A recent World Bank report has identified governance, regulatory, and structural weaknesses as significant obstacles to private investment in Kenya. The Kenya Country Private Sector Diagnostic report, published in September 2026, notes that despite strong fundamentals for private-sector-led growth, the country has struggled to translate economic growth into sufficient investment, productivity, exports, and formal jobs.
The report highlights that corruption and red tape are major concerns among investors, with one-third of firms surveyed experiencing at least one request for a bribe. Additionally, 25.3 per cent of firms identified business licensing and permits as a major or very severe constraint. These findings suggest that governance weaknesses are undermining investor confidence at a time when Kenya is seeking more private capital to drive economic growth.
High taxes, unreliable utilities, expensive credit, county levies, land problems, and climate shocks are compounding the burden on investors, threatening Kenya's efforts to attract private capital and create jobs. The report shows that 64 per cent of firms identified tax rates as a major or very severe constraint in the 2025 World Bank Enterprise Survey, while 38.6 per cent cited tax administration.
The World Bank notes that Kenya's corporate income tax rates are broadly comparable with those of regional peers, but the wider tax system creates uncertainty through multiple levies, frequent changes, and administrative requirements. The National Tax Policy of 2023 has been criticized for its non-binding nature, allowing frequent, piecemeal changes through annual Finance Bills.
Devolution has introduced another layer of complexity, with business permits, property rates, market fees, and other charges varying considerably across counties. This has resulted in an uneven regulatory environment for businesses operating in multiple jurisdictions. The County Licensing (Uniform Procedures) Act of 2024 and regulations issued in 2025 aim to standardize licensing, reduce duplication, and promote digital processes.
However, the World Bank notes that even where laws and regulations exist, their implementation faces severe lags. Businesses are also paying heavily for unreliable basic services, with electricity tariffs of about $0.26 per kilowatt-hour being among the highest in the region. About 75 per cent of firms reported frequent power outages, and about 60 per cent of firms own or share a generator, adding another cost to production.
The report also highlights that water is a major constraint, with more than 37 per cent of firms reporting insufficient water, compared with 17.2 per cent among lower-middle-income countries. These infrastructure weaknesses continue to raise operating costs despite improvements in roads, ports, and other transport infrastructure.
Key points
- Governance and corruption are key concerns among investors in Kenya.
- High taxes and unreliable utilities are major constraints to private investment in Kenya.
- Devolution has introduced complexity and inconsistency in the regulatory environment for businesses in Kenya.
