South Africa could benefit from a surge in AI data center investment as global demand for AI infrastructure grows, though experts say the opportunity carries significant environmental trade-offs.
Africa currently accounts for just 1% of the world’s data centers, despite rising investment and lower construction and operating costs than many developed markets, according to financial journalist Rob Rose. Microsoft is among the companies investing heavily. Rose said the company has already spent 20.5 billion rand on enterprise-grade data centers in Johannesburg, Cape Town and Durban, and plans another 5.5 billion rand facility in Centurion over the next few years.
Rose described a data center as essentially a large room full of servers that stores and processes company data and can host information for major international technology firms. Africa should be well placed to attract more of them, he said, because power and construction costs are lower than in Europe. But an unreliable electricity supply in recent years, along with concerns about regulatory certainty, has slowed growth.
“There is some big momentum behind this,” Rose said. He added that global consultancies have consistently stressed the importance of stable political and regulatory environments when companies choose where to build. Kenya and Nigeria have already become major data center markets on the continent, he said, and South Africa has an opportunity to benefit if the right conditions are created.
The rapid growth of AI is accelerating demand for data centers worldwide, Rose said, warning that countries risk falling behind if they fail to build the infrastructure to support it. “It’s very clear that it is powering much of the AI surge throughout the world,” he said. “And you don’t want to be left behind the AI surge either.” Greater cooperation between government and the private sector — similar to South Africa’s recent renewable energy expansion — could help unlock further investment, he said, adding that investors have held more discussions with governments about providing the certainty large infrastructure projects require.
Rose cautioned that large data centers consume enormous amounts of electricity and water. Some overseas facilities use millions of gallons a day, he said, creating challenges for water-scarce countries such as South Africa. “We are an absolutely water-scarce region,” he said. Governments would need to consider alternatives such as seawater and weigh environmental concerns against the potential economic benefits, he added, noting that advocates sometimes overlook those risks.
Despite the environmental concerns, Rose said the potential economic impact could be substantial, with increased investment creating significant employment at a time when South Africa continues to face very high unemployment. “It would be foolish not to at least consider the potential for this and then weigh up the trade-offs,” he said.
