The World Bank’s new report, From Barriers to Bridges: Pro-Competitive Reforms for Productivity and Jobs in Kenya, warns that the country’s ability to create formal-sector jobs has weakened over the past decade. A tougher business environment has forced firms to slash overheads rather than expand payrolls
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By The Weekly Vision Business Desk
Kenya’s informal economy now accounts for 90 % of all new jobs, up from 84 % a decade ago, according to the latest World Bank report. In 2024, it generated 704,000 of the 782,300 net new positions created nationwide. This heavy reliance on informal work poses a triple challenge: chronically low productivity, inadequate social protection (pensions, medical cover), and volatile incomes that leave millions of households exposed to shocks.
The World Bank’s new report, From Barriers to Bridges: Pro-Competitive Reforms for Productivity and Jobs in Kenya, warns that the country’s ability to create formal-sector jobs has weakened over the past decade. A tougher business environment has forced firms to slash overheads rather than expand payrolls.
The prescription is clear:
Kenya must place pro-competitive reforms at the heart of its economic policy if it is to unlock sustainable formal employment and higher living standards. Stronger competition drives down consumer prices, boosts demand, encourages productivity-enhancing investment, raises wages and enables firms to grow and hire more workers.
The potential gains are substantial:
- Full pro-competitive reforms in key service sectors (electricity, transport, telecommunications and professional services) could add 1.35 percentage points to annual GDP growth.
- Sustained over time, this would raise per-capita income and accelerate Kenya’s journey towards upper-middle-income status.
- The same reforms could increase annual labour compensation growth by up to 2.0 percentage points, equivalent to more than 400,000 additional formal jobs per year at current average wages.
Practical steps Kenya can take
Economy-wide measures.
- Reduce distortions caused by state-owned enterprises (SOEs)
Recurrent bailouts and privileged access to finance create an uneven playing field. The government should tightly target support and loan guarantees to genuine public-service obligations. The Government-Owned Enterprises Bill 2025, which aims to convert SOEs into public limited companies, is a welcome move, but swift and rigorous implementation will be essential.
Ease restrictions on foreign investment and trade
Foreign-equity caps and non-tariff barriers still limit access to technology, inputs and global best practice. Capitalising fully on the African Continental Free Trade Area (AfCFTA) would amplify these benefits. Sector-specific interventions.
Agriculture:
Reform the fertiliser subsidy programme, which currently grants exclusive rights to a handful of importers and distributors. Introducing competitive selection of suppliers and issuing e-vouchers that farmers can redeem at outlets of their choice would lower transport costs, improve product choice and deliver better value for public money. Energy
High electricity costs remain a major drag on competitiveness.
Key actions include:
- Competitive procurement of new power-purchase agreements (the National Assembly lifted the moratorium on new PPAs on 13 November 2025)
- Full rollout of the Renewable Energy Auction Policy
- Implementing the open-access provisions of the Energy Act 2019 to allow generators to sell directly to large consumers
Telecommunications:
Despite impressive progress, data costs and digital adoption lag regional peers. Stronger regulation of dominant players, updated rules on infrastructure sharing, spectrum management and interconnection and clearer frameworks for digital markets would drive down prices and spur innovation and inclusion.
The World Bank stresses that Kenya already possesses much of the necessary legislation. What is now required is decisive implementation to create a fairer, more dynamic economy capable of generating productive, formal jobs that match the aspirations and talents of its people.
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