IMF Warns Africa’s AI Growth Dividend Could Fall to Just 0.2%

Sub-Saharan Africa could derive almost no meaningful economic benefit from artificial intelligence over the next decade unless governments address persistent electricity, internet and digital-skills deficits, according to an International Monetary Fund study.

The IMF estimates that AI could increase the region’s economic output by approximately 4 percent over ten years if countries improve their digital infrastructure and develop the expertise required to deploy the technology effectively.

Without significant reforms, however, the projected economic gain could fall to just 0.2 percent—a level too small to materially change the region’s growth trajectory.

The assessment comes as governments and technology companies worldwide increase investments in data centres, computing infrastructure, electricity generation and high-speed communication networks to capture the productivity benefits of AI.

Sub-Saharan Africa remains poorly positioned in this race. The region ranks at the bottom of the IMF’s AI Preparedness Index, reflecting deficiencies in infrastructure, workforce capabilities, regulation and institutional readiness.

Unlike advanced economies, where policymakers are largely concerned about AI replacing workers, Africa faces a more fundamental risk: failing to adopt the technology quickly enough to participate in the emerging global digital economy.

Electricity Remains the Primary Constraint

Reliable electricity represents one of the biggest barriers to AI adoption across the continent. Around half of Sub-Saharan Africa’s population does not have dependable access to power, limiting the use of digital services by households, businesses and public institutions.

AI systems require substantial and consistent electricity, particularly for operating data centres and advanced computing equipment.

Countries with unstable grids may therefore struggle to attract large-scale technology investments, regardless of the potential size of their markets.

The IMF study suggests that governments could prioritise grid extensions and smaller decentralised power systems around schools, hospitals and other public facilities. Such investments could create local technology hubs while expanding access to essential services.

Rising demand for computing power could also create commercially viable electricity projects. Data centres typically require long-term energy arrangements, which could provide predictable demand for renewable-power developers and other infrastructure investors.

Limited Internet Access Restricts Adoption

Connectivity presents another major challenge. Only 38 percent of Africa’s population used the internet in 2024, compared with approximately 68 percent globally.

The digital divide prevents millions of people and small businesses from accessing AI-enabled education, financial services, healthcare and productivity tools.

High data prices and limited fibre infrastructure also make it difficult for African technology companies to scale their operations.

Investment in national fibre backbones, cross-border links and open-access networks could lower connection costs and widen access.

However, infrastructure development must be accompanied by policies that promote competition and prevent critical digital networks from becoming prohibitively expensive.

Investors Begin Positioning for Demand

Private capital is already moving into selected African markets with stronger energy and connectivity foundations.

Microsoft and technology company G42 have announced plans for a $1 billion geothermal-powered data-centre campus in Kenya with a proposed capacity of 100 megawatts.

Cassava Technologies and NVIDIA are also pursuing a $700 million initiative to deploy 12,000 graphics processing units across South Africa, Nigeria, Kenya, Egypt and Morocco.

The computing equipment is expected to support AI development and cloud-based services across participating markets.

These investments indicate growing confidence in Africa’s long-term demand for computing capacity. However, they also expose the risk of an uneven AI economy concentrated in a small number of countries.

Africa currently has about 160 data centres, representing only around 5.5 percent of the global total. Nearly half are located in South Africa, Nigeria and Kenya, leaving much of the continent without nearby computing infrastructure.

Policy Response Will Determine the Outcome

For investors, the IMF’s assessment identifies electricity, telecommunications, data centres and professional training as some of the sectors most likely to benefit from Africa’s transition towards AI.

But infrastructure spending alone will not be sufficient. Governments will also need to improve digital education, establish workable data-protection rules and create regulatory systems capable of encouraging innovation without exposing citizens and businesses to unnecessary risks.

The difference between a 4 percent economic boost and a negligible 0.2 percent gain will ultimately depend on execution.

Countries that provide dependable electricity, affordable internet and skilled workers are likely to attract a larger share of AI investment, while slower-moving markets risk falling further behind.