NAIROBI, Kenya – Kenya’s economy is forfeiting more than Sh77.7 billion in additional Gross Domestic Product (GDP) and the creation of over 400,000 jobs annually due to persistent anti-competitive practices across key sectors. This is according to a new joint report by the World Bank and the Competition Authority of Kenya (CAK) launched in Nairobi on Thursday, November 27, 2025, EAT.

The report, titled "From Barriers to Bridges: Procompetitive Reforms for Productivity and Jobs in Kenya," identifies a landscape where state dominance, restrictive regulations, and high barriers to entry stifle innovation and inflate costs for consumers and businesses. The analysis indicates that comprehensive pro-competition reforms could boost Kenya's annual GDP growth by as much as 1.4 percentage points.

Speaking at the launch, CAK Director-General David Kemei emphasized the urgent need for a coordinated reform effort. "The findings reaffirm the direct link between competitive markets, productivity, and economic resilience," Kemei stated. "Uncompetitive markets raise business costs, stifle Small and Medium-sized Enterprises (SMEs), and ultimately hurt consumers through higher prices and reduced choice."

State Dominance and Market Distortions

A primary concern highlighted in the report is the extensive and often inefficient presence of State-Owned Enterprises (SOEs) in commercial markets. The government holds stakes in over 200 such entities, many of which operate in competitive sectors where public ownership lacks a clear rationale. These SOEs frequently benefit from subsidies, bailouts, and loan guarantees, creating an unlevel playing field that crowds out more efficient private investment.

According to the World Bank's analysis, financial support to underperforming SOEs has cost taxpayers an equivalent of 6% to 7% of GDP annually in recent years, a figure that reached approximately Sh1.199 trillion in the fiscal year ending June 2024. This financial drain diverts public resources from critical services and perpetuates inefficiencies, particularly in sectors like energy and agriculture.

Sector-Specific Bottlenecks Harming Kenyans

The report provides a granular analysis of the barriers in critical areas:

• Electricity: The study points to a lack of transparent and competitive bidding for power purchase agreements (PPAs) and the dominance of Kenya Power as key drivers of high energy costs. These inefficiencies result in Kenyan electricity tariffs being significantly higher than regional peers—53% higher than Uganda's and 88% higher than Tanzania's. For manufacturers, high energy costs, which can account for up to 30% of production expenses, severely undermine competitiveness.
• Professional Services: The report identifies restrictive rules, such as rigid minimum fees and discriminatory licensing regimes, as significant barriers to competition. These regulations limit consumer choice and can inflate the cost of essential services in fields like law, engineering, and architecture.
• Agriculture: In the agricultural sector, the report critiques the design of the fertilizer subsidy program, which has granted exclusive distribution rights to a few firms. This has reportedly led to shortages and increased costs for farmers, undermining a sector that is the backbone of the Kenyan economy.

The Path to Economic Renewal

The World Bank and CAK stress that these barriers are not insurmountable but are the result of policy choices that can be reversed. The report calls for a "whole-of-government" approach to dismantle these hurdles. Key recommendations include reforming SOE governance to ensure they compete on neutral terms, strengthening the enforcement of competition law, and reducing barriers to trade and foreign investment.

"Economic growth momentum could be further sustained by addressing key barriers to competition, which would also lead to more and better-paying jobs, and lower prices to consumers," said Qimiao Fan, a World Bank Division Director, in a statement related to the report's findings.

The report notes that Kenya has the most restrictive Product Market Regulation (PMR) score among countries with available data, highlighting substantial barriers to market entry and limitations on trade. Addressing these issues is presented as critical for Kenya to achieve its goal of transitioning to an upper-middle-income economy and tackling the challenge of youth unemployment, with official data showing that 90% of the 782,300 jobs created in 2024 were in the informal sector.

The ongoing legislative efforts, such as the Competition Amendment Bill 2025 and the Government-Owned Enterprises Act of 2025, are cited as positive steps toward creating a fairer and more dynamic economic landscape. The successful implementation of these reforms, the report concludes, is essential to unlock Kenya's vast economic potential for the benefit of all its citizens.