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.

The investment will fund the expansion of advanced data centres, artificial intelligence infrastructure, and talent development programmes across the country.

According to Microsoft Vice Chair and President Brad Smith, the company’s focus is to meet the UAE’s surging demand for AI technology. “The biggest share of (the investment), by far, both looking back and looking forward, is the expansion of AI data centres across the UAE,” Smith told Reuters during the ADIPEC energy conference in Abu Dhabi. 

He added, “From our perspective, it’s an investment that is critical to meet the demand here for the use of AI.”

The new funding comes after Microsoft’s $1.5 billion equity investment in G42, Abu Dhabi’s sovereign AI company, last year, a deal that also gave the U.S. firm a board seat. 

G42 has faced some issues in Washington over previous ties with China, but Smith noted that the company had made “enormous progress” in aligning with U.S. legal and compliance standards.

Part of the funding will go towards providing Microsoft’s data centres with some of the most powerful chips available. Licences approved by both the Biden and Trump administrations now allow the company to export thousands of Nvidia GPUs to the UAE. 

Smith revealed that Microsoft currently holds the equivalent of 21,500 Nvidia A100 GPUs in the country, combining models such as A100, H100, and H200. More recently, approvals have been granted for an additional 60,400 A100-equivalent GB300 chips, which are expected to arrive within months.

Between 2023 and the end of this year, Microsoft will have spent $7.3 billion in the UAE. A further $7.9 billion is scheduled for deployment between 2026 and 2029, covering cloud expansion, data centre development, and local operating costs. 

None of this figure includes Microsoft’s involvement in Stargate UAE, a massive data hub announced earlier this year during U.S. President Donald Trump’s Gulf visit.

Smith, in a detailed post on Microsoft’s website, said the company’s approach in the UAE extends beyond technology. It includes driving local talent, building trust, and enhancing economic collaboration between the U.S. and the UAE. 

Microsoft’s workforce in the Emirates now includes nearly 1,000 employees of 40 nationalities, supported by a partner ecosystem of over 1,400 firms employing about 45,000 professionals nationwide.

The company recently established a Global Engineering Development Centre in Abu Dhabi and expanded its AI for Good Lab, focusing on research that benefits communities across Africa and the Middle East. Efforts include training language models for low-resource African languages and skilling one million people in the UAE by 2027.

In February, Microsoft and G42, alongside the Mohamed bin Zayed University of Artificial Intelligence, founded the Responsible AI Future Foundation (RAIFF) in Abu Dhabi to promote ethical AI standards across the Global South. 

The foundation’s work complements an Intergovernmental Assurance Agreement (IGAA), a framework developed with U.S. and UAE input to ensure compliance with American export, cybersecurity, and data protection laws.

“Talent is the engine of AI leadership,” Smith wrote. “Attracting, nurturing, and building AI talent and know-how is essential to the UAE turning its vision of becoming a global leader into a reality.”

With this investment in the UAE, Microsoft is linking American innovation with Emirati ambition through what Smith described as “technology, talent, and trust.”

The data centre, located in the Olkaria region of southwest Kenya, will operate entirely on geothermal energy and aligns with Microsoft’s mission of meeting climate goals while boosting cloud-computing capacity in East Africa.

In tapping into the heat naturally stored beneath the earth’s crust, the project will address two challenges: power reliability and environmental impact. Kenya’s abundant geothermal resources make it an ideal location for such an endeavour.

The initial phase of the project will have a capacity of 100 megawatts, with plans to expand to 1 gigawatt in the future. 

Kenyan President Dr. William Samoei commended the partnership as more than just a technological venture. He noted that the collaboration is a similar concept among three nations, aimed at supporting Kenyan citizens in the global digital industry, facilitating the country’s prosperity.

Beyond the data center, Microsoft and G42 are focused on enhancing Kenya’s digital infrastructure and connectivity. The key components of their comprehensive investment include the East Africa Cloud Region.

Microsoft will launch an East Africa cloud region, providing scalable, secure, high-speed cloud and AI services. This initiative aims to accelerate cloud adoption and digital transformation across Kenya and East Africa.

Again, in collaborating with Kenya’s Ministry of Information, Communications, and the Digital Economy, Microsoft and G42 will boost Internet connectivity nationwide. Their efforts include supporting the development of marine and terrestrial fibre cable infrastructure.

Microsoft’s ongoing work aims to bring last-mile wireless Internet access to 20 million people in Kenya and 50 million people across East Africa by 2025. The companies will develop an AI model tailored to both English and Swahili, promoting local language capabilities, as they finance digital skills programs for Kenyans to thrive in the digital economy.

Brad Smith, Vice Chair and President of Microsoft emphasized the opportunity to bring digital technology to the Global South securely. According to him, this investment is of the government and its people. It’s the largest and broadest digital commitment in Kenya’s history.

Peng Xiao, G42 CEO, agreed with this, noting that the establishment of a green data centre and developing AI solutions aligned with local culture, with G42 being committed to sustainable technological growth. “Together, we lay the foundation for a thriving digital economy in Kenya and the region.”