Reliable power is central to Africa’s data centre growth

There is no shortage of optimism about Africa’s data centre future. Rising internet penetration, mobile usage and cloud adoption continue to support expectations of long-term growth. More users generate more data and more data increases demand for digital infrastructure.

The investment case, however, is more nuanced. Data centre investment decisions are shaped by several factors, including connectivity, land availability, regulatory certainty, proximity to users and access to subsea cable infrastructure.

While electricity availability, reliability and cost have always been a factor, they are becoming Increasingly central considerations as facilities grow larger, denser and more energy intensive.

According to the International Energy Agency, data centres already account for roughly 1% to 1.5% of global electricity consumption, with demand expected to rise further as artificial intelligence workloads scale. AI models require significantly more computing power and in turn, more energy. The next phase of digital growth is therefore not only data intensive, but also energy intensive.

South Africa remains Africa’s most developed data centre market, yet continues to face structural power constraints. Eskom has struggled for more than a decade with generation and transmission challenges, resulting in rolling blackouts that have weighed heavily on economic activity.

The Council for Scientific and Industrial Research estimates that load shedding cost South Africa more than R1 trillion between 2007 and 2023.

For data centre operators, this is not only a macroeconomic issue but an operational one. Uptime standards typically require availability above 99.99%, leaving little room for disruption. Operators therefore rely on multiple layers of redundancy, including diesel generators, battery storage and backup systems, all of which increase operating costs. Electricity already represents one of the largest cost components for data centres and depending on factors such as cooling systems, geography and power usage effectiveness, can account for up to 40% of operating expenses.

At the same time, Africa holds significant renewable energy potential. The World Bank estimates that the continent has around 60% of the world’s best solar resources. Countries such as South Africa, Namibia and Kenya benefit from strong solar irradiation, while wind corridors and hydro resources provide additional capacity.

This matters because renewable energy is increasingly the lowest-cost source of new power generation globally. In South Africa, recent Renewable Energy Independent Power Producer Procurement Programme bid windows have delivered solar and wind tariffs below historical coal-based generation costs. Across the continent, renewables overtook thermal power as the most competitive source of energy between 5-10 ago depending on the market.

As battery prices continue to fall, energy storage is also helping to address the intermittency challenges associated with renewables while keeping them cost competitive.

For data centres, this creates both a cost and strategic advantage. Lower energy costs can improve competitiveness, while renewable supply also aligns with the sustainability targets of hyperscale clients and global technology companies. Green energy is increasingly becoming a requirement within global digital infrastructure supply chains rather than a secondary consideration.

The challenge, however, extends beyond generation capacity. Transmission infrastructure remains a major constraint. South Africa’s grid was largely designed around centralised coal generation, not geographically dispersed renewable projects. As a result, some of the country’s strongest solar and wind resources are located far from demand centres and existing grid capacity.

The National Treasury of South Africa has acknowledged that grid limitations are delaying billions of rand worth of renewable energy projects. In many cases, generation capacity exists, but transmission infrastructure is unable to deliver power where it is required.

This suggests that Africa’s data centre outlook is influenced less by underlying digital demand and more by the pace of energy infrastructure development. Improvements in grid reliability and transmission capacity could materially change the sector’s trajectory over time.

There are early signs of progress in South Africa. Regulatory reforms are enabling greater private sector participation in electricity generation. Companies are increasingly entering into power purchase agreements (PPAs) to secure dedicated renewable supply at more predictable long-term pricing. Energy wheeling frameworks are also beginning to improve geographic flexibility by allowing electricity generated in one location to be consumed in another. This is also evident in other African markets such as Morocco, Egypt and Zambia, which are embarking on similar journeys to open their grids to private sector participation.

These developments are gradually improving procurement options for energy-intensive industries such as data centres. However, transmission capacity and broader grid expansion remain medium- to long-term challenges.

Globally, demand for data centre capacity is expected to continue rising. McKinsey & Company estimates that demand could grow by more than 10% annually through to 2030, driven largely by AI and cloud adoption. At the same time, some markets in Europe and the United States are facing increasing resistance to new developments due to power constraints, rising electricity costs and environmental pressures.

This creates a potential opportunity for African markets. Countries able to provide reliable, affordable and increasingly renewable power may become more attractive destinations for digital infrastructure investment.

There is also a broader economic dimension. If data centre growth is linked to new energy generation, digital infrastructure investment could support renewable energy expansion, grid upgrades and technical skills development. Increasingly, large operators are also exploring ways to integrate more actively into electricity systems. Google, for example, has developed demand-response capacity across parts of its US data centre network, allowing facilities to reduce electricity usage during periods of grid stress. For African markets, the relevance is not necessarily the replication of global models, but the broader principle that data centres may increasingly form part of the energy ecosystem rather than functioning solely as large electricity consumers.

For investors, the key consideration is likely to be the availability of reliable, affordable and scalable electricity supply. Markets, operators and projects able to secure long-term power access through grid capacity, private generation or structured PPAs are likely to hold a competitive advantage. Conversely, energy constraints may continue to limit deployment pace, increase costs and cap scale despite strong underlying demand for digital infrastructure.