Africa’s Data Centre Boom: Investors Eye Returns of Up to 20% — If Power and Regulation Hold

Africa’s data centres are shaping up as one of the continent’s most talked-about investment stories — with one major asset manager now targeting annual returns of 18% to 20%, provided governments can deliver stable regulation and reliable power. In an interview this week with Currency, Mark Moorhouse, head of infrastructure and project finance at Sanlam Alternative Investments, said data centre investment is primed to “land in a big way” on the continent over the next few years. That optimism is backed by fresh market data: research firm Arizton projects African data centre investment will climb to US$8.76 billion by 2031, while McKinsey forecasts capacity could more than triple by 2030.

The returns on offer — and why they beat the alternatives

Sanlam Alternative Investments, which manages roughly R200 billion in assets, is betting on digital infrastructure such as data centres and mobile towers precisely because of the returns on offer. Moorhouse told Currency that Sanlam is targeting 18% to 20% on its data centre investments — ahead of the roughly 14% typical of mobile towers and better than most renewable energy projects. His framing is that the sector is still early in its growth curve, comparable to long-haul fibre around 2007, where early returns were strong before the market matured and flattened.

It is worth stressing that these are an investor’s target returns, not guaranteed outcomes — and they reflect a strategy of catching a growth curve at the right moment, which by definition carries timing risk. Sanlam has invested alongside Teraco, the Digital Realty-owned operator, in facilities in Isando, Johannesburg. For context on scale, Microsoft has spent R20.4 billion since 2020 building what it calls South Africa’s first enterprise-grade data centres in Johannesburg and Cape Town, and last year pledged a further R5.4 billion for an AI-focused facility in Kosmosdal, Centurion.

A market starting from a very low base

The upside case rests on how little capacity Africa currently holds. McKinsey estimated in November that only about 1% of global data centre capacity sits on the continent, with the Africa Data Centre Association putting the figure even lower at roughly 0.6%. The combined installed capacity of Africa’s top five markets — Egypt, Kenya, Morocco, Nigeria and South Africa — remains under 500MW, less than France alone had in 2024. McKinsey projects continental demand could rise 3.5 to 5.5 times, from about 0.4 gigawatts today to between 1.5 and 2.2 gigawatts by 2030, requiring US$10 billion to US$20 billion in new investment and unlocking a US$20 billion to US$30 billion revenue pool across the value chain.

Arizton’s numbers point the same way: investment growing at a compound annual rate of 15.76% to reach US$8.76 billion by 2031, up from US$3.64 billion in 2025, with installed power capacity reaching 348MW over the period. South Africa, Kenya, Nigeria and Egypt continue to attract the lion’s share, while Morocco and Tunisia gain ground on the strength of their proximity to Europe and dense submarine-cable connectivity. For property investors, this is increasingly a real estate story: data centres, alongside student housing and industrial logistics, are the alternative asset classes African REITs are rotating toward as retail and office lose their shine.

The catch: power, regulation and a slow occupancy ramp

The returns come with real conditions attached. Moorhouse is candid that South Africa has not fully leveraged its cost advantage, blaming foreign-investor perceptions that the regulatory environment can shift quickly. Energy is the harder constraint — modern hyperscale facilities need tens of megawatts of reliable power, and in several markets national grids simply cannot guarantee it, pushing operators toward costly on-site diesel, solar and battery redundancy. Nigeria is a notable example, where energy can represent a significant share of total operating costs.

There is also a demand-side risk that rarely makes the headlines. Outside South Africa, occupancy tends to ramp up slowly: only about a third of built capacity beyond South Africa is fully utilised, versus 74% inside it. That gap lengthens the time to stabilised income and changes the return maths for developers and funds — which is why analysts consistently recommend patient capital and phased build-outs over speculative overcapacity. Investors should treat headline return targets as best-case projections that assume power, tenants and regulation all cooperate.

Snapshot: Africa’s data centre opportunity

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