It was an invitation President Cyril Ramaphosa couldn’t possibly decline: the announcement last Thursday that Microsoft was investing R5.4bn in AI data centres in South Africa over three years.
So, a beaming Ramaphosa arrived at Microsoft’s Joburg offices to hear the announcement by the world’s largest software company that it was committing billions of rand — on top of billions already spent — to build new data centres with advanced AI capabilities to serve the African continent.
Microsoft rolled out one of its top leaders for the occasion: Brad Smith, its long-serving president. Smith, also vice-chair of the board, announced the investment to much cheer from the assembled audience of politicians and business leaders — among them Naspers South Africa CEO Phuthi Mahanyele-Dabengwa and Eskom and BSG chair Mteto Nyati.
This type of event is not unusual for Smith, who travels the world meeting senior political leaders and announcing significant investments, usually in data centre infrastructure needed to power Microsoft’s lucrative enterprise cloud services business. Not surprisingly, the politicians love it.
And getting South Africa’s politicians onside is a smart strategy for Microsoft, which has its eyes on the government digitalisation plans announced in Ramaphosa’s state of the nation address last month, much of which will rely on modern cloud infrastructure.
Microsoft, like its US big tech rivals, is building the global infrastructure it hopes will underpin the future of IT in business and government. It’s in a race with Amazon Web Services (AWS, the market leader), Google Cloud and others to build the vast, energy-gobbling infrastructure that will power the global economy for decades to come.
And much of this infrastructure for Africa is being built in South Africa because it’s still — despite all the country’s problems, including load-shedding — the best place to do so, thanks to well-developed telecoms networks, including national fibre routes and undersea cable systems.
The broader economic benefits are clearer: access to onshore advanced AI platforms will help South African organisations as they build out their AI strategies.
Much of this network infrastructure, it must be said, was built by the private sector in the past 18 years after the market was liberalised through a court order that overturned the ANC government’s failed policy of “managed liberalisation” of telecoms, through which it was foolishly trying to protect Telkom from a fully competitive market.
Though last week’s announcement by Microsoft is welcome, some IT industry players have privately voiced doubt about whether it will have a meaningful direct impact on jobs in the sector. As one noted: “You rent a structure and send every last piece of kit from the US. Hardly any South African companies see even 1c.”
It’s true that the biggest cost associated with building AI data centres is the expensive graphics chips made by Nvidia that are so in demand by “hyperscale” data centre operators such as Microsoft. These GPUs, or graphics processing units, will be imported into South Africa directly, with little if any involvement by the South African sales channel.
Of course, the broader economic benefits are clearer: access to onshore advanced AI platforms will help South African organisations as they build out their AI strategies. AWS and Google Cloud won’t leave the market to Microsoft either, so further investments are likely, and even if much of the gear used in the new data centres is imported directly by these tech giants, the local economy will still benefit. Goodness knows, we need as much foreign direct investment as we can get, and let’s be frank, it’s great to have one of the US’s largest firms investing here, considering the Donald Trump administration’s increasingly hostile approach to the country.
Speaking of Trump, his South Africa-born sidekick, Elon Musk, has taken an entirely different approach to investment here. A day after Smith shared the stage with Ramaphosa at Microsoft’s offices, Musk took to X — where else? — to berate Ramaphosa’s government and complain that Starlink is “not allowed to operate in South Africa because I’m not black”. He was referring to a regulatory requirement that telecoms licensees sell 30% of their equity to black shareholders.
Musk has been seeking a licence for SpaceX’s Starlink satellite broadband service in South Africa but has balked at the equity requirement. His fierce criticism comes despite efforts by communications minister Solly Malatsi to change the licensing rules to allow for “equity equivalents” such as skills development.
Equity equivalents make sense. Empowerment rules should not discourage foreign investment, otherwise what’s the point? That said, Musk may want to learn from Microsoft’s approach. When you’re the world’s richest man, playing the victim card isn’t going to earn you much sympathy, even when the rules should be amended — and they absolutely should be.
* McLeod is editor of TechCentral
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.