Political influence and weak oversight have left Kenya’s State-owned enterprises dependent on government funding and unable to compete effectively, warns the World Bank.
In its latest Kenya Economic Update, the international lender says many of these firms operate under protections that normal businesses do not enjoy, leaving taxpayers to cover the costs when operations fail.
The report highlights that short-term political objectives often take priority over long-term business performance. “These firms are shielded from market rules that apply to other players,” the World Bank notes, pointing to systemic inefficiencies linked to ministerial control.
Current performance-monitoring systems are also under scrutiny. While the National Treasury sets key performance indicators and targets, the World Bank says these benchmarks are not in line with private sector standards, meaning SOEs do not face meaningful financial consequences for underperformance.
Accountability gaps remain a major concern. “While performance bonuses for directors and executives are contingent upon meeting KPI targets, failure to do so is not generally considered grounds for removal,” the report says, highlighting how weak oversight has allowed inefficiency to persist.
The report also raises concerns over conflicts of interest, noting that ministries responsible for regulating sectors are often involved in the governance of companies within the same sectors.
“Line ministries act both as policymakers for the whole sector and shareholders of selected companies,” it states.
The World Bank gives examples including Kenya Airways, where the Ministry of Roads and Transport has a board member and the Principal Secretary for Aviation serves as a director. Similarly, KPLC and KenGen have representation from the Ministry of Energy and Petroleum on their boards.
To address these challenges, the World Bank is urging reforms aimed at improving transparency and competitiveness.
“Kenya should ensure that subsidies and grants to SOEs are tied to clear public policy objectives and measurable outcomes,” the lender says, stressing the need for stronger governance to protect public funds and improve efficiency.
