Digital Infrastructure - The investment asset class of the future

For infrastructure investors focused on South Africa and emerging markets, digital infrastructure is moving into the same strategic category as renewable energy, transport and utilities. The question is no longer whether connectivity matters. The real question is whether fibre and digital networks now warrant a defined position within strategic asset allocation frameworks.

“Digital infrastructure” behaves like other infrastructure asset classes because it shares the same defining characteristics: high upfront capital expenditure, long asset lives, predictable operating profiles once networks mature, and revenues linked to the utilisation of physical assets. Fibre is laid once and monetised over decades, although like any physical infrastructure asset in emerging markets, it requires active management of operational risks such as theft and vandalism.

Connectivity is still too often discussed through a technology lens. In practice, fibre networks resemble roads, power grids and water pipelines far more than software platforms.

That shift is visible in where global institutional capital is already moving. When Canada Pension Plan Investments took a stake in Telecom Italia’s fixed-line network, its Global Head of Infrastructure, James Bryce, framed it plainly: the investment would “help deliver high-quality digital infrastructure… as well as generating long-term risk-adjusted returns”.

Digital infrastructure also carries an attribute that most traditional infrastructure assets do not: the economic spillover effects are unusually broad and unusually fast. In the same way that roads and ports expand access to markets, connectivity expands access to opportunity. It supports education platforms, remote work, entrepreneurship and digital service delivery, while improving the efficiency of existing services and supply chains.

The multiplier effect

The multiplier effect begins during the build phase. Prioritising local contractors, developing local supplier capacity and reinvesting into the communities where networks are deployed creates immediate economic activity alongside longer-term productivity gains. The impact compounds once households and businesses are connected, as reliable broadband opens markets that were previously unreachable and allows small enterprises and creatives to participate in regional and global digital ecosystems.

Our own experience illustrates how the investment case has matured. When we first explored large-scale fibre deployment into township markets, demand was not the constraint. Capital appetite was. The commercial logic existed, but investors were cautious about backing areas that had historically been overlooked.

That hesitation is not unique to South Africa. Across emerging markets, digital infrastructure has long been viewed as socially important but financially uncertain. What has changed is the operating model.

Changing economics in dense urban markets

In dense urban environments, particularly townships and informal settlements, the economics of network deployment are fundamentally different from traditional suburban rollouts. Higher population density lowers the cost per home passed. Redesigned construction processes, more efficient network architectures and vertically integrated operations allow operators to reduce both build and operating costs.

In our own business, removing unnecessary layers in the value chain and operating directly at the retail level proved to be a turning point. It created a commercially sustainable model at scale, without relying on subsidy or concession-style structures. For infrastructure investors, that matters because the return profile in many urban and peri-urban markets is now driven by execution discipline and capital efficiency, rather than by policy support alone.

Digital infrastructure should also be understood for what it is: a permanently capital-intensive asset class. Networks are not built once and left untouched. Expansion, densification, technology upgrades and ongoing maintenance require continuous reinvestment. Capital is constantly deployed into new build areas and into capacity, which is precisely why the sector aligns so well with long-duration infrastructure capital.

Internationally, this has been reflected in deal activity and allocator interest. McKinsey noted that digital infrastructure has become the fastest-growing infrastructure category and has risen to roughly 16% of global infrastructure deal value, driven by demand for towers, fibre and edge data centres. The trajectory mirrors what was seen in renewable energy a decade ago, where early project-level investments evolved into scaled operating platforms backed by long-duration capital.

The consolidation taking place across fibre operators reflects that shift. In South Africa, as in many emerging markets, consolidation is primarily about scale and access to deeper capital pools. Larger platforms are better positioned to standardise network design, centralise procurement, manage supply chains, structure funding efficiently and absorb deployment risk.

At an operational level, the fundamentals are straightforward. Two metrics ultimately drive performance: homes passed and homes connected. Customer experience and service quality directly influence take-up and retention, which in turn underpin revenue stability. These are infrastructure utilisation metrics, not technology vanity metrics.

Policy, rural coverage and capital mobilisation

A clear distinction still matters when assessing risk, particularly between urban connectivity and deep rural coverage.

True rural deployment remains commercially challenging without some form of public-sector participation. Low population density, limited backbone infrastructure and high deployment costs mean that private capital alone cannot always justify investment in remote areas. Wireless technologies and alternative solutions can extend reach, but backbone infrastructure remains a prerequisite for sustainable connectivity.

This is where policy and regulatory frameworks become critical. Targeted incentives, planning reform and infrastructure co-investment mechanisms can materially reduce deployment risk and accelerate coverage into marginal areas.

We recently hosted the Minister of Communications and Digital Technology – Solly Malatsi – and we were very impressed with his willingness to engage on these topics. It is critical that we have forward-thinking Ministers who can bring public and private sector stakeholders together.

The objective is not to replace private capital, but to unlock it. Well-structured mechanisms can catalyse large-scale deployment in precisely those areas where the economic and social returns are highest, but where commercial risk remains elevated.

For infrastructure asset managers assessing South Africa and comparable emerging markets, digital infrastructure increasingly belongs in the same conversation as energy, transport and logistics within diversified infrastructure portfolios.

Digital infrastructure is no longer an enabling layer sitting outside the infrastructure universe – it is rapidly becoming one of its most investable components.