South Africa’s improving electricity position is creating a deceptively simple narrative for technology infrastructure investors: a power-constrained market has suddenly found spare capacity just as artificial intelligence is driving a global hunt for electricity. Eskom chairman Mteto Nyati has positioned that surplus as an opportunity, saying the utility is pursuing major technology companies that could absorb generation the system cannot otherwise monetize. He told the Financial Times that Eskom was in discussions with “the Amazons, the Microsofts, the Googles”, identifying the world’s largest technology companies as the kind of power-intensive customers that could help turn improved generation availability into commercial demand. “We’ve got this power that we cannot sell,” he told the newspaper, framing electricity availability as an emerging competitive advantage for a country that spent years struggling with shortages.

Teraco, South Africa’s largest data center operator, offers a substantially different reading of the market, and its assessment shifts the infrastructure debate away from generation alone. Teraco head of sustainability Bryce Allan told TechCentral that the industry’s immediate limitation does not originate with the amount of electricity Eskom can generate, but with the mechanisms required to connect new renewable supply and move contracted power across the grid. “The primary constraint is not linked to generation capacity itself, as South Africa currently has a generation surplus of between 3-6GW,” Allan said. “The main constraint facing the industry relates to connecting and unlocking new renewable energy capacity through grid access and frictionless wheeling to enable the data centre industry to meet near-term ambitions for 100% renewable energy.”

The Grid, Not Generation, Defines the Opportunity

Teraco’s position places transmission access at the center of South Africa’s digital infrastructure equation, particularly as operators seek more renewable electricity for increasingly power-intensive workloads. Allan said Eskom remains essential because its network can provide the physical infrastructure needed to move electricity from generation assets to data centers, regardless of who owns or contracts the underlying generation. “Eskom plays an important role and will continue to supply us with physical energy, enabling the transmission and distribution of electricity from our own and contracted renewable energy production.” That model gives the utility a potentially important role even when data center operators do not rely exclusively on Eskom-generated electricity. It also creates a more complex commercial relationship in which Eskom could earn value from enabling renewable power flows rather than simply selling surplus generation directly to hyperscalers.

Teraco’s renewable-energy plans illustrate how grid access and wheeling arrangements shape the company’s approach to electricity procurement. The company expects more than half of its consumption to come from new-build renewable projects by the end of next year, while a 120-megawatt solar facility under construction is scheduled for mechanical completion and commissioning in the fourth quarter of 2026. The company has also signed wind power purchase agreements with NOA, a Cape Town-based renewable energy aggregator that combines its own generation fleet with supply from independent power producers. The first project covered by those agreements is expected to enter operation in the second half of this year, followed by the associated wheeled electricity. Battery storage is also under consideration, which Allan described as “a critical enabler to accelerating our path to achieving 100% renewable energy ahead of our 2035 target”.

Renewable Access Could Shape Data Center Growth

Teraco’s approach suggests that South Africa’s AI infrastructure opportunity will depend increasingly on the quality of its electricity architecture rather than the volume of available generation. Teraco’s experience shows that developers must also secure grid access and finalize wheeling arrangements to move renewable electricity to their data centers. The approach links Teraco’s renewable-energy requirements with the transmission infrastructure operated by Eskom and municipalities. Teraco has also left room for Eskom to participate more directly in that emerging renewable market through Eskom Green, indicating that the utility does not necessarily sit outside the transition toward contracted renewable supply. Allan said the same wheeling route “is also open to the likes of Eskom Green, which we see as an important entrant to the sector in driving the growth of renewables in South Africa going forward”.

Teraco has been advancing this argument for months, suggesting that the company’s latest comments represent a consistent infrastructure strategy rather than a response to Eskom’s new surplus narrative. Chief executive Jan Hnizdo said in February that a frictionless renewable energy wheeling framework involving Eskom, municipalities and data center operators would remain important to continued investment in the sector. His argument also linked renewable wheeling with the broader need for Eskom to invest in transmission infrastructure capable of supporting future demand. Chris Hattingh, executive director at the Centre for Risk Analysis, similarly told the Financial Times that data centers would need to function as “anchor tenants rather than backup suppliers” if the strategy is to address Eskom’s revenue challenge.

AI Demand May Not Match Hyperscale Expectations

The biggest assumption in the emerging South African AI narrative concerns the type of computing infrastructure the country is likely to attract. Global headlines frequently center on enormous AI campuses designed around thousands of GPUs operating simultaneously for model training, creating electricity requirements that can rival those of major industrial facilities. “AI deployment in South Africa will be driven primarily by inference rather than large-scale model training,” he explained. “By its nature, AI inference workloads rely on smaller and more efficient cluster deployments. These inference-led deployments avoid the complex grid connection challenges associated with the large multi-hundred-megawatt builds, and local data centre operators are already well positioned to support cloud and AI demand with existing capacity.”

The difference between training and inference has broader consequences for how investors should interpret South Africa’s electricity surplus. Large training facilities can create concentrated demand that requires major grid reinforcement, dedicated substations and substantial power-delivery planning, while inference can distribute computing demand across existing facilities and regional infrastructure. South Africa could therefore experience meaningful AI-related data center growth without immediately creating the same electricity profile associated with the largest global AI developments. Its existing data center footprint may give operators a foundation for accommodating cloud and AI workloads before the market requires entirely new campuses designed around extreme power density. That does not eliminate grid constraints, but it changes their character by placing greater emphasis on network availability, renewable procurement and incremental capacity expansion.

Eskom’s Surplus Still Needs a Customer Model

Eskom’s improving operational position nevertheless represents a meaningful change for South Africa’s infrastructure outlook. The utility entered winter with about 6GW of surplus peak capacity, its strongest reserve position in nearly a decade, following a 5.2GW reduction in unplanned losses. Its energy availability factor reached about 65.35% in fiscal 2026, compared with 54.55% in fiscal 2023, underscoring the scale of the operational recovery. The Financial Times reported the improvement at about 66% this year versus roughly 50% when Nyati became chairman in 2023. That recovery creates room for additional electricity consumption, but surplus capacity does not automatically translate into an investable data center power product. Eskom must still determine which customers can consume the electricity reliably, under what commercial terms and through which infrastructure. A power surplus therefore creates an option for economic expansion, rather than guaranteeing that data centers will become the mechanism that absorbs it.

Eskom’s earlier experience with proposals to attract bitcoin miners illustrates the complexity of creating a new electricity customer class. Distribution head Agnes Mlambo told TechCentral that any new tariff or commercial structure for such customers would require approval from the National Energy Regulator of South Africa, or Nersa. The regulator would also need to conduct a public consultation before a pilot could begin. A bespoke tariff for hyperscalers would face the same regulatory architecture, meaning Eskom cannot simply redirect surplus electricity to technology companies whenever demand appears. This introduces another layer between generation availability and commercial data center expansion. For hyperscalers, long-term power contracts also require confidence around pricing, reliability, renewable sourcing and the regulatory framework governing future electricity access.

The Investment Case Depends on Infrastructure Friction

South Africa’s opportunity therefore rests on whether policymakers and infrastructure operators can remove friction across several interconnected systems rather than merely improve generation performance. Transmission capacity must expand where demand and renewable generation develop, while municipalities and Eskom need workable arrangements for wheeling electricity across their respective networks. Data center operators need predictable access to power, and renewable developers need credible routes for monetizing contracted generation. Storage could add flexibility by reducing the operational mismatch between renewable production and data center consumption, particularly as operators pursue higher renewable coverage. Each element reinforces the others, but delays in one part of the chain can undermine the investment case for the entire system. That makes grid modernization and market design central to South Africa’s AI infrastructure strategy, even if the country continues to report a generation surplus.

At the same time, the country’s relatively different AI demand profile could prove advantageous because it reduces the immediate requirement for enormous new power connections. Smaller inference clusters can expand within established data center environments, allowing operators to absorb AI workloads without reproducing the infrastructure intensity of the world’s largest training campuses. Existing capacity can therefore become strategically valuable if operators can secure sufficient renewable energy and network access around it. This creates a more incremental pathway for AI infrastructure development, with demand potentially scaling through multiple facilities rather than concentrating in a handful of extreme-density campuses. For investors, that means the most important assets may not always be the sites with the largest theoretical power allocations. Instead, the strongest positions could emerge around facilities with dependable grid access, renewable procurement options and the ability to expand computing capacity without triggering major connection bottlenecks.

South Africa’s AI Power Boom Needs a Reality Check

The disagreement between Eskom’s surplus-power pitch and Teraco’s renewable-wheeling strategy reveals a broader issue in how AI infrastructure opportunities are being assessed. Generation availability is an important prerequisite, but it does not answer whether a data center can obtain the electricity it needs, whether that electricity meets its sustainability requirements or whether the grid can deliver it where demand develops. South Africa has improved the reliability of its electricity system, creating a stronger foundation for digital infrastructure than the country had several years ago. Yet the next stage of growth will depend on converting that operational recovery into usable capacity through transmission investment, renewable connections, wheeling arrangements and commercially workable tariffs. The country therefore has an opportunity to turn its power recovery into an infrastructure advantage, but that process requires more than persuading hyperscalers to consume surplus electricity.

For South Africa, the strategic prize may consequently be smaller and more specialized than the global AI campus boom suggests, but that does not make it insignificant. The country can position itself as a regional computing market where inference, cloud services and distributed AI workloads grow around existing data center capacity rather than through immediate construction of multi-hundred-megawatt training campuses. Eskom’s stronger generation position gives that market a more credible electricity foundation, while Teraco’s renewable strategy highlights the infrastructure work still required to convert supply into usable digital capacity. The challenge will be ensuring that grid access and renewable wheeling evolve quickly enough to match investment decisions made by operators, developers and technology companies. If those mechanisms improve, South Africa could turn its power surplus into a durable competitive asset without needing to recreate the hyperscale model elsewhere.