South Africa’s Eskom targets data centre ‘gold rush’ for its power surplus

Eskom is courting the world’s biggest tech companies about providing power to their data centres, as South Africa’s state-owned utility seeks new customers for its excess energy after ending years of rolling blackouts.

The plan to capitalise on South Africa’s emerging AI “gold rush” by selling surplus capacity to “power-hungry” hyperscalers marks a dramatic recovery for Eskom, which was long synonymous with electricity outages known as load-shedding.

Eskom chair Mteto Nyati said talks with tech groups were part of a growth strategy centred on energy-hungry industries.

“We are having discussions with the Amazons, the Microsofts, the Googles. We love those discussions because those are power-hungry sectors — that’s exactly what we need right now,” he told the FT.

Eskom headed into winter with about 6 gigawatts of surplus peak capacity, its strongest reserve margin in almost a decade, after a generation recovery plan largely ended unplanned outages. That pushed South Africa past 12 months without load-shedding for the first time since 2018.

After years of rolling power cuts, businesses and households have sought alternative energy sources such as solar, while weak economic growth shrank industrial demand and eroded Eskom’s revenue base as it struggled to service its debt of about R359bn ($22bn).

“We’ve got this power that we cannot sell, that’s the reality of the situation,” Nyati said.

South Africa’s fast-growing data industry has become a major bright spot for the utility. Africa’s most industrialised economy has about 70 per cent of the continent’s data centres, thanks to its fibre infrastructure and mature financial sector.

Cloud computing and AI-driven investments are forecast to more than double South Africa’s data centre market to more than $5bn by 2031, according to Arizton Advisory & Intelligence, a US-based market research company.

Nvidia, Cassava Technologies, Huawei Cloud and Oracle Cloud Infrastructure are among major companies that have committed to investing billions of dollars in data centres across Africa.

Last month, Cape Town approved plans by US-listed Equinix to build two facilities requiring about 170 megawatts — a load approaching the roughly 189MW of total critical capacity currently run by Teraco, Africa’s largest data centre operator.

“The data centres gold rush is real. Whether Eskom is the one who profits from it, rather than just watching operators self-generate around it, is the open question,” said Chris Hattingh, executive director at the Centre for Risk Analysis consultancy.

Eskom has roughly 2,000MW of capacity in cold storage that can return online without straining the system, but planned investments could overwhelm the current grid’s capacity, analysts said.

Data centre owners, who need huge and uninterrupted amounts of energy, have also been using their own projects and purchasing power from solar farms rather than relying solely on Eskom for electricity.

“The strategy solves Eskom’s revenue problem only if it can hold on to these customers as anchor tenants rather than backup suppliers,” Hattingh said.

The data boom has intensified debate about whether South Africa can support power-intensive facilities alongside households and other businesses. Eskom has also signed discounted electricity agreements with smelters, including the Glencore-Merafe Chrome venture in April.

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The company’s renewed commercial push reflects a sharp improvement in its operational performance since Nyati became chair in 2023.

Its energy availability factor — which shows the percentage of its coal-fired stations able to deliver power, rather than broken down or in maintenance — improved to 66 per cent this year, from about 50 per cent in 2023.

A R254bn debt relief package from the government has also strengthened Eskom’s finances, though it still faces pressure from municipal arrears, with local authorities collectively owing the utility about R118bn.

“If that amount is allowed to go up, all of the good work that was done . . . is going to go out of the window,” Nyati said.