Kenya’s Electricity Bill Is an Industrial Policy Written in Red Ink

A small bakery does not buy electricity for decoration. Its ovens, refrigeration, and lighting determine whether bread can be baked at a price customers can afford. The World Bank’s 34th Kenya Economic Update compares business power costs and puts Kenya at about 17.5 US cents per kilowatt-hour, against roughly 11.8 cents in Uganda and 7.8 cents in Vietnam. Different tariffs and systems complicate cross-country comparisons, but the competitive challenge is unmistakable.

The update also raises questions about power-purchase agreements, including contract structures that may obligate payments for capacity even when demand is limited. Reporting on its findings cites evidence that relatively few historical agreements were demonstrably competitively procured. The report also points to network losses above 23 per cent, against a regulatory target of 16.5 per cent. Some losses are technical; others arise from theft and billing weaknesses.

High electricity costs reduce the attractiveness of processing milk, milling grain and running workshops in Kenya. Owners may raise prices, delay hiring, operate fewer shifts or rely on diesel generators. A country can celebrate new industrial parks while quietly making production within them too expensive. That is an avoidable contradiction in economic policy.

Government and regulators should publish meaningful summaries of power contracts, beneficial ownership and capacity obligations, subject to narrowly justified commercial confidentiality. New projects need competitive procurement and independent value-for-money testing. Kenya Power should report independently verified loss-reduction performance, while targeted grid upgrades should prioritise industrial and productive rural demand.

Cheaper energy alone will not create a manufacturing revolution. But it is difficult to imagine one without it. A serious industrial policy begins with a monthly power bill that allows a Kenyan factory to compete, not merely survive.

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