Africa: Africa's AI Future Hinges On Smaller, Local Data Centres - Experts

Microsoft and G42's planned digital investment in Kenya has become a case study in how large infrastructure deals can run into challenges tied to power availability, policy direction, and public interest.

Unveiled in 2024, the proposed $1 billion-plus investment led by G42 and partners centered on a green data centre in Olkaria powered by geothermal energy. The facility was expected to support a new East Africa cloud region for Microsoft's Microsoft Azure, enabling scalable, secure cloud and AI services for businesses across Kenya and the wider region.

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Speaking at GITEX Kenya, Sandy Okoth, director of the Investment Deal Room at Invest Kenya and an adviser with the Tony Blair Institute for Global Change, said the project's scale quickly became a sticking point.

"When you look at the Microsoft G42 deal, initially it was supposed to be piloted with 100 megawatts of power and then scaled up to one gigawatt," he said. "Kenya is producing around 3,000 megawatts, and peak consumption is about 2,400 megawatts."

He warned that the project could have consumed a disproportionate share of national supply. "This single $1 billion investment was going to consume more than half the country's power," Okoth said, noting Kenya's long-term target of expanding generation capacity to 10,000MW.

The main obstacle, he added, was risk allocation. G42 reportedly sought government guarantees for the full scale-up, including sovereign-backed assurances, an arrangement Okoth said would have made taxpayers "de facto liability bearers in a private sector investment."

Instead, the government pushed policy reforms such as time-of-use tariffs to shift heavy users to off-peak hours, and an open-access regime allowing private power purchase agreements using state transmission infrastructure.

Despite growing investment interest, East Africa remains a small player in the global data infrastructure map. Kenya leads the region with 19 operational data centres, followed by Tanzania with 11. Rwanda hosts three, while Uganda and DR Congo have four each.

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Across Africa, there are about 259 data centres, less than 1% of global capacity leaving much of the continent dependent on servers located thousands of kilometres away.

This gap, analysts say, explains why Africa's digital economy still relies heavily on external infrastructure.

Snehar Shah, CEO of iXAfrica Data Centres, said Africa must leverage its renewable energy potential