Microsoft and G42 are investing $1 billion in Kenya's digital infrastructure, marking the largest private-sector digital investment in the country's history. The investment will fund a "green" data center powered by Kenya's geothermal energy, expected to be completed in 24 months. Kenya's data center market, valued at $184 million in 2023, is projected to grow at a 12% CAGR from 2024 to 2029. This initiative will create over 1,000 direct and 5,000 indirect jobs, leveraging Kenya's 791.5 MW geothermal capacity.
Source: Emerging Real Estate Digest
Today, Emerging Markets Business published an article regarding an announcement made this week that Kenya would receive a $1 billion investment from Microsoft and G42 to invest in Kenya's digital infrastructure. This investment is the largest single private-sector digital investment in Kenya's history and coincides with Kenyan President Ruto's trip to the United States this week.
The investment objectives have several key components and will enhance Kenya's digital infrastructure. A primary use of the proceeds will be to construct a data center within 24 months to support Microsoft Azure's offerings in East Africa. The data center will be "green" and powered by Kenya's geothermal energy reserves.
In 2023, Kenya's data center market was valued at approximately $184 million, expected to grow at a CAGR of 12% from 2024 to 2029. The country's digital economy, currently contributing around 7.7% to GDP, is projected to rise to 10% by 2025. With a population of 53 million, Kenya has an internet penetration rate of 43%, indicating significant room for growth.
Kenya's strategic location and robust geothermal resources make it an attractive hub for data centers. The country has 26,000 km of fiber optic cable, supporting digital infrastructure growth. The investment will also create jobs, with projections of over 1,000 direct and 5,000 indirect jobs during construction and operation.
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Geothermal Powered Data Center
Kenya is home to one of the largest geothermal fields in the world with an installed capacity of 791.5 MW which are mainly located in the Olkaria region along the Great Rift Valley, about 75 miles (i.e., 120 kilometers) northwest of Nairobi. This region represents virtually all of Kenya's total capacity of 891 MW.
Developing Olkaria's geothermal capacity began in the 1980s with the construction of Africa's first geothermal plant by KenGen, Kenya's leading electricity generation company. The plant was commissioned with an installed capacity of 45 MW.
Since then the power plant has been expanded four times with the last being the addition of the Olkaria V Power Station which brought the total generation capacity of the power plant to 791.5 MW, making it one of the largest geothermal power plants in the world. The largest being The Geysers in California with an installed capacity of 1,517 MW.
Electricity is generated from geothermal sources by harnessing the natural heat from the earth. Hot water or steam is extracted from underground reservoirs through wells and used to drive turbines, which in turn produce electricity. The steam is then cooled and condensed back into water, which is reinjected into the reservoir, making it a cost-effective, renewable and sustainable energy source.
The first phase of this data center will require 100 MW but the full project will require one gigawatt of electricity from the grid. Estimates of timelines and costs for the entire project are not presently available.
G42 Will Lead Initial Investments
“In collaboration with Microsoft and other stakeholders, G42 will lead the arrangement of an initial investment of $1 billion for the various components outlined in the comprehensive package,” Microsoft said in a statement on Wednesday.
G42 is the largest AI firm in the UAE and is backed by the UAE government as well as Microsoft who recently invested $1.5 billion into G42. A condition of the investment was that G42 would terminate all business dealings with Chinese firms such as Huawei, and part of the broader push to limit China's access to advanced AI technology.
“This will take several years to give us a positive financial return,” G42's CEO, Peng Xiao said. “But we’re not there for the near-term return. We believe this is a continent where we have to have a strong foothold.”
G42's expansion into Kenya aligns with the UAE's broader $100 billion investment pledge in Africa over the past two years. This initiative is part of the UAE's strategy to enhance its geopolitical influence and compete with Saudi Arabia in AI dominance.
Microsoft's Data Center Strategy for Africa
Microsoft has been actively investing in data centers in Africa to support its cloud computing services, particularly Microsoft Azure. Most of the investments have occurred in South Africa starting in 2019 when Microsoft launched its first data centers in Cape Town and Johannesburg.
This marked a significant milestone for the company, as it was the first global cloud provider to deliver cloud services from data centers on the African continent. The Kenya data center will be the next iteration on the Africa strategy.
South Africa has received the bulk of the $5 billion investment expected for data centers in Africa by 2026 attracting data center investments from big tech companies (i.e., hyperscalers) such as Google, Amazon, Microsoft, and Oracle. Further investment has come from colocation investment firms such as Teraco, Africa Data Centers, and Convergence Partners.
According to Cloudscene, South Africa houses 55 of the Continent's 121 data centers.
South Africa's Power Struggles Increase Kenya's Attractiveness
Perhaps one reason Kenya was selected for this investment was the potential for abundant geothermal energy. South Africa has been plagued by power issues making operating data centers in the country cost-prohibitive and more expensive than operating similar centers in Europe or other parts of the world.
“The frequent load-shedding and unreliable energy supply from the utility is hindering the growth of data centers in South Africa. This is significant because South Africa is not only the largest peering hub in the Sub-Saharan Africa, but it also serves as a crucial access point for neighbouring countries to access applications, local caching, and even the internet through the multiple submarine fibre optic systems that land in SA,” according to Karabo Thulo, a data center professional.
South Africa's power grid is marked by aging and lossy infrastructure, expensive power procurement costs, lack of metering, and outright theft of power. These challenges have had a considerable impact on data center operators forced to make additional CAPEX investments to ensure power is reliably available when the national grid is down.
Meanwhile, Kenya has been making strides in improving its business environment, with reforms aimed at reducing bureaucracy and improving the ease of doing business. The country has also been actively promoting investment in the technology sector, including data centers. This could be a significant factor in the decision to invest in data centers in Kenya.
