Stafford Masie rips government’s draft AI policy

One of SA’s leading tech investors and former CEO of Google SA, Stafford Masie, has slammed government’s draft AI policy for attempting to regulate a vital sector of the economy before it is even built.

The draft policy envisages creating seven new institutional bodies, including an AI commission, an AI ethics board, an ombud and a regulatory authority.

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“Seven new institutions, before a single rand of public money has been committed to compute infrastructure, before a single regulatory sandbox has processed its first application, and before the country has answered the most basic question any AI economy must answer: where will the electricity come from?” asks Masie in an open letter to Minister of Communications and Digital Technologies Solly Malatsi.

The draft policy aims to attract R2.5 billion initial government co-investment for AI research and development over five years.

Among the other proposals are building a national AI talent pool, and embedding AI in the SA Constitution so it does not violate already entrenched rights to dignity, equality and other protections.

The missing element

Masie says AI is not merely a tech policy matter, but a national security concern.

Given the country’s massive unemployment and unequal income distribution, the potential for AI to do further economic harm cannot be ignored.

“If this country does not position itself as a builder and deployer of AI, rather than merely a consumer of AI products built elsewhere, the labour market impact will be catastrophic,” says Masie.

“In a society already this unequal, mass displacement of low and mid-skilled workers without a corresponding AI-driven job creation engine is not an economic adjustment. It is a social detonation.”

The draft policy mentions job displacement in passing and proposes reskilling programmes as the remedy.

“This fundamentally understates the scale and urgency of the threat,” says Masie.

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“The correct response is not to reskill people for jobs that may no longer exist, it is to ensure that South Africa is where AI companies build, train, deploy, and employ. That requires infrastructure, incentives, and speed. It does not require seven new government bodies.”

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Masie says he has watched AI startups he personally funded or advised struggle – not because of ethical ambiguity, but because they could not access GPU (graphics processing unit) time.

“I have watched founders relocate to the Netherlands, the UAE, or USA, (even Rwanda) not because South Africa lacked an ethics board, but because those countries offered compute credits, co-investment, and a clear signal that they wanted the business.

“This policy, in its current form, would add compliance cost to an ecosystem that barely exists, while offering nothing concrete to help it grow.

“You cannot govern what you have not built.”

The correct sequence, demonstrated by every country that has successfully attracted AI investment, is:

Infrastructure and incentives first,
Governance second (or in parallel).

Not because governance doesn’t matter, but because governance without an ecosystem to govern produces only bureaucracy.

Energy preparedness is the issue

The draft policy dispenses with “energy preparedness for the AI age” in a single bullet point. It is not a bullet point issue. It is the issue, says Masie.

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Ironically, SA has nearly 4 000 megawatts of surplus supply, having gone more than 300 days without load shedding. Electricity demand continues to decline as industrial consumers move to self-generation and residents move to solar rooftop. SA is now generating far more electricity than it consumes, particularly at midday.

“We have surplus electricity at precisely the moment when the rest of the world is desperate for it,” says Masie.

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Between 30% and 50% of planned data centres in the US face delays or cancellation because of power constraints.

Alphabet, Amazon, Meta, and Microsoft are spending over $650 billion this year on AI infrastructure, and are literally running out of places to put it.

Transformer lead times in the US have stretched to five years, while local opposition to data centre development is mounting across North America and Europe.

Says Masie: “South Africa could absorb a meaningful share of that displaced demand, if we act now. Our surplus generation, abundant renewable energy potential, strategic time zone position between Asia and the Americas, and sub-sea cable connectivity make us a viable destination for hyperscaler compute.

“But capturing this requires a deliberate national strategy: dedicated energy allocation frameworks for data centres, streamlined permitting, wheeling agreements, and self-generation provisions that work.

“The draft policy contains none of this.”

No incentives anywhere in sight

The draft policy makes mention of tax breaks, incentives and an AI Innovation Fund without specifying a single mechanism.

There is no R&D tax credit schedule, no matching fund ratios, no Special Economic Zone provisions for AI or data centres.

Nor is there any discussion about exchange control reform to allow local AI companies to raise capital internationally or repatriate earnings without punitive friction.

“There is nothing that would incentivise a company like Nvidia to invest in South Africa (at meaningful scale) and that absence alone could define whether this country participates in the AI economy or watches from the sidelines.”

AI startups in SA face a cost-of-compute disadvantage against competitors elsewhere that receive subsidised cloud access, along with an exchange control regime that treats outward investment as suspicious.

The venture capital market is underdeveloped precisely because government has created no instruments to derisk early-stage AI investment.

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The unstoppable brain drain

Roughly 70 skilled South Africans leave the country every single day.

The AI talent that SA produces is being successfully recruited abroad. Unless policies are changed, the brain drain will continue.

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This skills migration is an emergency that needs urgent attention in the form of competitive research grants, compute access, visa facilitation and an environment where building an AI company in Joburg or Cape Town is a rational economic choice rather than an act of patriotic sacrifice.

South Africa could be the AI services hub for a continent of 1.4 billion people, but Nigeria, Kenya, Egypt, and Rwanda are all moving ahead of us.

Egypt graduated 1 300 AI trainees in 2025, while Rwanda has adopted light-touch regulation. SA’s window as the AI gateway is closing with each passing month of inaction.

Recommendations

Masie makes seven recommendations to fix this:

Declare AI infrastructure a national strategic priority: Make a specified amount of compute power and electricity available to AI.
Capture the energy surplus before it closes: Publish a data centre energy allocation framework within the first year. Position South Africa as a destination for the US and European hyperscaler capital that cannot find power at home.
Build real incentive instruments: Such as R&D tax credits, accelerated depreciation for AI capex, and Special Economic Zones for data centre clusters.
Consolidate the institutions: Replace the seven proposed bodies with one.
Launch an emergency talent retention programme using a range of different incentives.
Make open-source AI a strategic pillar, including for public services and indigenous languages.
Measure what matters: The draft policy contains no quantified targets. There’s no time to waste. Commit to specifics.

“Countries that move decisively on infrastructure and investment incentives in the next 24 months will participate in this economy,” says Masie.

“Countries that spend those 24 months designing ethics boards and ombudsperson offices will find, when they finally look up, that the race has been run without them.”

Read the open letter here.

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