By Edwin Baru, Partner, Bowmans

Digital growth in East Africa is shifting from a narrative around connectivity and innovation to one of compute – the processing power, networking and memory needed to carry out complex digital operations. To facilitate development in this sector, countries in the region must extend their power and water infrastructure, build heavy-duty infrastructure to house data centres and backup systems, and extend their access to high-bandwidth, low-latency connectivity. To factor all these requirements into the mix, the growth of the sector in East Africa is best seen through a hub-and-spoke model, with Kenya serving as the central hub, connecting Tanzania, Uganda, Rwanda and Ethiopia.

Kenya

Mobile market

The country leads in development of fintech and mobile money, pioneered by the growth of M-Pesa. This fintech ecosystem has driven broad growth in ICT, with most Kenyans using their mobile numbers primarily to access financial services. According to the Communications Authority of Kenya, the country had an impressive mobile penetration rate of 149.5% as of 31 December 2025 . This is driven by a consumer market that commonly holds multiple SIM cards -  retaining their primary mobile money SIM while using SIMs from other networks to take advantage of better voice and data offers.

Infrastructure and energy

Digital infrastructure is anchored by strategic subsea cables, of which eight are currently operational in Kenya, with additional lines under discussion.

Energy access remains a core driver for digital infrastructure investment and the country’s electricity grid is heavily dominated by renewables. According to the International Energy Agency, Kenya was sourcing nearly 90% of its electricity generation from renewable sources in 2023. For enterprise operators seeking green credentials and the reduction of carbon emissions, the jurisdiction offers a highly favourable environment for developing green ICT infrastructure. This is highlighted by active plans to establish a dedicated data centre hub in Naivasha near the Olkaria geothermal fields, for example.

On the other hand, Kenya is still grappling with the aftermath of a previous moratorium on state utility power purchase agreements, which left several advanced independent power projects stranded without buyers. The upside is that this has created secondary opportunities, including co-locating data centres directly within power plants or building containerised data centres at private generation sites.

Regulations

This year has been a busy one for Kenyan regulators in the digital infrastructure space. The Government, which is well aware of the lack of data centre capacity in Kenya, has been quick to respond to investors’ concerns about a lack of regulatory guidance. The decision was taken to regulate data centres as network service providers, with mixed reactions in the marketplace. On the one hand, there is relief that regulatory clarity has been provided; on the other, there is concern about the complexity of the new approach, which will see data centres being regulated as active electronic and data-processing infrastructure rather than passive (non-electronic and physical) infrastructure. The introduction of the AI Bill on governance, privacy and public safety will also affect data centres, which are now subject to multiple, multifaceted streams of regulation. The question has been raised as to whether Kenya is trying to regulate too much, too soon – especially when the challenges of energy security and data centre infrastructure availability remained unresolved.

Tanzania

In contrast with Kenya, Tanzania seems to be keeping its data centre regulatory framework simple. The technical requirements that the Tanzania Communications Regulatory Authority issued recently are strongly modelled on international standards, with little local customisation and few surprises for investors.

The other critical piece of legislation affecting data centres in Tanzania is the Personal Data Protection Act, which came into force in 2023, introducing strict data sovereignty requirements that regulate the local storage and processing of Tanzanian citizens’ personal data.

From a commercial perspective, Tanzania has the advantage of a robust finance and banking sector and a growing renewable energy supply, enhancing its position as a jurisdiction with strong investment potential.

Ethiopia, Uganda and Rwanda

These are definitely markets to watch in the region.

Ethiopia has a massive population and offers substantial scale, although the current operational environment presents entry challenges that must first be resolved. Uganda is a smaller but growing market thanks to its carrier-neutral colocation policy. Rwanda’s market scale is limited, but it has a policy-forward environment that is of interest to investors.

Operational realities and investment strategies

Ongoing challenges that directly affect data centre development in the region include the familiar constraints of energy transmission and water scarcity. Less discussed, but arguably as critical in Kenya, is the vandalisation of infrastructure - an often-overlooked risk that forces investors to allocate significant additional resources to physical security, including collaboration with law enforcement agencies.

Investing in this market requires a careful balancing act in terms of time and scale to avoid overbuilding capacity ahead of viable demand, particularly in smaller economies. Regional projects must also compete for international finance against jurisdictions that offer a more seamless business environment or larger incentives.

Amid the challenges, there is opportunity. In East Africa, success in the digital sector will not be a single-market story. Rather, success lies in executing a regional, multi-market strategy anchored in Kenya and supported by the emerging nodes around it.