Microsoft’s planned $1 billion data centre project in Kenya has slowed after talks with the government ran into problems over payment guarantees and electricity demand.
The project, announced in May 2024 during President William Ruto’s visit to Washington, was expected to become one of the biggest digital infrastructure investments in East Africa.
Microsoft and Abu Dhabi-based G42 planned to build the facility in Olkaria, near Naivasha, using geothermal power. It was also meant to host Microsoft’s first Azure cloud region in East Africa.
However, negotiations later became difficult after Microsoft and G42 asked the Kenyan government to guarantee annual payments for part of the data centre’s computing capacity.
According to reports from Bloomberg, Kenya could not provide guarantees at the level the companies requested, and discussions on the Microsoft data centre project stalled.
The delay has now raised wider concerns about whether Kenya’s current infrastructure can support hyperscale data centres and growing artificial intelligence workloads.
At full scale, the facility was expected to require around 1 gigawatt of electricity. That is close to one-third of Kenya’s current installed power capacity, which stands between 3,000 and 3,200 megawatts.
President Ruto had earlier warned about the pressure such a facility could place on the country’s grid.
“To switch on that one data centre, we would need to shut off power for half the country.”
Kenyan officials say the project has not been abandoned. John Tanui, principal secretary at Kenya’s Ministry of Information, said discussions are still ongoing, although the structure and scale of the project is still under review.
“The scale of the data centre they wanted to do still requires some structuring,” he said, while adding that power requirements are still under discussion.
The government now wants to expand Kenya’s electricity capacity to 10,000 megawatts by 2030 as it pushes to attract more large-scale technology investments.
Officials are also considering a phased rollout, beginning with a smaller 100-megawatt facility before expanding gradually. That approach could reduce immediate stress on the national grid while allowing Kenya to continue negotiations with Microsoft and G42.
The uncertainty around the project also reveals a bigger challenge facing African countries trying to attract global cloud and AI investments.
While demand for digital infrastructure is growing with speed, many countries still lack the power generation and transmission capacity needed to support energy-intensive facilities.
The delay could also affect the rollout of Microsoft Azure services across East Africa, including cloud tools tied to products such as OneDrive and Copilot.
Neither Microsoft nor G42 immediately responded to requests for comment on the reported Kenya data centre dispute.
