Microsoft East Africa data centre project delayed over payment disputes

Microsoft’s plans to establish a flagship data centre in East Africa have been delayed following a breakdown in negotiations with the Kenyan government.

According to recent reports from Bloomberg News on Sunday, the project stalled after Microsoft and its partner, UAE-based AI firm G42, requested guaranteed annual payments for a specific volume of computing capacity.

The Kenyan government was reportedly unable to provide these financial assurances at the level requested by the tech giant, leading to a pause in the billion-dollar initiative.

The project, which was first announced in May 2024 during President William Ruto’s state visit to Washington, was envisioned as a cornerstone of the region's digital infrastructure.

Located in Olkaria, the facility was designed to run entirely on geothermal energy and host a new Microsoft Azure cloud region.

However, President Ruto recently acknowledged that the scale of the 1-gigawatt facility would place an unsustainable strain on the national grid, which currently has an installed capacity of approximately 3,000 megawatts.

"To switch on that one data centre, we would need to shut off power for half the country," the President remarked during an event in Nairobi.

Despite the setback, Kenyan officials maintain that the project has not been officially withdrawn. John Tanui, the Principal Secretary at the Ministry of Information, stated that negotiations are ongoing and that the project "is not failed."

Analysts suggest that Microsoft and G42 may eventually decide to scale back the project to a more manageable footprint that aligns with Kenya's current power and financial capabilities.

The delay underscores the significant infrastructure and economic hurdles facing hyperscale cloud expansion within emerging markets across the African continent.