Procompetitive reforms in key sectors could significantly boost Kenya’s economic growth and job creation, with the potential to raise the country’s GDP by 1.35 percentage points annually and generate up to 400,000 jobs per year at the average wage. These reforms focus on creating a level playing field between state-owned and private enterprises, reducing trade and investment barriers, and removing regulatory restrictions in critical input sectors such as electricity, telecommunications, and fertilizer. With 90% of the 782,300 new jobs created in 2024 concentrated in the informal economy, Kenya faces challenges including low productivity, inadequate social safety nets, and unpredictable incomes that leave households vulnerable to economic shocks.
The World Bank’s report, From Barriers to Bridges: Procompetitive Reforms for Productivity and Jobs in Kenya, highlights the deterioration of Kenya’s formal sector job creation over the past decade due to a challenging operating environment. Strengthening competition is identified as a critical pathway to address structural issues, as more robust competition can lower consumer prices, stimulate demand for output and labor, and encourage firms to make productivity-enhancing investments that raise wages and expand employment.
Sector-specific reforms could have transformative effects on Kenya’s economy. In agriculture, reforming the fertilizer subsidy program to allow wider private sector participation and introducing e-vouchers could reduce costs for farmers, improve product selection, and enhance the efficiency of public spending. In the energy sector, increasing transparency in electricity procurement, implementing competitive processes for power purchase agreements, and enabling open access for generators could lower energy costs and support private sector growth. Telecommunications reforms, including stronger regulation of dominant players, improved infrastructure sharing, and better management of digital markets, could reduce data costs, enhance connectivity, and accelerate digital adoption by businesses.
At the economy-wide level, ensuring competitive neutrality for state-owned enterprises by targeting financial support and implementing the Government Owned Enterprises Bill of 2025 effectively would reduce market distortions and improve efficiency. Reevaluating foreign investment and trade restrictions and leveraging opportunities presented by the African Continental Free Trade Area (AfCFTA) would provide access to critical inputs, technology, and global best practices.
Kenya has a strong legislative foundation for procompetitive reforms, but fully implementing these measures is essential to unlocking productivity, fostering formal sector job creation, and creating a fairer and more dynamic economy. By doubling down on these reforms, Kenya can enhance economic output, increase wages, and build a private sector capable of driving inclusive and sustainable growth.
