Economy

South Africa's data centre 'gold rush' risks resource crunch

The Times of India July 22, 2026

South Africa's data centre 'gold rush' risks resource crunch - The Economic

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and GadgetsBusiness NewsTechTech & Internet South Africa's data centre 'gold rush' risks resource

crunchSouth Africa's data centre 'gold rush' risks resource crunchReutersLast Updated: Jul 22, 2026,

12:47:42 PM ISTFollow usShareFont SizeAbcSmallAbcMediumAbcLargeSavePrintCommentSynopsisEmerging as the digital

powerhouse of Africa, South Africa's expanding data centers play a vital role in reinforcing national security and

fueling business growth. However, environmental advocates caution about the increased strain on electricity and water

resources. The government is aware of these challenges and is actively encouraging sustainable practices to mitigate the

potential impacts on local resources.Listen to this article in summarized format ListenRapid expansion of data centres

has helped make South Africa the continent's biggest digital hub, even as critics warn the industry's appetite

for electricity and water could worsen shortages affecting millions of people.President Cyril Ramaphosa this month

hailed the growth of data centres as essential for the country's security and its businesses, while calling for

the protection of human rights and the environment amid the boom.As Africa's largest economy, South Africa boasts

advanced digital infrastructure, including connections with international sub-sea cables, helping to make it home to 70%

of the continent's data centres, which house the computer servers that power everything from cloud computing to

artificial intelligence.Tech giants Microsoft and Amazon have committed billions of dollars to cloud and AI

infrastructure in South Africa, where the sector is expected to more than double to $5 billion by 2031, a report from

U.S.-based market research firm Arizton Advisory & ‌Intelligence said in March.But data ⁠centres need ⁠large

amounts of electricity to run the servers and water to cool the rooms they sit in, and South Africa's recent

struggles to provide these basic necessities to citizens due to climate change-related drought and an aging power grid

have exposed potential risks.Even a small data centre can draw as much power as thousands of households and requires

hundreds of thousands of litres of water a day.'BRAGAWATTS'In Johannesburg's industrial zone, at a data

center run by South Africa's largest operator Teraco Data Environments, the scene resembles a set from the film

"Charlie and the Chocolate Factory": shiny metal pipes, small multicoloured wires, rows of cabinets and a

constant, low buzzing sound.Bryce Allan, Teraco's head of sustainability, said South Africa's data centres are

smaller than those elsewhere in the world and require less resource-intensive technology since they do not focus on

training AI systems.He said the market is a far cry from the United States, where residents from Texas to California

have campaigned against data centres. New York last week announced a statewide moratorium over worries about their

environmental impact."The explosion of AI in the States - with gigawatt projects being announced, and the numbers

coming through from operators that have decided ⁠to use evaporative ‌cooling, and the water resources that they

would deplete in doing that - are really creating a problem," he said. "Whenever people hear of AI coming to

South Africa, they associate that U.S. example and transcribe it over to here."While evaporative cooling

requires a constant supply of fresh water to keep servers cool, Teraco has claimed it uses closed-loop cooling, which

recirculates the water."A 30-megawatt data centre using a closed-loop ⁠cooling system would consume the same

amount of water as the average restaurant on an annual basis," Allan said.While the United States'

thousands of data centres have a combined capacity of about 17 gigawatts in order to run servers, South Africa now

hosts more than 50 data centres with a combined capacity of 350 megawatts - less than 1% of the global total.Some

developers in South Africa have inflated the amount of electricity their facilities will have for servers, Allan

said."Those 'bragawatts' create a big problem, because the reality is not nearly as sexy," he said.

"It takes years for these facilities to actually ramp up to meet anything like half of that capacity."Teraco,

which is owned by the U.S. firm Digital Realty, runs on power from South Africa's electricity grid and uses diesel

generators for backup. It is now building a 120-MW solar farm in South Africa's Free State that will also

contribute to the grid when it begins operating next year.The company expects to use 70% of its energy from renewable

sources by the end of 2027 and 100% by 2035.ECONOMIC NECESSITYData centres running on clean energy will prove crucial in

South Africa to reduce stress on resources.In 2018, the city of Cape Town warned it was ‌facing "Day Zero,"

when the taps would run dry because of low water levels in reservoirs, and imposed restrictions to avoid the worst-case

scenario.The government was forced to introduce almost daily power cuts, known as loadshedding, across the country in

2023 to manage rising demand that aging infrastructure could not handle, although this has since eased considerably.The

state-owned power utility Eskom told the Thomson Reuters Foundation that it is able to meet existing demand from data

centres. "There is no pressure on the ⁠grid," the company said in an email.Solly Malatsi, South

Africa's minister of communications and digital technologies, said the government "takes seriously"

concerns about whether data centres will intensify competition for electricity and water."It's worth noting

that a number of mitigation measures are increasingly standard in the sector, including scheduling intensive workloads

for off-peak periods and the use of closed-loop liquid cooling systems that significantly reduce water

consumption," Malatsi said.South Africa has a national policy that calls for environmentally sustainable data

centres, and Malatsi said a just energy transition that is equitable for communities is a national commitment.The

sector is "critical to economic competitiveness," he said. "It underpins everything from financial

services and cloud computing to the AI systems that will shape the next decade of economic activity, and it supports the

wider digital ecosystem in which jobs are ultimately created."Activists want more transparency and community

consultation as data centres spring up across the country and have criticised the Cape Town municipality's approval

last week of a new centre by U.S.-based Equinix, which operates facilities worldwide."Part of the concern here is

that it does feel like we're in this gold rush," said Daniel Hartford, who works on AI infrastructure

accountability at tech justice non-profit Foxglove, which opposes the Equinix facility, arguing there was insufficient

information on how much water it would use."When we look at our domestic power requirements, it necessitates a

conversation about prioritising, when we have growth in the sector that is going to be so energy demanding," he

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Source: economictimes.indiatimes.com