Microsoft and Abu Dhabi's G42 are experiencing delays in a major East African data center project in Kenya due to a disagreement with the Kenyan government over payment guarantees. According to informed sources, Microsoft and G42 had requested that Kenya commit to paying for a guaranteed annual data center capacity. However, negotiations broke down after the government was unable to provide the level of assurance Microsoft desired. Representatives for Microsoft and G42 declined to comment. John Tanui, Principal Secretary of Kenya's Ministry of Information, stated that discussions are still ongoing and the project is "not dead or withdrawn." Sources indicated the involved parties may ultimately decide to scale down the project's size.
Announced in 2024, the agreement originally planned for a $1 billion data center powered by geothermal energy, which would have significantly boosted cloud computing capacity in the region. The initial phase was expected to have a capacity of approximately 100 megawatts, with potential operations starting this year. The broader goal was to eventually expand to 1 gigawatt. However, the project's scale appears to conflict with Kenya's power constraints. Kenyan President William Ruto recently stated at a national event in Nairobi that the country would need to "switch off half the country" to power the data center. Philip Thigo, Kenya's Technology Envoy, clarified that Ruto's comment did not mean the project was paused, but rather that Kenya must confront the scale of energy required to support next-generation digital infrastructure. Tanui added that power requirements are still under discussion. According to one source, negotiations with local developer EcoCloud for a separate 60-megawatt project continue.
For investors, this setback serves as a key reminder: Microsoft's global AI and cloud expansion depends not only on demand for computing power but also on local electricity supply, government commitments, and project-level structural design. The Kenya project was intended to be a cornerstone of Microsoft's broader pledge to help Kenya develop AI, including job training and new software models. It was also seen as a move to counterbalance the technological expansion of Chinese companies across Africa. This project marks the first major collaboration between Microsoft and G42 following Microsoft's $1.5 billion investment in the UAE-based tech firm. Prior to that investment, G42 had agreed to divest its Chinese assets and remove Chinese equipment. For G42, the base represented its ambition to expand beyond its home market and become a major AI cloud developer. Microsoft President Brad Smith had described the project's construction as a symbol of U.S.-UAE diplomatic strength and called it the "biggest step forward for the spread of digital technology in Kenya's history."
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