Kenya’s labor market is facing significant challenges as the majority of new jobs are being created in the informal sector. In 2024, 90% of the 782,300 new jobs were informal, compared to 84% in 2014. This trend has led to concerns about low productivity, limited access to safety nets such as pensions and medical coverage, and unstable incomes for many households.
A recent World Bank report titled "From Barriers to Bridges: Procompetitive Reforms for Productivity and Jobs in Kenya" highlights that the country’s ability to generate formal sector employment has declined over the past decade. The report points out that businesses are struggling with a difficult operating environment and are seeking ways to reduce their costs.
The World Bank recommends that Kenya prioritize pro-competitive reforms to address these structural issues in its economy and labor market. According to the report, “More robust competition lowers prices for consumers, thereby increasing demand for output and labor. It also opens the door to productivity-enhancing investments by firms, leading to higher wages and growing firms that create more employment.”
The report suggests that implementing pro-competitive reforms in sectors such as electricity, transport, telecommunications, and professional services could increase Kenya’s GDP growth rate by 1.35 percentage points. If maintained over time, this could raise per capita income and help Kenya move from lower- to upper-middle-income status. The reforms could also boost annual labor compensation growth by up to 2 percentage points—equivalent to more than 400,000 jobs each year at current wage levels.
To support competition across the economy, several policy interventions are proposed:
- State-owned enterprises (SOEs) should receive targeted financial support based on impact and public service needs rather than blanket exchequer backing. The Government Owned Enterprises Bill of 2025 aims to make SOEs public limited liability companies for greater efficiency.
- Restrictions on foreign investment and trade remain significant barriers. Reevaluating foreign equity ownership limits and non-tariff barriers could give Kenyan businesses better access to technology and global practices. Leveraging opportunities from the African Continental Free Trade Area (AfCFTA) is also recommended.
Sector-specific recommendations include:
- In agriculture—the backbone of Kenya’s economy—the fertilizer subsidy program should be reformed. Currently, a few importers have exclusive rights over certain fertilizers at fixed prices. Introducing competition principles could reduce costs for farmers and improve product selection.
- For energy costs—a major obstacle for private sector growth—increasing transparency in electricity procurement through competitive power purchase agreements is advised. The National Assembly recently lifted a moratorium on new PPAs on November 13th, 2025. The Renewable Energy Auction Policy (REAP) requires competitive procurement for new projects; full implementation of open access provisions under the Energy Act of 2019 would allow generators direct consumer access.
- In telecommunications, further regulation of dominant players is needed along with updated rules on infrastructure sharing and digital markets governance.
The World Bank concludes that while Kenya already has legislation supporting pro-competitive reforms, stronger implementation is necessary: “Doubling down on reform momentum is key to an economy that is fairer, more dynamic, and better able to generate job opportunities worthy of Kenya’s talent.”