•The net exports of services have been increasing over time and are now substantially higher than net exports of goods.
•Labour ministry data shows that as at 2022, The Kingdom of Saudi Arabia (KSA), Qatar and United Arab Emirates (UAE) were key labour destinations for Kenya's semi and unskilled migrant workers.
Kenya's skilled labour export is on the rise, especially in technology and finance, a shift from the traditional export of low and semi-skilled labour.
A new report by The World Bank shows that Kenya's export of services is growing, with global innovator service exports (especially finance and telecommunications) driving much of the increase.
The net exports of services have been increasing over time and are now substantially higher than net exports of goods.
This has translated to increased remittances, with the cumulative inflows for the last 12 months to August 2023 totalling $4120 million (Sh616 billion) compared to $3992 million (Sh597 billion) in same period last year, an increase of 3.2 per cent.
“Historically, low-skill tradable exports (mostly logistics and transportation) have accounted for 60 percent or more of Kenya’s services exports, but recently global innovator services have been playing a larger role, growing as a share of total services exports from about 5 percent to above 20 percent by 2019,” the report reads in part
In the past 10 years transport and communication have recorded the highest export labour income, among services.
Education comes third; health and financial services close the top five outsourced sectors by Kenya.
The report further notes that for every Sh10 earned by a high skilled worker involved in the exports of ICT services, another Sh15 goes to a less-skilled worker directly employed, and Sh4 goes to less-skilled workers through linkages, showing how further development of skilled services can also support less-skilled workers
World Bank Senior Economist Elwyn Davies says that the services inputs account for more than three times the labour income from exports such as manufacturing.
“The forward service linkages attributed to total unskilled wages are substantial and twice that of skilled wages, hence, a very large number of unskilled jobs (especially in transportation) are supported through forward service linkages,” said Davies.
Labour ministry data shows that as at 2022, The Kingdom of Saudi Arabia (KSA), Qatar and United Arab Emirates (UAE) were key labour destinations for Kenya's semi and unskilled migrant workers.
According to report by the Ministry of Labour, titled: Labour Migration Senate Study visit to the Middle East and Policy implications
Saudi Arabia accounted for at least 80,000 of the Kenyan workforce living and working there with majority serving as domestic workers.
World Bank says that going forward the service industry in Kenya will be driving economic growth and job creation compared to other sectors.
Most of the growth in Kenya has come from the services sector, which now contributes 54 percent of value added and 45 percent of total jobs.
In comparison, agriculture made only a modest contribution to the increase in value added.
In period under review the growth in industry was dominated by construction activity growth linked to public infrastructure and housing investment, rather than tradable manufactures.
Manufacturing did expand between 2009 and 2022, but at a lower growth rate (3.4 percent) than services (5.4 percent) or other industrial sectors (7.0 percent).
However, World Bank is warning that state involvement in some sectors is likely to distort the services market.
World Bank data on state involvement show that the government has ownership stakes of at least 10 percent, either directly or indirectly, in 132 business entities operating across 11 percent of Kenyan markets.
Two-thirds (67 percent) of businesses with state involvement (89 of them) operate in services markets.
A high proportion—about 73 percent—of the services sector businesses operate in competitive markets where the economic rationale for State participation is weak, and some of them are dominant market players in their industries.
“Reducing the State’s footprint in competitive sectors of the Kenyan economy can reduce the risk of market distortions, enhance efficiency, and stimulate private investment,” said the Alex Sienaert the team lead for the report.
The Kenyan Cabinet recently approved a Privatisation Bill that foresees the establishment of a Privatisation Authority.
WB says it will be critical to ensure that privatisation processes are transparent and do not lead to new forms of market concentration.
Besides privatisation, ensuring the good governance of businesses with State involvement and fair competition with their private peers is important, to avoid locking resources into inefficient uses and to support productive investment.