The World Bank has raised concerns over Kenya’s continued protection of state owned enterprises (SOEs), warning that shielding them from market forces is limiting competition, suppressing productivity, and slowing job creation. The findings are contained in the latest Kenya Economic Update, released in late November 2025, which examines the country’s economic resilience and structural constraints.
According to the report, several major SOEs continue to operate under regulatory preferences that give them advantages over private competitors. These include guaranteed government support, favorable licensing conditions, and limited exposure to competitive pressures. The Bank argues that such practices distort pricing, restrict the entry of more efficient firms, and ultimately weaken Kenya’s competitiveness.
The report highlights that Kenya’s Product Market Regulation (PMR) score remains among the most restrictive in similar middle income economies, indicating persistent barriers that prevent fair competition across sectors. Industries such as energy, telecommunications, logistics, and transport were cited as areas where SOEs hold dominant positions protected by policy, rather than performance.
World Bank economists warn that without reducing these protections, Kenya risks losing out on higher investment flows and the opportunity to build stronger, more dynamic markets.
The report notes that “insulating state-owned enterprises from competition reduces incentives for innovation, limits efficiency gains, and increases the burden on taxpayers.”
The Bank adds that Kenya has shown economic resilience in recent years, but structural constraints particularly weak competition are slowing the pace at which the private sector can create stable, well-paying jobs. The private sector currently generates most new employment, yet the majority remains informal and low income due to limited conditions for firm growth.
The World Bank recommends a set of regulatory reforms aimed at leveling the playing field between SOEs and private firms. These include revising monopoly protections, opening sectors to new entrants, strengthening regulatory independence, and improving oversight on state-firm performance.
According to the Bank, adopting pro-competitive reforms could add more than a percentage point to annual GDP growth and accelerate the creation of quality jobs. Without such reforms, Kenya risks slower growth, continued fiscal pressure, and rising inefficiencies in key public enterprises
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