Data Centres: South Africa

Tumisang Mongae, a director in the DLA Johannesburg office, considers some of the challenges relating to data centers and how to build resilience into projects:

 

Supply chain constraints

There are jurisdiction-specific procurement requirements in South Africa, where government contracts usually require that a percentage of equipment and plant be sourced from local manufacturers or suppliers. Whilst there are good intentions for such a requirement, the bespoke nature of equipment required for data centres means that some equipment may not be readily available locally.

We have experienced projects being delayed and disputes arising from such procurement requirements, where contractors allege that they could not source equipment and plant locally. When concluding contracts where there is provision for a local procurement requirement, regard must be had to the capacity of local suppliers, in an endeavor to avoid delays and resultant disputes.

 

Labour shortages and skills gap

South Africa is no exception to the dearth of skills in relation to data centre construction works. With the data centre market in South Africa continuing to grow rapidly, contractors should be mindful of the risk of job-hopping by skilled workers, which may negatively impact the aggressive timelines and result in delays.

 

Energy security

Depending on their size, data centres require a significant amount of power for their operation. A critical task in the construction of a data centre is the commissioning phase which would require a supply of consistent power for purposes of certifying that all components of the data centre operate as intended.

Regard must be had to power availability in certain jurisdictions when agreeing schedules and contractual clauses, particularly in African jurisdictions such as South Africa which experiences power shortages from time to time. Power shortage may delay final completion of the works, which may result in a dispute if there are no clauses providing a suitable remedy for such event.

 

Key takeaway to build resilience into projects

Proactive contract management: Proactive administration of contracts, managing package interfaces and dealing with issues as and when they arise, are necessary and may assist in avoiding or minimising conflicts from escalating into time-consuming disputes.