World Bank tips Kenya on jobs to reverse flagging economic fortunes

Kenya can create more than 80,000 direct jobs and mobilise up to Sh193.5 billion in private investment by fixing a narrow set of policy bottlenecks in three sectors, the World Bank Group said on Wednesday, offering a practical growth agenda at a moment of intense political pressure over jobs.

The Country Private Sector Diagnostic (CPSD), released in Nairobi, identifies avocado and mango production and processing, coastal tourism, and medical consumables manufacturing as the areas with the strongest near-term potential to attract private capital if specific regulatory, tax and planning constraints are removed.

The report lands as President William Ruto faces mounting public anger over the cost of living, limited formal employment and weak income growth.

Roughly one million Kenyans enter the labour market each year, but only about 100,000 are absorbed into formal jobs, according to the report, leaving the vast majority in informal, low-productivity work.

At the heart of the report is a blunt diagnosis of where the Ruto administration needs to improve.

It flags weak enforcement of quality standards, fragmented pest management, delayed VAT refunds, unclear land planning, slow government payments to suppliers, overlapping regulation and a private-sector credit squeeze.

It notes that credit to the  private sector has fallen from 36.7 per cent of GDP in 2015 to 29.1 per cent in 2024 as government borrowing crowds out business lending. Electricity tariffs of around Sh50 per kilowatt-hour are among the highest in the region, with 75 per cent of firms reporting frequent outages, while water access constraints affect more than 37 per cent of firms.

Governance weaknesses also weigh on investors. Kenya ranks in the bottom third of the Transparency International Index, and one-third of firms report being asked for bribes, the report says.

"The Kenya CPSD identifies a pathway to unlock up to US$1.5 billion in investment and support more than 80,000 direct jobs," World Bank Division Director for Kenya, Rwanda, Somalia and Uganda Qimiao Fan said in a statement.

"By addressing key constraints to private investment, Kenya can attract new capital, increase competitiveness, and create opportunities at scale."

IFC Division Director for Eastern Africa Mary Porter Peschka said: "Kenya has the economic diversity, entrepreneurial talent, and regional reach to attract significantly more private investment. The priority now is to translate these strengths into stronger businesses and jobs. This report sets out practical reforms that can help make that happen."

Kenya is Africa's largest avocado producer and a major mango producer, but the report says poor enforcement of export quality standards, fragmented pest management and delays in value-added tax refunds on imported processing equipment are costing the country investment and reputation.

"Inadequate inspection and enforcement systems of quality standards permit the export of immature fruit, damaging the reputation of Kenyan fruit and reducing demand," the report says. It notes rejection rates for immature Kenyan fruit in premium markets such as the European Union reached as high as 30 per cent in 2025.

CPSD recommends replacing sporadic inspections that rely on exporter-selected fruit samples with universal, consignment-level inspections at packhouses using independent, risk-based sampling, overseen by the Horticultural Crops Directorate.

It also calls for sequential enforcement of export clearance controls under a single digital platform, the National Horticulture Traceability System, so that no consignment reaches phytosanitary certification or customs release without a passing quality inspection.

On pests, the report urges Parliament to pass the draft Plant Protection Bill 2025 to create a statutory co-financing mechanism for pest detection and emergency response, and to publish implementing regulations setting out who declares an outbreak, who acts, who pays and within what timeframes.

It also recommends establishing additional low pest prevalence areas in priority mango and avocado counties. A pilot in Makueni County reduced fruit fly populations by more than 85 per cent and raised mango processing yields from 8 per cent to 14 per cent, at a cost of about Sh4,257 per hectare, the report says.

To unlock processing investment, the report proposes a VAT deferment regime for fruit processing equipment through an amendment to the Finance Act, so that importers account for the tax on their next return rather than paying cash at the border.

Together, the measures could unlock up to Sh21.5 billion in incremental private investment and 36,000 more and better-paid jobs over a decade, relative to a business-as-usual scenario, the report estimates.

Kenya's 600-kilometre Indian Ocean coastline, its proximity to safari circuits and its strong meetings and conference market give it a differentiated tourism proposition, yet the coast attracts only about 134,000 European arrivals, compared with 2 million from the same markets at comparable long-haul beach destinations.

"Kenya's coastal tourism areas lack adequate spatial and beach management plans, leaving investors uncertain about surrounding land use and the preservation of tourism assets," the report says.

CPSD recommends that the State Department for Lands and Physical Planning recognise tourism as a distinct land-use category in the national spatial plan and planning handbook, and that county governments designate coastal tourism zones in Diani, Mombasa, Kilifi, Watamu and Lamu, with subdivision controls to prevent further fragmentation of beachfront land.

It also proposes designating selected high-value beaches as "beach parks" under an International Union for Conservation of Nature-aligned framework, and establishing a public-private management entity for each zone to enforce planning rules and coordinate county and national agencies.

To tackle land speculation, the report recommends amending the Land Act to allow an idle-land rent premium of at least 5 per cent on leasehold public land where development conditions have not been met, and extending digitised land registry coverage, known as ArdhiSasa, into Kwale and Kilifi counties.

On air access, it calls on the State Department for Aviation and Aerospace Development and the Kenya Civil Aviation Authority to publish the objective criteria used to grant airline access to Mombasa and to publish Kenya's bilateral air service agreements.

"If implemented as part of a broader package of public investments and reforms, the recommendations could help unlock $560 million in private investment in coastal hotels and related services over the medium term," the report says, supporting up to 14,000 more and better-paid job equivalents.

Tourism has one of the strongest employment multipliers in Kenya's economy, at 2.7, meaning each direct job supports an estimated 2.7 more elsewhere.

Kenya's medical consumables market reached Sh55.5 billion in 2025 and is projected to grow to Sh69.7 billion by 2030, while the wider African market is estimated at Sh619.2 billion and growing at around 10 per cent a year. Kenya is already among Africa's top recipients of health-related foreign direct investment.

But the report says fragmented public procurement, delayed government payments, overlapping regulation and VAT distortions are holding back domestic manufacturing.

"Local manufacturers are not paid on time for supplies to the government, negatively affecting cash flow and business viability," it says, noting the Kenya Medical Supplies Authority (Kemsa) has more than Sh7.6 billion in overdue payments and that delays of six to 24 months are common.

CPSD recommends that Kemsa consolidate and publish government procurement data for medical consumables to make demand more predictable, and that the National Treasury link the electronic government procurement system to the Integrated Financial Management Information System to enable real-time, automated payments.

It also proposes amending the Public Finance Management Act to redirect funds within existing health financing channels to KEMSA through an escrow mechanism, so suppliers are paid promptly once delivery conditions are met.

On regulation, the report calls on the Pharmacy and Poisons Board to require approval from only one reference regulatory authority for reliance-based marketing authorisation, instead of two, aligning with World Health Organisation good practice. It urges the Ministry of Health to gazette subsidiary regulations under the Kenya Health Products and Technology Regulatory Authority Bill to establish adverse event reporting, post-market surveillance and enforceable registration timelines, advancing the PPB toward WHO Maturity Level 3 status.

It further recommends that the Ministry of Health and the Ministry of Investment, Trade and Industry jointly suspend the Kenya Bureau of Standards certificate of conformity requirement for medical devices already registered by the PPB, ending dual regulatory gatekeeping that inflates compliance costs.

To correct VAT disadvantages, the report says Kenya should zero-rate a clearly defined list of locally manufactured medical consumables, allowing manufacturers to recover input VAT and compete with importers.

The reforms could unlock up to Sh100.6 billion in incremental private investment and 33,200 more and better-paid direct jobs over 10 years, with further indirect employment gains, the report estimates.

CPSD cautions that sector-specific fixes are not a substitute for economy-wide reform. It says the recommendations align with Kenya's Vision 2030 and the Bottom-Up Economic Transformation Agenda, and could help reduce the cost and uncertainty of doing business while deeper structural reforms advance.

"This report sets out practical reforms that can help make that happen," Peschka said.