The global acceleration of artificial intelligence continues to reshape investment flows, digital infrastructure and economic growth.
According to a new global analysis by Coface, data centres – the backbone of AI development are expanding at an unprecedented pace, driven by massive capital expenditure and a high concentration of activity in the US.
However, this exponential growth brings structural limitations, new vulnerabilities and potential imbalances with major implications for emerging digital economies such as South Africa.
South Africa, now Africa’s leading data centre hub and home to multiple hyperscale expansions, faces similar pressures: energy constraints, water scarcity, rising operational costs, and talent shortages. These factors position the country at the intersection of global opportunity and domestic fragility.
These developments shape the global environment in which South Africa’s digital economy must operate, affecting everything from local project costs to equipment availability and investment appetite.
AI-driven investment boom reshapes global and South African markets
Since the launch of ChatGPT 3.5 in late 2022, AI has shifted from specialist labs into everyday usage, triggering a sustained explosion in demand for digital infrastructure.
The combined market capitalisation of leading global AI-linked firms – including Nvidia, Microsoft, Alphabet, Amazon and Meta – has grown by more than $12-trillion in under three years, propelling US stock markets and driving major capital expenditure.
This trend is shaping South Africa’s digital landscape, where global cloud providers are expanding their local footprints, banks, insurers, retailers, and mining houses are increasingly adopting AI tools, telecom and infrastructure operators are grappling with rising power and cooling demands and escalating global equipment costs are driving up local data-centre and cloud-services pricing.
Coface’s global analysis points to mounting constraints that resonate locally.
Energy grid capacity is a critical bottleneck
The rapid expansion of data centre and AI infrastructure is colliding with technical, geographical, and human limitations, and South Africa is no exception.
While the US faces delays of up to five years for grid interconnection, South Africa’s own grid instability, transmission backlogs, and persistent load energy shortages create even more acute challenges for energy-intensive data centre operations.
Land and water availability add further pressure, with global concerns mirrored by South Africa’s scarcity issues particularly in Gauteng and the Western Cape, two of the country’s major data centre hubs.
Demand for experts outstrips supply
The shortage of skilled labour compounds these difficulties.
Both globally and locally, demand for specialised engineers, technicians, and AI-infrastructure experts far outstrips supply, driving up costs and causing project delays.
Coface estimates that every $1-billion invested globally in AI-dedicated data centres requires approximately $125-million in related energy-sector investment – two-thirds for grid upgrades and one-third for generation capacity.
In South Africa, this ratio is even more critical given structural electricity constraints, underscoring the need for strategic planning and investment to sustain growth in the digital economy.
Emerging risks: Overcapacity, delays and value-chain vulnerabilities
The global data centre boom is not without downside risk. Coface highlights several emerging threats.
- Uncertain demand forecasts: Projections for global AI processing requirements vary by up to 80%, raising the risk of overcapacity.
- Knock-on effects across the value chain: Any global overcapacity shock would first affect colocation operators and then cascade across the entire supply chain impacting cloud providers, equipment manufacturers, installers, and service partners. South Africa, heavily dependent on imported IT hardware, would be exposed to price fluctuations and supply disruptions.
- Revenue pressure and tighter margins: Overexpansion could affect profitability across the sector, including South African operators building data centres based on optimistic AI-adoption projections.
“The rise of data centres in the age of AI is a colossal gamble: it promises major advances but also exposes the economy to unprecedented risks of overheating and imbalance,” says Aurélien Duthoit, information and communications technology economist at Coface.
“For this boom to have a lasting impact, it must translate into real productivity gains and large-scale services beyond investment growth.
“At this stage, AI is fuelling economic expansion without profoundly transforming it.”
Why the findings matter for SA
South Africa stands to benefit from the global AI acceleration, but its domestic constraints mean the country must manage the associated risks proactively.
As South Africa works to strengthen its position as Africa’s digital gateway, the question remains whether infrastructure, skills and energy capacity can keep pace with global AI-driven momentum.
The full report is available here.