World Bank Says Kenya Businesses Pay Nearly 50% More for Electricity Than Uganda, Raising Manufacturing Costs

Kenyan businesses pay approximately 48% more for electricity than their counterparts in Uganda, according to the World Bank's November 2026 Kenya Economic Update, which identifies expensive power purchase agreements, weaknesses in electricity procurement and substantial network losses as factors increasing production costs and weakening the country's manufacturing competitiveness. The World Bank's latest assessment of Kenya's economy has identified electricity pricing as a major constraint on the country's industrial development, revealing that businesses pay an average of 17.5 US cents per kilowatt hour for electricity, compared with 11.8 cents in neighbouring Uganda, 10 cents in South Africa and 7.8 cents in Vietnam. The comparison places Kenya among the more expensive markets examined for industrial electricity consumption, despite the country's substantial investments in power generation, transmission infrastructure and electricity access. The findings appear in the November 2026 Kenya Economic Update, Edition 34, which examines how governance weaknesses affect public finances, private investment, business costs and employment creation. The report identifies weaknesses in the procurement and management of power purchase agreements, insufficient competition in contracting, conflicts of interest and inefficiencies in the electricity distribution system as contributors to Kenya's elevated electricity costs. For Kenya's manufacturing industry, the price difference has direct commercial implications because electricity is an essential production input across food processing, cement production, steel fabrication, chemicals, textiles, packaging and other industrial activities. Higher tariffs increase operating expenditure and influence the prices at which manufacturers can profitably sell their products in domestic and international markets, particularly when competing with producers operating in countries where energy costs are substantially lower. The comparison is especially relevant within the East African Community, where Kenya and Uganda participate in a common market and compete for manufacturing investment, industrial production and regional export opportunities. Although Kenya has a more diversified manufacturing base and advantages in financial services, logistics infrastructure and access to regional markets, the World Bank's findings suggest that electricity pricing remains a disadvantage for businesses whose production processes require substantial power consumption. Kenya's Electricity Costs Exceed Uganda, South Africa and Vietnam The World Bank's comparison of business electricity prices reveals considerable differences across African and Asian economies, with Kenya recording the highest price among the five countries presented in its assessment. According to Table 5 of the November 2026 report, Kenyan businesses pay 17.5 US cents per kilowatt hour, compared with 11.8 cents in Uganda, 10.9 cents in Morocco, 10 cents in South Africa and 7.8 cents in Vietnam. This means that Kenya's business electricity price is approximately 48.3% higher than Uganda's, 75% higher than South Africa's and 124% higher than Vietnam's. The figures are particularly relevant because Vietnam has established itself as a major international manufacturing destination, attracting significant industrial investment in electronics, textiles, machinery and other export industries, while Kenya continues to pursue policies intended to expand manufacturing's contribution to GDP, exports and employment. CountryBusiness electricity price per kWhKenyaUS$0.175UgandaUS$0.118MoroccoUS$0.109South AfricaUS$0.100VietnamUS$0.078Source: World Bank, Kenya Economic Update, November 2026, Table 5, using GlobalPetrolPrices data. The commercial implications become clearer when the differences are applied to industrial electricity consumption. A manufacturing facility consuming 100,000 kilowatt hours would incur an indicative electricity expense of $17,500 at Kenya's reported benchmark, compared with $11,800 in Uganda, representing a difference of $5,700 for the same quantity of electricity. At consumption of one million kilowatt-hours, that difference would increase to $57,000. These calculations are illustrative because actual electricity bills depend on customer classification, contracted demand, consumption patterns, taxes and other applicable tariff adjustments, but they demonstrate how relatively small differences in unit prices can accumulate into substantial operating expenses for energy intensive manufacturers. They also explain why electricity pricing can influence decisions about factory location, production capacity, machinery investment and the competitiveness of finished products, particularly where companies compete in markets where customers are highly sensitive to price. Higher electricity costs can also influence manufacturing indirectly through suppliers and supporting services. A food processing company may purchase packaging materials from a manufacturer that faces elevated power costs, use refrigerated transport services whose operators must recover electricity and fuel expenses, and rely on warehouses, cold storage facilities and distribution centres where energy forms part of the operating budget. Each additional expense can increase the final cost of the product, reducing the ability of domestic producers to compete against imported alternatives or products manufactured elsewhere in the region. The World Bank notes that Kenya's manufacturing sector exports substantially within the East African Community, making the comparison with Uganda particularly relevant because firms in both countries increasingly compete for customers and investment within overlapping regional markets. Kenya has nevertheless made considerable progress in expanding electricity access and developing a relatively diversified power generation system. The World Bank estimates that approximately 75% of the population has access to electricity, substantially above the Sub Saharan African average of 53.3% recorded in 2023, while investments in geothermal, hydropower, wind, solar and thermal generation have expanded the country's electricity supply. Geothermal resources have been especially valuable in reducing dependence on imported fuels for electricity generation, while public and private investment has extended electricity infrastructure to communities and businesses that previously lacked reliable grid connections. These achievements have improved access to an essential economic service, but the November assessment indicates that expanding electricity availability has not been accompanied by sufficiently competitive prices for industrial users, partly because of the commercial arrangements through which electricity is procured and the operational efficiency of the institutions responsible for delivering it. Power Purchase Agreements and Network Losses Are Increasing Costs One of the World Bank's central concerns involves the procurement of electricity from independent power producers, which supply power to Kenya's national electricity system through contractual arrangements. Citing research undertaken in 2021 by Energy, Environment and Development Advisory and the Energy for Growth Hub, the Bank reports that only 24% of 42 power purchase agreements signed by Kenya Power were known to have undergone competitive procurement. The finding does not establish that all the remaining agreements were unlawful or involved corruption, but it indicates that competitive procurement could be confirmed for only a minority of the agreements examined. This creates concerns about price discovery, contractual transparency and the extent to which electricity purchasers have been able to obtain commercially favourable terms, especially where contracts involve long repayment periods, guaranteed capacity payments and financial obligations that continue even when electricity consumption falls below earlier projections. Electricity generation projects typically require substantial capital expenditure before they begin producing revenue, making predictable contractual payments necessary for developers seeking financing from banks and institutional investors. Power purchase agreements are therefore a normal feature of electricity markets, including those that have successfully attracted private investment into renewable energy. However, the prices and financial obligations contained in those agreements depend heavily on how projects are selected, how contracts are negotiated and whether competing developers are given opportunities to submit alternative bids. The World Bank refers to international evidence indicating that competitively procured solar electricity projects can be approximately 47% cheaper than directly negotiated projects, although that finding applies to a specific category of generation investments and cannot be interpreted as proof that Kenya's existing electricity contracts are collectively overpriced by the same percentage. The report also raises concerns about conflicts of interest and insufficient transparency regarding the ownership of companies involved in electricity generation. According to the assessment, some officials involved in approving electricity projects subsequently held positions in, or ownership interests connected with, companies operating in the sector, while corporate structures involving foreign registered entities have complicated efforts to establish the ultimate beneficial owners of certain independent power producers. Such arrangements can weaken confidence in procurement decisions where regulatory authorities, public institutions and commercial suppliers have overlapping financial interests. Kenya has previously investigated power purchase agreements through presidential and parliamentary processes, including a presidential task force that examined electricity costs between 2021 and 2023, followed by further parliamentary scrutiny of procurement procedures, contract terms and the governance of independent power producers. The persistence of these concerns suggests that electricity pricing cannot be examined solely through the cost of generating power, because contractual decisions made years earlier may continue influencing tariffs long after the original projects have been completed. Operational losses within Kenya's electricity network represent another source of financial pressure. The World Bank reports that transmission and distribution losses have remained above 23%, compared with a regulatory target of 16.5% for the 2025/26 financial year. These losses include technical losses associated with electricity transmission, transformers and distribution networks, as well as commercial losses arising from electricity theft, illegal connections, defective metering, billing irregularities and failures to collect payment for electricity already consumed. The report cites investigations by Kenya's Ethics and Anti Corruption Commission identifying integrity concerns involving illegal reconnections and the manipulation of prepaid and postpaid electricity systems. When electricity is generated or purchased but cannot be fully billed and collected, utilities must absorb the financial consequences, potentially weakening their ability to maintain infrastructure, invest in additional network capacity and meet contractual obligations to electricity suppliers. The relationship between network losses and electricity prices is particularly difficult because a utility must continue financing generation capacity, transmission infrastructure and distribution services even when part of the electricity supplied does not produce corresponding revenue. High losses can increase the amount of electricity that must be purchased to satisfy paying customers and reduce the financial resources available for investment in maintaining the network. Where electricity tariffs are designed to recover the overall cost of supply, these inefficiencies can place additional pressure on prices, although the extent to which consumers bear the costs depends on the tariff framework and regulatory decisions. The World Bank's findings suggest that reducing network losses, improving billing integrity and strengthening the management of electricity infrastructure could improve the financial position of Kenya's power sector without requiring equivalent increases in generation capacity. The report also identifies a more difficult problem involving electricity demand forecasts and the terms of existing power purchase agreements. Some contracts contain capacity payment or minimum purchase obligations intended to provide revenue certainty to developers, but these arrangements can impose costs when electricity demand grows more slowly than expected. Kenya experienced periods in which contracted generation capacity exceeded actual demand requirements, increasing pressure on electricity purchasers and contributing to disputes over the affordability of existing agreements. Concerns about procurement and electricity prices led to a moratorium on new power purchase agreements between 2018 and 2025, but the World Bank notes that the resulting restrictions have also contributed to capacity challenges as electricity demand subsequently increased. Kenya therefore faces the challenge of securing sufficient investment in generation while avoiding contractual arrangements that could reproduce the high costs associated with earlier projects. Cheaper Electricity Could Improve Industrial Investment and Economic Growth The World Bank's assessment extends beyond identifying expensive electricity by estimating the potential economic benefits of reducing electricity costs. Using its macroeconomic modelling framework, the Bank considers a scenario involving a permanent 10% reduction in electricity costs beginning in 2026 and examines the resulting effects on output, private investment and wages. Under conservative assumptions appropriate for lower middle income economies, the model suggests that Kenya's GDP could increase by approximately 0.27% relative to the baseline, private investment by 0.33% and the real wage bill by 0.29%. These figures represent simulated improvements compared with a scenario in which electricity costs remain unchanged, rather than predictions that the reductions or resulting economic gains will necessarily occur. The modelling provides an indication of how electricity prices influence decisions throughout the economy. Lower electricity costs can improve manufacturing profitability, increase the financial viability of machinery investments and make domestic production more competitive against imported goods. Businesses that operate machinery, refrigeration systems, processing equipment and other electricity dependent facilities may also find it easier to expand production where energy expenses are predictable and affordable. Improvements in production costs can influence wage negotiations, employment decisions and the prices charged to consumers, although the distribution of these benefits depends on the competitiveness of individual markets and whether firms pass savings through to customers or retain them as higher profit margins. For Kenya, the manufacturing implications are particularly relevant because the country has struggled to translate its established industrial base into sufficiently rapid growth in productive employment and manufactured exports. The World Bank's broader assessment notes that manufacturing continues to face high financing, energy, logistics and regulatory costs, while private investment as a share of GDP has remained relatively stagnant over an extended period. High electricity prices compound these constraints by increasing the capital and operating expenditure required to maintain commercially competitive production. In sectors where imported goods compete directly with domestically produced alternatives, energy costs can influence whether local manufacturers retain market share or find it financially viable to invest in expanding production capacity. The relationship between electricity costs and industrial competitiveness is also visible in Kenya's regional position. Uganda has invested in electricity generation capacity, including major hydropower projects, as part of efforts to expand supply and support industrial development. The World Bank's comparison indicates that Ugandan businesses benefit from a substantially lower average electricity price, although the country's electricity market differs from Kenya in generation composition, tariff structures, connection arrangements and network requirements. For an investor evaluating a new factory serving the East African market, the approximately 48% electricity price difference may influence the choice of location, particularly in energy intensive industries where power consumption accounts for a substantial share of production expenditure. However, electricity prices alone cannot establish whether Uganda offers a lower overall manufacturing cost than Kenya. Uganda's landlocked position creates additional logistics expenses for imported inputs and exported finished products, while Kenya benefits from direct access to the Port of Mombasa, established manufacturing suppliers, a relatively developed financial sector and extensive transport infrastructure. Factory location decisions also depend on taxation, labour productivity, land prices, financing costs, regulatory requirements and proximity to customers. The World Bank's figures therefore identify a measurable disadvantage within one major production input rather than provide a comprehensive comparison of industrial competitiveness across the two countries. The price difference remains commercially relevant because high energy consumption can make electricity costs a decisive factor even where a location offers advantages in other areas. The comparison with Vietnam introduces an international dimension to the same problem. Vietnam's reported business electricity price of 7.8 US cents per kilowatt hour is less than half Kenya's, providing an advantage for manufacturers competing in industries where electricity constitutes a significant operating expense. Vietnam's manufacturing performance cannot be explained by electricity pricing alone, because its industrial expansion has also benefited from investment in export infrastructure, integration into international supply chains, trade agreements and substantial foreign direct investment. Nevertheless, the difference illustrates the competitive environment facing Kenyan businesses seeking to expand exports or replace imported manufactured goods. Companies operating in Kenya must recover higher electricity expenses while competing against international producers that may also benefit from greater production scale, more specialised suppliers and lower financing costs. Kenya's Industrial Prospects Depend on More Competitive Electricity Pricing The World Bank's November 2026 findings suggest that improving the affordability of electricity will require changes in procurement, contract management and network efficiency alongside continued investment in electricity generation and transmission infrastructure. Competitive procurement can improve price discovery for new generation projects, while clearer disclosure of contract terms and beneficial ownership can strengthen oversight of the commercial relationships between electricity providers and public institutions. Reducing technical and commercial losses would improve the efficiency of electricity delivery and could reduce financial pressures on utilities, particularly where better metering, billing integrity and infrastructure maintenance allow more of the electricity purchased to generate recoverable revenue. However, reducing electricity prices will also require careful management of existing financial commitments. Long term power purchase agreements may contain contractual obligations that cannot be changed without negotiation, compensation or other financial consequences, while new generation and network projects require substantial investment before they begin producing commercial returns. Electricity tariffs must therefore balance affordability for consumers with the costs of maintaining reliable supply and financing future infrastructure. A policy that reduces tariffs without addressing underlying costs could weaken the financial position of electricity providers and create additional pressure on public finances, particularly where government institutions are required to support utilities experiencing financial difficulties. The report indicates that Kenya has made considerable progress in expanding electricity access and developing a diversified generation system, but the price of electricity remains a constraint on the country's ambitions to increase industrial production, attract investment and create productive employment. At 17.5 US cents per kilowatt hour, the benchmark business electricity price is approximately 48% above Uganda's and more than twice that recorded in Vietnam, while the Bank identifies limited competitive procurement, expensive contractual arrangements and network losses exceeding 23% as problems contributing to the cost of supply. These findings demonstrate how decisions involving power generation contracts, utility management and electricity regulation can influence the production costs faced by manufacturers and other businesses across the economy. For Kenya's manufacturing sector, the potential gains from cheaper electricity extend beyond immediate reductions in utility bills. Lower energy expenses can improve the financial viability of industrial investments, strengthen the competitiveness of domestically manufactured goods and support employment where firms respond by expanding production. The World Bank's modelling suggests that even a permanent 10% reduction in electricity costs could produce measurable gains in GDP, private investment and wages. Whether those benefits materialise will depend on the government's ability to improve procurement practices, manage existing power contracts and reduce operational inefficiencies while maintaining the investment necessary to support growing electricity demand. FAQ How much do Kenyan businesses pay for electricity compared with Uganda? According to the World Bank's November 2026 Kenya Economic Update, the benchmark electricity price for businesses is 17.5 US cents per kilowatt hour in Kenya and 11.8 cents in Uganda, representing a difference of approximately 48.3%. Why is electricity expensive in Kenya? The World Bank identifies expensive power purchase agreements, limited competitive procurement, conflicts of interest, network inefficiencies and electricity losses as factors contributing to higher costs. Other influences include generation costs, financing arrangements, infrastructure investment and tariff structures. How much electricity does Kenya lose through its power network? The World Bank reports transmission and distribution losses exceeding 23%, compared with a regulatory target of 16.5% for the 2025/26 financial year. These losses include technical inefficiencies and commercial losses involving electricity theft, billing irregularities and other failures to recover revenue. How many Kenyan power purchase agreements were competitively procured? The World Bank cites research indicating that only 24% of 42 power purchase agreements examined were known to have undergone competitive procurement. This does not establish that all the remaining agreements were unlawful. How could cheaper electricity affect Kenya's economy? World Bank modelling suggests that a permanent 10% reduction in electricity costs could increase Kenya's GDP by approximately 0.27%, private investment by 0.33% and the real wage bill by 0.29% relative to the baseline under conservative assumptions. These are modelled economic effects rather than guaranteed outcomes. Does cheaper electricity make Uganda a better manufacturing location than Kenya? Not necessarily. Electricity is one component of production costs, and investors must also consider transport, labour productivity, taxation, market access, financing, infrastructure and supply chain conditions when evaluating manufacturing locations.