New York recently became the first American state to halt the expansion of new hyperscale data centre development. In July, Governor Kathy Hochul signed an executive order imposing a one-year moratorium while the state develops a regulatory framework to protect ratepayers, the environment and communities.
New York is asking questions that developing countries, such as South Africa, should also consider. What do communities providing the land, electricity and water gain in return? Who controls the networks the facilities support and where does the value ultimately accumulate?
South Africa hosts about 70% of Africa’s data centre capacity, much of it concentrated around Johannesburg and Cape Town.
Microsoft has announced plans to invest billions of rand in expanding its cloud and AI infrastructure, while Google has launched its first African cloud region in Johannesburg. Amazon Web Services, which operates its Africa region from Cape Town, plans to invest more than R30 billion by 2029, while Teraco is building its 40MW JB7 facility at Isando in Ekurhuleni.
At the Google Cloud Summit in July, President Cyril Ramaphosa reiterated the importance of cloud and AI adoption, while stressing that data centre growth must be achieved sustainably. His position provides the right starting point.
South Africa’s ambition, he argued, should not simply be to host data centres but to build companies, develop researchers, commercialise African ideas and generate intellectual property. Sustainability cannot be measured only by investment levels, jobs created or infrastructure built. It also depends on South Africa’s position in the global digital networks the facilities serve.
Research on cloud infrastructure shows that critical cloud services are concentrated among a small number of global technology firms. While data centres may be geographically dispersed, command and control remain concentrated in key headquarters cities.
Hosting part of the network is not the same as controlling it. South Africa provides the land, electricity, water, connectivity and regulatory approvals on which the facilities depend, while cloud providers retain control over architecture, intellectual property, customer relationships and strategy.
This creates a potentially unequal geography of power. The host country’s contribution is territorially fixed, while software, platforms and intellectual property remain centrally controlled and mobile. Host locations therefore bear many of the place-bound costs while global providers retain greater ability to capture value.
None of this means data centres lack value. Local facilities reduce latency, strengthen digital sovereignty and lessen dependence on infrastructure. They also bring substantial investment into a capital-constrained economy.
The real question is what position South Africa occupies in the global cloud. Territorial presence without capability transfer is a thin bargain and accepting it is ultimately a policy choice.
A better bargain would assess new investments through three tests. First, a resource and spatial-cost test that asks which communities provide land, electricity and water, what opportunity costs they bear and who pays for supporting infrastructure. Second, an infrastructural-power and dependency test examining who controls standards, pricing, cybersecurity and service continuity and how dependent critical sectors become on foreign providers. Third, a capability and value-capture test assessing whether projects build domestic firms, skills, research capacity, affordable computing access and bargaining power.
The goal is to ensure that hosting strengthens South Africa’s capabilities, bargaining power and share of the value created.
• Opperman is a senior lecturer at Stellenbosch Business School and director of the African Centre for Development Finance
- New York State has imposed a one-year moratorium on new hyperscale data centre development to create a regulatory framework protecting ratepayers, the environment, and communities.
- South Africa hosts approximately 70% of Africa's data centre capacity, mainly around Johannesburg and Cape Town, with major investments from Microsoft, Google, Amazon Web Services, and Teraco.
- President Cyril Ramaphosa emphasized the importance of sustainable data centre growth, advocating for building companies, developing researchers, commercializing African ideas, and generating intellectual property.
- Data centres in South Africa provide essential resources like land, electricity, water, and connectivity, but global cloud providers retain control over architecture, intellectual property, and customer relationships.
- A proposed framework for evaluating data centre investments includes testing resource costs, infrastructural power and dependency, and capability and value capture to ensure South Africa benefits from hosting these facilities.
