NAIROBI, Kenya — Kenyan workers are receiving lower labour compensation relative to company profits than workers in comparable economies, owing to weak competition that allows firms to maintain unusually high profit margins, a new joint report by the World Bank and CAK has revealed.
The study analyses sector-by-sector gross operating margins over a 15-year period and finds that Kenyan firms consistently record higher margins than their peers in other lower-middle-income countries. These margins have risen sharply since 2008, even in sectors where global trends show the opposite.
“Persistently high margins signal limited competitive pressure,” the report states. “They indicate that firms can charge higher prices relative to costs, reducing consumer welfare and suppressing labour compensation.”
The report warns that weak competitive dynamics—driven by restrictive regulations, market concentration, and state dominance—limit firm entry and slow job creation. Kenya has added between 780,000 and 925,000 jobs annually since 2020, against a government target of 1.2 million.
Sectors with the highest distortions—energy, telecommunications, transport, and professional services—also exert strong spillovers across the economy.
Removing barriers in these sectors could boost Kenya’s GDP growth rate by up to 1.35 percentage points and raise labour compensation by nearly 2 P.c annually, equivalent to more than 400,000 jobs a year.
The report urges Parliament and regulators to prioritise pro-competition reforms, strengthen enforcement against anticompetitive conduct, and dismantle statutory protections for dominant players.
It concludes that improving competition is one of the most powerful levers available to raise wages, expand job opportunities, and drive inclusive growth.
