Kenya - Country Commercial Guide
Market Challenges

Learn about barriers to market entry and local requirements, i.e., things to be aware of when entering the market for this country.

Last published date: 2021-09-13

While the Kenyan business environment continues to improve, challenges remain. The top five challenges are 1) Corruption and weak governance; 2) COVID-19 pandemic related economic slowdown; 3) Weakened consumer spending (leading to rising unemployment and poverty); 4) Lower public investment and fiscal austerity; and 5) Security.

The following information gives greater detail on these challenges.

According to Transparency International Global Corruption Perception Index, Kenya ranked 124 out of 180 countries improving from rank 137 of 180 in the previous year (180 being the most corrupt). Kenya obtained a score of 31 out of 100 having scored 28 points in 2019. Kenya’s score still falls below the sub-Saharan average of 32 and global average of 43 (a score below 50 indicates serious levels of public sector corruption). Claims of corrupt dealings, particularly in land purchases and large government contracts persist. Other governance issues include government efficiency and weak regulatory and judicial systems. Despite some judicial reforms, courts remain subject to significant case backlogs, and cases can take years to resolve. Allegations of serious corruption within the judiciary persist.

Kenya’s public sector spending has been adversely affected by ballooning public debt. According to Deloitte, Kenya’s debt to GDP ratio rose from an average of 62.1% in 2019 to an estimated 68.7% in 2020 and is forecasted to reach 71.5% in 2021. This is likely to cause further shrinking of public sector procurement opportunities.

Unemployment accelerated because of the pandemic, resulting in more than 1.7 million job losses in 2020. This saw the unemployment rate rise from an average of 2.6% in 2019 to an estimated 6.2% in 2020 (Deloitte EA Economic Impact Report). This has had an adverse effect in consumer spending with reductions in household and business spending (by about 50%) due to liquidity constraints.

The lack of enforcement of intellectual property rights (IPR) protection on videos, music, and computer software makes some U.S. firms reluctant to export these goods and services to Kenya. The GOK is in the process of initiating policy changes, with a 2020 IP bill currently in the legislative process. According to the EIU, competition from low-cost Chinese imports and the prevalence of counterfeit and substandard goods are further barriers, especially in manufacturing.

Obtaining a title to land is uncertain. This reduces the borrowing capacity of families and businesses and constrains Kenya’s ability to broaden its capital base. Land reform is a divisive and emotional issue, complicated by tribal traditions, land sale scams, and perceived historical injustices, which Kenya has so far been unable to resolve.