You Cannot Have The Digital Economy Without Data Centres

South Africa cannot demand economic growth, technological development and mass housing while opposing the infrastructure that makes them possible.

Photo by Anne Nygård on Unsplash

You cannot have the digital economy without data centres.

This should be obvious; the internet is not an ethereal substance floating above the clouds. Every website, online payment, video call, streaming service, banking application and cloud-based business system depends on physical servers housed somewhere. Data centres are the factories, warehouses and power stations of the digital economy.

Yet activists increasingly speak about them as though they are useless monuments to artificial intelligence. A campaign against proposed data centres in Cape Town has combined environmental alarmism with the familiar complaint that commercially valuable land should instead be used for low-cost housing. The Housing Assembly has argued that the city must put “people before profit” – as though profitable enterprise and human welfare were natural enemies.

This is the ideology of poverty. It demands that wealth be distributed while opposing the enterprises and infrastructure that create it.

The internet must live somewhere

A data centre is a secure industrial facility containing servers, storage equipment and communications infrastructure. It stores and processes the information required by the modern economy. Hospitals, banks, retailers, universities, software developers and government departments all depend on these services.

The World Bank describes data centres as the backbone of cloud infrastructure. It warns that countries without affordable access to cloud and data services will fall behind in machine learning, artificial intelligence and other advanced technologies. Local data centres also move computing resources closer to users, reducing delays and improving reliability.

This matters particularly for developing economies. Cloud services allow a small company to rent computing power rather than purchasing and maintaining an expensive private server room. Thanks to data centres, a small South African start-up can access sophisticated storage, cybersecurity and processing capacity that was once available only to large corporations.

That lowers the cost of starting and expanding businesses. It enables online retail, financial technology, remote employment, software exports and digital public services. The International Telecommunication Union has estimated that a 10% increase in mobile broadband penetration in Africa is associated with a 2.5% increase in GDP per person. Digital infrastructure is not a luxury that follows development. It helps produce development.

If South Africa refuses to build data centres, the internet will not disappear. The facilities will be built in richer or more sensible countries. South African businesses will then purchase foreign cloud services, export their money and accept slower, less resilient connections.

We will still use the technology. We simply will not own its infrastructure, and the wealth it generates will be drained outwards.

Housing requires wealth

The demand that commercial land be sacrificed for low-cost housing exposes a deeper misunderstanding.

Homes do not materialise because activists declare them a human right. They require land, bricks, steel, electricity, transport, skilled labour and money. Government can build subsidised housing only by taxing or borrowing from a productive economy. Municipalities can service new communities only when businesses and ratepayers generate revenue.

Data centres form part of that productive base. They attract capital, purchase electricity, employ specialised contractors and support an ecosystem of telecommunications companies, software developers and digital businesses. South Africa is already Sub-Saharan Africa’s principal data-centre market. That position gives the country an opportunity to become the region’s digital hub rather than merely another consumer of technology developed elsewhere.

Replacing every prospective commercial development with subsidised housing would not solve poverty. It would eliminate the tax base needed to fund housing while reducing the number of places where residents might find employment.

A city consisting entirely of subsidised homes and no productive enterprise is not compassionate – it is insolvent.

The water panic is technologically obsolete

South Africa is water-scarce, but the campaign against data centres rarely places their expected consumption alongside that of existing industries. Agriculture accounts for approximately 60% of national water use, while industrial activity accounts for roughly 3%. While this fact does not make industrial water consumption irrelevant, it does expose the selective hysteria surrounding one politically fashionable target.

More importantly, not every data centre depends on continuous evaporative cooling. Closed-loop systems recirculate coolant, while outside air can be used to remove heat without consuming municipal water. Technology has responded to scarcity because water costs money and companies have an incentive to use less of it.

Teraco’s expanded CT2 facility in Cape Town uses a zero-water closed-loop cooling system. Its JB4 facility employs the same approach, and the company reported water consumption of only 0.05 litres per kilowatt-hour across its facilities in 2024. That is just 50 millilitres, roughly a double espresso, for every kilowatt-hour used by its computing equipment.

Environmentalists often speak as though technology creates problems but can never solve them. Increased demand encourages investment in more efficient cooling, recycling and water reuse. The answer to resource constraints is innovation and pricing, not economic paralysis.

Paying customers are not Eskom’s problem

Data centres consume large amounts of electricity; they also pay for it.

This distinguishes them from municipalities that collect money from electricity users and then fail to remit Eskom’s share. In May 2026, Eskom reported that Johannesburg and City Power alone owed it more than R5.2 billion in arrears. Eskom explicitly stated that escalating municipal debt undermines its ability to provide affordable power and leaves it reliant on collecting debts or increasing tariffs.

It is therefore absurd to blame a paying commercial customer for electricity prices driven partly by non-payment, theft, mismanagement and a failing distribution system. Data centres create demand, but they also provide revenue with which generation and grid capacity can be expanded.

Because they cannot tolerate blackouts, operators also invest in uninterruptible power supplies, batteries, backup generation and private energy procurement. The technology sector accounted for around 40% of corporate renewable-power agreements signed worldwide in 2025. Teraco has committed billions of rand to renewable capacity and signed private wind and solar agreements.

Large electricity consumers can therefore become catalysts for new generation rather than passive burdens on Eskom.

Choose development

The hostility to data centres is part of a wider ideology that finds a reason to oppose every mine, factory, power station, housing development and logistics project. Nothing may be built because building anything consumes something.

This is not environmental stewardship. It is an alliance with poverty.

South Africa needs investment, reliable infrastructure and industries capable of connecting the country to the most productive parts of the global economy. Data centres provide the foundation for software, finance, communications, artificial intelligence and almost every other modern industry.

We cannot demand economic growth while opposing capital investment. We cannot demand affordable housing while attacking the enterprises that generate taxes and employment. We cannot demand technological sovereignty while insisting that the machines running our digital lives must be located overseas.

Data centres are not enemies of human development. The activists trying to stop them, are.

Nicholas Woode-Smith is a political analyst and author. He is the managing editor of the Rational Standard and a senior associate of the Free Market Foundation. He writes in his personal capacity.