Agency (GIEPA) has identified ICT
as one of the core activities to be pursued at the July 22nd Business Park.

A HELPING HAND – EVERY STEP OF THE WAY

The Gambia Investment and Export Promotion Agency (GIEPA) is the

Government Agency mandated to support companies with their investment,
business and export development as well as support to MSMEs
From the initial provision of information right through to supporting the
establishment, growth and development of an investment project, GIEPA is
your supporting partner for doing business in The Gambia – every step of the
way
Here are just a few of the ways in which GIEPA can support your business:
FOUR GOOD REASONS TO CHOOSE THE GAMBIA

STRONG GOVERNMENT AMBITION AND SUPPORT FOR THE SECTOR:

 The Government has ambitions to turn The Gambia into an ICT hub for
the region.
1  The sector has been targeted for growth and a range of excellent
incentives are now available for investors.

COMPETITIVE INVESTMENT ENVIRONMENT:

 The best Institutions quality in West Africa (WEF 2014)
2  West Africa’s most efficient labour market (WEF 2014)
 5th lowest political risk level in the sub-Saharan Africa (AON)

ENGLISH SPEAKING COUNTRY:

 Foreign investors find it easier to conduct business in Gambia than in
3 other West African countries. English is the country’s official language
and the most commonly spoken language in the business arena.

ATTRACTIVE INCENTIVES, COMPETITIVE COSTS:

 Competitive costs
4  Strong political support for telecommunications industry
 Comprehensive guidance and support from GIEPA
 PROJECT PRE-FEASIBILITY STUDY
The business plan/pre-feasibility study below is for the set up and operation of a data
centre. The targeted workforce8 and break down of job titles can be seen on the table
below. Over the 5 year timeframe of the study it is expected that the workforce will
grow in accordance with the development of the turnover.
Job Title Head Count
Database Analyst 10
Engineering Technician 4
Technology Engineering Specialist 2
Computer Operator 2
Data Entry Clerk 2
Network Engineer 2
Software Programmer 2
Systems Analyst 2
MIS Manager 1
Senior Manager 1
Systems Designer 1
Systems Manager 1
The projected costs and sales for a Gambian data centre company are based on
similar companies in Senegal. The information was collected through interviews and
internet research.
Underlying assumptions to the project
Base case scenario
Related to constant price evaluation

Inflation The model assumes no inflation. Any variation in operating costs due to inflation rate is
expected to be reproduced on the company’s sales price. However, it is important to note
that variations in inflation rate and its level remain an important indicator of The Gambia
economic stability.

Related to costs

Facilities Acquisition & Based on market price. It is expected that the company will acquire land and facilities
Installation (office building and data building) needed because of relatively
low cost of real estate and for security issues related to data
centre activity.
Installation of security, firewalls are included in the purchased
price of the facilities.
Marketing Based on revenues: The share of revenue dedicated to marketing activities can
 Public Relation 5% vary depending on the company’s strategy to enter the
Advertising 3%. market.

Market price It is planned than every staff will have a computer

IT equipment IT equipment renewed One third of the existing IT equipment has to be renewed
every three years every three years (incl. computers, printers, software) because
of technology progress

Predictive 15% of servers and This rate can obviously vary according to company’s business
maintenance facilities plan strategy/policy.
Software upgrade and IT equipment renewal/repair costs are
captured in the applied rate.

Supplies 5% of IT equipment Incorporate office supplies (excl. IT equipment)

value

Training In house. An annual training will be organised to develop employees’

skills (1 week).
The annual training will be delivered by an internal highly
skilled staff.

Taxes Corporate tax rate: 31% For the sake of visibility, overall cost of taxes has been
evaluated at 31%, which is the corporate tax rate.
Social security rate have been included in the labour costs.

Utilities Based on fDi Utilities consumption per staff is based on Data Centre fDi
Benchmark (Financial Benchmark profile. Details of headcount and utilities
Times) Data Centre consumption are shown in the section “A comparative project
project profile. profile”

Related to sales

Sales projections Sales projections are based on data centre market growth and demand in Europe, the US
and Africa. The expected sales by segment are more specifically based on opportunities
identified by BPO companies operating in the English speaking Africa, notably Nigeria,
Ghana, Ghana, South Africa.

Market Opportunities
Based on the regional market growth rate in data centre services, it is estimated that
the company’s turnover compound annual growth rate (CAGR) will be of 52%10.
As points of comparison, the data centre market in Nigeria, Ghana, and Senegal is
expected to reach $67.5 million in 2017, up from $25 million in 2011 (CAGR: 15%)11:
− Out of this $25 million of revenues, 84% came from Nigeria.
− The healthy growth rates will be fuelled by co-location and cloud-based
services (supported by the landing of several undersea cables in Nigeria and
Ghana) such as remote backup and virtual desktop.

10
Frost and Sullivan are forecasting a CARG of 16.3% between 2011-2017 in Senegal and 15% in the region
(incl. Senegal, Ghana, Nigeria) over the same period.
11
“West African Data Centre Market”, Frost and Sullivan, February 2013
 − Sonatel Business Services is the only data centre provider in Senegal. This
situation is likely to change in the medium to long term as OVH is likely to
deploy a data centre facility in the country.
− In 2011, there were more than 27 data centre providers in the three countries,
mostly Internet Service Providers (ISPs).
Main Data centres’ clients in Africa have been identified as financial institutions,
telecom companies, public organisations (ministries, hospitals, universities…),
international organisations (bilateral and multilateral), NGOs…
Income Statement Year 1 Year 2 Year 3 Year 4 Year 5

Revenue From Domestic Market

Co-location 61,946 74,063 88,552 105,874 126,585
Hosting 104,330 124,738 149,140 178,314 213,195
Cloud Solution 104,330 124,738 149,140 178,314 213,195
Disaster recovery 55,751 66,657 79,696 95,287 113,926

Revenue From Foreign Sub-Region Markets

Co-location 151,213 271,556 487,676 875,796 1,572,804
Hosting 318,343 571,697 1,026,686 1,843,781 3,311,166
Cloud Solution 286,508 514,528 924,018 1,659,403 2,980,050
Disaster recovery 157,580 282,990 508,210 912,672 1,639,027

Total Revenues 1,239,999 2,030,969 3,413,117 5,849,441 10,169,950

Cost of Goods Sold

Total Business Development Salaries & Benefits - - - - -
Workstation (Computer, Mouse, Desk…) (8,190) (1,755) (1,755) (4,680) (1,170)
Printer (235) (235) (235) (235) (235)
Software (5,000) (5,000) (5,000) (5,000) (5,000)
Servers (4,236,366) (1,630,085) (2,257,315) (3,125,893) (4,328,687)
Utilities - Electricity (121,618) (147,679) (173,740) (243,236) (260,610)
Utilities - Telecom (7,213) (8,758) (10,304) (14,426) (15,456)
Other Costs of Goods Sold - - - - -
Total Cost of Goods Sold (4,378,622) (1,793,512) (2,448,349) (3,393,470) (4,611,158)

Gross Income (3,138,623) 237,457 964,768 2,455,971 5,558,792

Sales & Marketing Expenses
Total Salesperson Salaries & Benefits - - - - -
Total Marketing Salaries & Benefits - - - - -
Public Relations (5,167) (8,462) (14,221) (24,373) (42,375)
Advertising (2,067) (3,385) (5,689) (9,749) (16,950)
Other Sales & Marketing Expenses - - - - -
Total Sales & Marketing Expenses (7,233) (11,847) (19,910) (34,122) (59,325)

General & Administrative Expenses

Total Highly Skilled Labour Salaries & Benefits (53,579) (53,579) (53,579) (53,579) (53,579)
Total Skilled Labour Salaries & Benefits (139,770) (186,360) (232,950) (326,130) (357,190)
Total Semi-Skilled Labour Salaries & Benefits (3,494) (3,494) (3,494) (6,988) (6,988)
Total Other Salaries & Benefits - - - - -
Facilities Acquisition (950,000) - - - -
Training (597) (597) (597) (1,195) -
Predictive Maintenance (730,227) (956,375) (1,269,542) (1,703,209) (2,303,744)
Other - - - - -
Total General & Administrative Expenses (1,877,667) (1,200,405) (1,560,161) (2,091,100) (2,721,501)

Depreciation Expense (19,750) (29,400) (38,500) (49,100) (57,900)

Total Operating Expenses (1,904,651) (1,241,653) (1,618,571) (2,174,322) (2,838,725)

Operating Income (5,043,273) (1,004,196) (653,803) 281,649 2,720,067

EBITDA (5,023,523) (974,796) (615,303) 330,749 2,777,967

Interest Expense (136,975) (220,653) (297,973) (367,355) (315,929)

Interest Income 56,284 90,667 122,439 150,948 129,817
Pre-Tax Profit (Loss) (5,123,964) (1,134,181) (829,337) 65,243 2,533,955

Add (Subtract) to Tax Loss Carryforward 5,123,964 1,134,181 829,337 (65,243) (2,533,955)
Taxable Income (Loss) - - - - -
Tax Expense - - - - -

Net Income (5,123,964) (1,134,181) (829,337) 65,243 2,533,955

Project Valuation
Weighted Average Cost of Capital 15.5%
Terminal Value Growth 3.0%

2016 2017 2018 2019 2020

Operating Income (5,043,273) (1,004,196) (653,803) 281,649 2,720,067
Tax Expense - - - - -
Tax-Effected EBIT (Earnings Before Interest) (5,043,273) (1,004,196) (653,803) 281,649 2,720,067
Plus: Depreciation Expense 19,750 29,400 38,500 49,100 57,900
Capital Expenditures (68,000) (45,500) (45,500) (53,000) (44,000)
Changes in Working Capital (73,326) (41,949) (73,604) (130,113) (231,191)
Changes in Other Assets & Liabilities - - - - -
Unlevered Free Cash Flow (5,164,849) (1,062,245) (734,407) 147,636 2,502,776
Present Value of Unlevered Free Cash Flow (4,471,973) (796,357) (476,718) 82,977 1,217,950

Terminal Value 20,633,195

Present Value of Terminal Value 10,040,934

NPV based on terminal year 5 5,596,814

Sensitivity analysis
A sensitivity analysis has been conducted to test the viability of the project and determine the risk management. The results show
that the project profitability is relatively robust and could withstand quite large variation in some variables (everything else remaining
equal) without compromising the sustainability of the project.
An increase of the income tax rate would have no effect on the profitability because of substantial investments at the beginning of
the project are generating tax profit loss to carry forward.
A discount rate of 34.2% (evaluated at 15.5% today) would make the project unprofitable.
The project profitability is relatively sensitive to sales variations; a 10.7% decrease would make the overall project unsustainable.
The penetration rate and its growth is key to the success of the project. The company has to reach sub-region markets which are
more mature and where the demand for data centre services is already high, it includes Nigeria, Ghana and Senegal.
Costs have to be maintained at a reasonable level to keep the project profitable. Power cost and servers price are the main costs to
control. Second hand or “low cost” servers and low PUE12 should be a priority, as well as alternative energy sources - other than
the national grid.

NPV=0

Tax rate13 (Level) no effect

Discount Rate (Level) 23.6%

Sales Revenues (% change) -10.7%

Operating Costs + COGS (% change) +11.9%

12
PUE is the ratio of total amount of energy used by a computer data centre facility to the energy delivered to computing equipment.
13
It is Income tax rate, other taxes are not taken into account here.
PROJECT RISK AND SUSTAINABILITY FACTORS
Impact
Issues rating Description
Socio-political Tertiary education medium The Gambia has a lack of tertiary level ICT and business education. The majority of ICT
workers in the country at present were educated abroad. Any business investing in the country
should expect to provide a large amount of training internally.
Low internet medium Internet penetration within the Gambia is currently very low. This will have an impact on both
penetration the market size and also the ability for ICT employees to work remotely.

Macro- Access to bank loans medium Bank loans in The Gambia are hard to obtain and interest rates are often too high to be a
economics feasible option for businesses.
Utility Costs high The price of electricity in the Gambia is among the highest anywhere in the world. The supply is
also highly unreliable and the requirement of generators, and the fuel they burn, is a significant
addition to the investment needed to operate successfully. Recent increases in fuel costs give
this issue even greater importance.
Increasing wages low The Gambia is currently in a position to use low labour costs as a major pull in attracting foreign
investment. However, Increasing success will inevitably push up these costs and potential
investors need to be certain that increasing costs can be covered.

Infrastructure Single data cable high While the connection to the ACE cable provides The Gambia with an abundance of bandwidth
connection to grow its ICT economy, it presents a major risk if this single access point was to ever fail.
Additional connections to the wider global network would be of huge benefit to the country's
ambitions within the sector.
Poor road infrastructure low Many of the country's roads are in poor condition making travel throughout the country difficult
and even impossible at times.
Poor internet medium Gambia's internet coverage is limited and the speeds are often slow.
infrastructure
 For further information, contact:
Chief Executive Officer
Gambia Investment And Export Promotion Agency (GIEPA)
GIEPA House
48 Kairaba Avenue, Serrekunda, K.S.M.D., P.O.Box 757, Banjul, The Gambia
info@giepa.gm
Tel. +220 4377377 / 78
www.giepa.gm