Kenya’s dominant telecommunications provider, Safaricom, is launching a cloud computing service today that it says will be the largest on the continent, reflecting the cloud’s emerging importance to economic growth in Kenya and other parts of Africa.

“We are calling it the largest indigenous cloud in Africa,” says George Makori, Safaricom’s senior manager of cloud and managed services, in Nairobi. “The demand is really, really huge.”

Safaricom will provide cheap computing to individuals, entrepreneurs, and large companies alike, though Makori says small and medium-sized businesses, which sustain 80 percent of Kenya’s GDP, might benefit most. “By empowering these [small to medium businesses] through cloud computing, you are increasing the GDP of the country,” he says. Safaricom’s effort joins those of other local cloud providers, such as MTN Business.

In Kenya, traditional IT infrastructure is particularly costly in both absolute and relative terms. Electricity costs about 20 cents a kilowatt-hour—roughly 50 percent more than the U.S. average of 13.5 cents. A server might cost about $5.00 a day to run (more than $1,800 a year), not including cooling and management costs.

Considering that salaries in Kenya average $6,265 for an accountant and $14,588 for an IT manager, that leaves traditional in-house IT infrastructure affordable mainly to well-funded startups and to larger businesses, like insurance companies, banks, and large retailers. And all players, no matter their size, must contend with relatively frequent power outages.

In theory, Kenyans have been able to use the services of large cloud providers such as Amazon and Rackspace. But those who do have faced data latency of several hundred milliseconds or more, because the cloud servers are so far away. Moreover, these two giants require users to pay with a credit card—a barrier to entry for many Kenyans, for whom the mobile payment system M-Pesa is more common.

The latency problem is being addressed by improved Internet connections in Kenya, including a fourth transoceanic cable scheduled to go online soon. But the credit card requirement remains. And this provides an opening for Safaricom, which runs M-Pesa. “Your average small business in Kenya has a line of credit with Safaricom. So they can use that to hire the [cloud computing] virtual machine,” says Phares Kariuki, an engineer in the Kenya branch of Westcon Africa, a major African IT vendor. “It will be easier to use your cloud from Safaricom—it will be cheaper and with no credit card issue.”

Makori says the Safaricom service will offer data storage as well as remote computing on either Linux or Windows operating systems. For now, customers will need to provide their own software, but Safaricom is in negotiations with Microsoft, Oracle, SAP, and others to provide cloud-based software as well.

In the longer term, Safaricom and other cloud providers may install data centers in a planned high-tech city called Konza Technology City. Still in the concept stages (the Kenyan government is seeking investors to fund the expected $7 billion development cost), it would be built about 37 miles south of Nairobi, on what today is scrubland; the government dubs it the “Silicon Savanna.” The data centers Safaricom installs there would likely be of the sort that allow customers to install their own servers and pay a monthly fee for space, cooling, reliable power, and IT support. Makori says that for now, Safaricom is running one data center in Nairobi and a second in Kisumu.

Major international companies see cloud services as key to their business prospects in Africa. Nairobi is home to outposts of Google, Microsoft, IBM, and others.

Meanwhile, use of smart phones is booming in Kenya, thanks to the availability of an $80 model. To serve these customers, the new Safaricom cloud service will allow users of smart phones and computers to visit the Safaricom website, download a data backup tool, put their information in the cloud, and use M-Pesa to pay.

Cloud services are still gaining critical mass in Kenya, says Erik Hersman, cofounder of the mobile mapping platform Ushahidi and a key figure in iHub, which brings together innovators and investors in Nairobi. He calls the payment issue with large providers “a gap that is difficult.” But he adds that startups are generally able to make do with their own individual computers—and in some cases shared servers—during their initial stages of growth.

Even as cloud solutions emerge, familiarity with the concept is still spotty in a country that is rapidly getting wired. In Safaricom’s initial market research six months ago, “one thing we found out that most people don’t know what cloud computing is,” Makori says. “The first challenge is to demystify the cloud. We are able to show that we are very, very cheap compared to you now going out and procuring your own IT infrastructure.”