Microsoft and G42 Plan to Build $1 Billion Data Hub in Kenya

The investment announcement in May 2024 coincided with Kenyan President William Ruto’s state visit to the United States and reflects growing global interest in Africa’s digital and cloud infrastructure potential. G42, the UAE’s leading artificial intelligence firm, will lead the initial $1 billion investment in collaboration with Microsoft and other stakeholders. A major component of the initiative is the development of a geothermal-powered data center outside Nairobi that will host Microsoft Azure cloud services for East Africa.

The facility will be completed within two years and is expected to create over 1,000 direct and 5,000 indirect jobs across construction, operations, and ancillary services. It forms part of a broader strategy to decentralize Africa’s digital infrastructure, which is currently concentrated in South Africa.

G42, backed by the UAE government and Microsoft (which previously invested $1.5 billion in G42), is expanding its presence in key African markets as part of the UAE’s broader $100 billion Africa investment pledge. G42’s recent withdrawal from partnerships with Chinese tech firms marks a realignment toward U.S.-friendly digital infrastructure partnerships.

Why Kenya?

Kenya’s digital economy currently accounts for about 7.7% of GDP and is projected to reach 10% by 2025. With a population of over 53 million, and an internet penetration rate of 43%, the country has significant upside for digital growth. It boasts 16,150 miles (26,000 km) of fiber optic cable and one of the most developed mobile money ecosystems in the world, providing a strong foundation for digital expansion. M-Pesa launched in 2007 in Kenya and became one of the world's first widely successful mobile money platform, just after GCash's launch in the Philippines in 2004.

In 2023, Kenya’s data center market was valued at $184 million, making it the fourth-largest in Africa after South Africa, Nigeria, and Egypt. While still modest in size, Kenya’s market is forecast to grow rapidly, fueled by rising demand for cloud services, AI infrastructure, and localized data storage to meet sovereignty and regulatory requirements. Nairobi’s position as a regional tech and services hub, home to major fintechs, startups, and global tech firms, further anchors demand.

Geothermal-Powered Infrastructure

A defining feature of the project is its reliance on Kenya’s geothermal energy, a renewable and cost-efficient source. Kenya currently has an installed geothermal capacity of 985 MW, most of it generated in the Olkaria region of the Great Rift Valley. This makes it the leading producer of geothermal power in Africa and among the top ten globally.

Kenya accounts for over 90% of Africa’s geothermal output, far ahead of countries like Ethiopia (~25 MW) and Djibouti (~15 MW), which are still in early development stages. The Olkaria field alone surpasses all other geothermal installations on the continent combined, reinforcing Kenya’s advantage in supporting energy-intensive infrastructure like data centers.

Globally, geothermal-powered data centers remain rare but significant. Google’s facility in Nevada taps enhanced geothermal systems to help meet its carbon-free energy goals, while Iceland’s geothermal-powered data centers attract blockchain and AI firms seeking low-emissions hosting in a cool climate. Kenya’s project would be the first of this scale in Africa, positioning it among a small group of countries using geothermal energy to support digital infrastructure.

The planned data center’s first phase will require 100 MW of power, with eventual capacity expected to exceed 1 GW—placing it among the largest in Africa. Kenya’s renewable energy base offers a key advantage as global tech firms push for greener, more resilient operations.

WATCH: How Geothermal Energy Works (3D Animated Explainer Video).

Strategic Considerations: Why Not South Africa?

While South Africa has historically dominated Africa’s data center market, hosting 55 of the continent’s 121 data centers and accounting for over 60% of Africa’s colocation capacity, its longstanding energy crisis is deterring new investment. The country experiences frequent load shedding, with rolling blackouts ranging from 2 to 10 hours a day, with power availability dropping to just 70% of demand during peak crisis periods in 2023.

The financial burden of mitigating these outages is substantial. Data center operators are often forced to invest in redundant diesel generators, private substations, and large-scale UPS systems, pushing capital expenditures significantly above regional norms. According to Africa Data Centres Association reports, this can add 15–25% to initial build costs and substantially increase operating expenses over time.

Without its power reliability issues, South Africa, with its deep enterprise IT market, multiple subsea cable landings, and skilled tech workforce, would be the natural hub for hyperscale expansion on the continent. Instead, global firms are forced to turn to markets like Kenya, which offer renewable power stability, and better overall climates for doing business.

Microsoft’s Broader Africa Strategy

Microsoft launched its Africa-focused data center rollout in 2019 with two Azure cloud regions established in Cape Town and Johannesburg, South Africa. Since then, the continent has seen over $5 billion in data center investment, with much of it concentrated in South Africa due to its strong subsea cable connectivity, enterprise ecosystem, and established infrastructure.

Microsoft has since pivoted its expansion northward. This $1 billion projects is poised to serve as the new East Africa Cloud Region and represents the next major phase in its continental strategy. The company is also investing in AI skills development, last‑mile wireless connectivity for up to 20 million Kenyans by end‑2025, and establishing an East Africa Innovation Lab in Nairobi to support local innovation and regional cloud adoption.