Economic Freedom: Country Studies — Kenya

Kenya Country Study

Rankings in Freedom in the World 2016: Status: Partly Free. Freedom Ranking: 4; Political Rights: 4; Civil Liberties: 4.



Kenya, home to the earliest hominids, was mostly a pastoral land, inhabited by Nilotic and Bantu speaking peoples. Starting in the 1st century AD, its coasts were colonized by Arabs, and its port cities served as Arab trading centers, ultimately under the control of the Great Omani dynasty. In the late 19th century, Great Britain took over Kenya as a colony. As part of the post-World War II period of decolonization, the country achieved independence in 1963. Kenya's early period of democracy devolved into a one-party state after 1969. Multiparty elections were re-introduced in 1992, but the authoritarian ruling party retained power until being defeated by the National Rainbow Coalition in 2002. Since then, there have been two changes of government through elections. In May 2013 elections, Uhuru Kenyatta, leader of the National Rainbow Alliance, was elected president. He faced trial in the International Criminal Court for crimes against humanity on charges that he financed ethnic cleansing campaigns after earlier elections in 2007. The charges were dropped in 2014, but his vice president, William Rutu, still faces charges in the ICC.

Kenya, with an area of 550 million square kilometers, has a population of 47 million people. Kenya's first president, Jomo Kenyatta (the father of Uhuru), adopted a mixture of free market and state interventionist policies that improved  land distribution while also allowing white colonial residents to retain property rights. After Kenyatta declared a one-party state in 1969, members of the president's Kikuyu ethnic group received preferential treatment in the distribution of wealth, land, and offices. Under Kenyatta's successors, the economy deteriorated as corruption flourished. Once one of Africa's economic success stories, Kenya fell into dire poverty. Under recent democratically elected governments, the economy has improved. For 2014, the International Monetary Fund puts Kenya’s nominal GNP at $60 billion (74th in the world). Nominal per capita GDP had improved from 175th in the world in 2006 to 143rd in 2015 ($1,432 per annum). The tourism industry has been hard hit due to terrorist attacks by the Somali extremist group Al-Shabaab. Surprisingly, recent reports indicate that a part of the Kenyan Defense Forces is tied to illicit trade in cooperation with the Shabaab. Kenya is ranked among the more corrupt countries in the world by Transparency International, 145th out of 176 countries in 2016.


Home to fossil evidence of some of the oldest known hominid species, Kenya owes most of its modern population to Nilotic and Cushitic speakers who migrated from the north in the second millennium BC and to Bantu speakers from the south who arrived roughly 2,000 years later. Trade with the Arabian Peninsula and Persian Gulf was already flourishing in the first century AD and migrants from those regions established port cities along the coast during the first millennium. The residents in these areas were gradually converted to Islam starting in the 8th century AD.

In 1498, the Portuguese explorer Vasco da Gama visited the main coastal city, Mombasa, on his famous voyage around the Cape of Good Hope to India. Subsequent explorers seized the port and the Portuguese exercised control over the Kenya coast for much of the 16th and 17th centuries. Beginning in the 1650s, the ruler of Oman sent naval forces to help free the Muslim city-states. The Portuguese were expelled from Mombasa for the last time in 1729 and the coast enjoyed a relative degree of independence under Omani dynasties until 1832, when the Omani sultan of Muscat began to rule his empire from the island of Zanzibar off of present-day Tanzania. He ousted a rival dynasty from Mombasa and secured control over the coastal area.

Supporter of Jomo Kenyatta

Colonization by Great Britain

Great Britain outlawed the slave trade in 1807 and began to suppress the practice throughout its empire in 1833. The Omani ruler of Zanzibar, a British ally, gradually shut down the thriving slave trade in his domain. Other commerce flourished as European, American, and Indian merchants arrived in greater numbers. As Christian missionaries and explorers made their way into the interior, competition between Britain and a newly unified Germany led the two powers to delineate their spheres of influence in East Africa in 1886 between modern Kenya and Tanzania to the south. In 1886, the sultan of Zanzibar transferred his territories on the mainland north of the colonial line to what was later chartered as the British East Africa Company. The British government replaced the struggling company in 1895 with the East Africa Protectorate.

In the first decades of the 20th century, the British constructed a railroad from Mombasa to Kisumu on Lake Victoria and encouraged white settlers to begin large-scale farming in the highlands of the interior. Their expanding presence met with resistance from the main Bantu-speaking nations, the Kikuyu and the Nandi, who were displaced to make way for these settlers and in some cases forcibly confined to reserve areas. The indigenous people had no formal landownership (land was typically held collectively by the tribe or ethnic group), so the British legal system simply granted title to settlers. After 1920, the territory was divided into the Kenya Protectorate (the coastal area that was still nominally under the sovereignty of Zanzibar) and the Kenya Colony (encompassing the interior). Only the white settlers were represented in the colony's legislative council.

Kenya Moves to Independence and One-Party Rule

The first indigenous political movement within the Protectorate was the Young Kikuyu Association, which started in 1921. Along with other similar but smaller groups, the Kikuyu Association initially sought African representation in the colonial legislature and improved economic and cultural rights for Africans. But even these modest demands were resisted by the colonial government and white settlers.

Instead of nationalizing or seizing the property of settlers, [President Jomo] Kenyatta recognized their property rights and arranged an inventive deal with the British government to finance the purchase of white-owned land for redistribution to

Under the banner of the Kenyan African Union (KAU), Africans finally gained limited representation in the legislative council in 1944. As international and African pressure on Great Britain to decolonize increased after World War II, a Kikuyu insurgent group known as the Mau Mau launched a rebellion against colonial rule in 1952. The British declared a state of emergency that lasted until 1960 and brutally suppressed the rebellion in a four-year military campaign that killed about 13,000 people. Jomo Kenyatta, the head of the KAU, was accused of orchestrating the Mau Mau Rebellion and jailed with other nationalist leaders. After the state of emergency was lifted, a new Kenya African National Union (KANU) was formed and Kenyatta was elected its leader after being released in 1961. Negotiations between the British and a coalition headed by Kenyatta resulted in adoption of a constitution, the holding of initial elections, and finally a declaration of independence on December 12, 1963. Kenyatta was the prime minister in the first post-independence government, but assumed the office of president when the country converted to a presidential system under a new constitution adopted in 1964.

Jomo Kenyatta consolidated power by dispensing privileges and economic favors to members of the country's various ethnic groups and by using authoritarian methods to silence critics and potential rivals. Opponents perceived favoritism toward the Kikuyu and relegation of non-Kikuyu leaders to minor posts. In 1969, Kenyatta banned the main opposition party and Kenya became a de facto one-party state.

Economic Freedom

For more than a century, Kenya was under British colonial administration and its non-coastal economy was dominated by white settlers who owned and operated large estates for agricultural production and other purposes, although there was application of British law that allowed some Kenyans to benefit from economic activity. Since independence, Kenya’s economic freedom and well being has been integrally tied to its struggle for political rights and civil liberties. At first, economic freedoms allowed the rise of private ownership of property and development of the economy by Kenyans. The one-party state that was declared in 1969 turned into a full-fledged dictatorship that resulted in widespread economic poverty and the concentration of land ownership in the hands of a few. The re-emergence of democracy in 2002 started to reverse Kenya’s decline and the resolution of the 2007–08 political crisis (see below) led to the establishment of a unity government, a new constitution, and free elections. Within that framework, the economy started to recover and Kenya adopted some measures allowing greater economic freedom, however it still has not addressed the issue of land displacement and the concentration of wealth within elite groups of ethnic communities. More recently, the victory of two prominent politicians accused by the International Criminal Court in being directly involved in the 2007-08 ethnic violence as president and vice president, along with the rise of terrorism, has resulted in increased political instability, police and government abuses, and a decline in economic progress due to decreased foreign investment and the decline in one of Kenya’s major industries, tourism.

An Early Model

Kenya’s early independence period was marked by general economic freedom. Kenyatta rejected socialism, which was adopted by many other post-colonial independence leaders in Africa. He was mostly pro-Western and supported the legal features of a free-market system as established under British rule. Instead of nationalizing or seizing the property of white settlers, Kenyatta recognized their property rights and arranged an inventive deal with the British government to finance the purchase of white-owned land for redistribution to Africans. Many settlers left the country voluntarily, while others stayed and aided in the country's economic growth. Kenya's initial economic success, built on this consensus approach, made the country an economic model for Africa and a target for foreign investment. The economy grew at an average annual rate of 6 percent from 1971 to 1981, outstripping most other countries on the continent.

Over time, however, Kenyatta adopted contradictory governing policies that blended economic liberalism, political authoritarianism, and corruption. While many poor Kenyans received small farms as part of the land redistribution effort, large blocks of land went to a privileged Kikuyu elite. At the same time, Kenyatta also spent a third of the budget on education for development of human resources. Despite wide disparities in wealth, most Kenyans benefited from overall economic growth.

In 1988, Moi instituted mlolongo (queuing), a voting system in which voters literally line up behind an image of their chosen candidate or

Authoritarianism’s Rise and the Economy’s Decline

Kenyatta, who died in office in 1978, was succeeded by his vice president, Daniel Arap Moi. Under Moi, the country descended into a full-fledged dictatorship. The constitution was amended in 1982 to make Kenya a formal one-party state with KANU as the only legal political party. The courts and the media were tightly controlled by the government and political repression intensified. Corruption spread widely throughout government. Members of Moi's Kalenjin ethnic group displaced many of Kenyatta’s favored Kikuyu in prominent positions. Foreign aid and investment declined as political conditions worsened. As part of a policy he called “Africanization,” Moi actively sought to limit foreign ownership of industry. Economic growth rates fell and were worsened by drought, declines in world prices of key agricultural exports (such as coffee), and large population growth (from 8 million people at independence to 22 million in 1988).

Mwai Kibaki

In 1988, Moi instituted the mlolongo (queuing) system of voting. Citizens were forced to line up at the polling station behind the image of their chosen candidate or party to register their vote—a clear violation of the right to a secret ballot. Arrests of democracy advocates sparked mass protests and riots. Under international pressure, Moi ended the mlolongo system and removed the single-party clause from the constitution in 1991. Amid allegations of electoral fraud, Moi still claimed victory in multiparty elections in 1992 and 1997, but new opposition parties gained 45 percent of the seats in parliament in 1992 and nearly won a majority in 1997. Moi’s policies, however, put the economy in a downward spiral. Kenya was joining the poorest countries in the world.

Democracy Reborn

For the 2002 elections, Moi was constitutionally barred from running for another term. Meanwhile, opposition parties united into the National Rainbow Coalition (NARC). In presidential elections, NARC’s leader, Mwai Kibaki, handily defeated Moi's handpicked candidate, Uhuru Kenyatta, the son of Kenya’s first president but a political novice. In parliamentary elections, NARC routed KANU. It was the first time a peaceful transfer of power had taken place between political parties since independence in 1963.

President Kibaki broadened representation in his government, decentralized authority, curbed corruption, and generally improved the economy, all of which brought a return of foreign investment. Just two years after the election, however, Kibaki, attempted to reform the constitution in a manner to strengthen the presidency. Several members of Kibaki’s own cabinet formed the Orange Democratic Movement to oppose the new constitution in a referendum held in November 2005. The referendum lost by 57 to 43 percent. Its defeat appeared to be another step on a democratic path, but Kibaki’s subsequent actions to consolidate power, especially by again favoring the Kikuyu, created political tensions.

Democracy in Crisis

In the 2007 elections, Kibaki was challenged by Raila Odinga, the leader of the Orange Democratic Movement (ODM). Odinga, an ethnic Luo and the son of Kenya’s first vice president, had been a leading opponent of Daniel Arap Moi. In the elections, Kibaki was declared the victor amid widespread reporting of fraud and vote rigging. Odinga and the ODM organized protests to call for a new vote. The dispute sparked ethnic conflicts that lasted two months, pitting Kikuyu tribal militias against those of other minority groups (Luo, Luyahs, Kalenjins, among others) for the presumed crime of backing Odinga, who is Luo. More than 1,000 people were killed and 650,000 people were displaced in the fighting. After some delay, a power-sharing agreement was reached to form a government dividing responsibilities between Kibaki as president, in charge of the military and foreign affairs, and Odinga, in a new position of Prime Minister overseeing domestic affairs. The two sides also agreed to address what was perceived to be the main underlying issue behind the violent outbreak: the wide disparity of land distribution in favor of the Kikuyu. (In fact, most Kikuyu are also dispossessed.  Land distribution reflects more the issue of political power. The largest accumulated land holdings are held by the families of Uhuru Kenyatta, a Kikuyu, and Moi, a Kalenjin, while Kibaki and even Odinga have amassed large tracts of land.)

The 2007 election results and subsequent events showed an underlying political instability and potential for violence that exists due to economic, ethnic, and political inequalities. On the other hand, political elites were able to agree on power-sharing among competing parties representing different ethnic groups.  A non-partisan national commission investigated the violence, which some claimed to have been pre-planned by various ethnic leaders. The recommendations of the Waki commission, however, were ignored by parliament, which refused to establish a special tribunal to investigate the instigators of the violence. The commission appealed to U.N. Secretary-General Kofi Anan to submit the names of individuals suspected of crimes against humanity to the International Criminal Court (ICC).

A Democracy Stabilized?

The power-sharing government survived its complete term of five years. Under a new constitution adopted in 2010 that limits executive powers, Kenyans were scheduled to vote in 2013 for the president and deputy president (the latter post replaces that of prime minister); a new bicameral parliament; and governors and assemblies for 47 counties (a new layer of territorial administration). Meanwhile, after a lengthy investigation, the ICC in 2012 indicted four persons on charges of crimes against humanity in connection with the 2008 ethnic violence. Among them were Deputy Prime Minister Uhuru Kenyatta, who was charged as an indirect co-perpetrator for financing attacks by Kikuyu gangs and Education Minister William Ruto, who was indicted for orchestrating revenge attacks on Kikuyu by Kalenjin gangs. A cabinet secretary and a radio executive, Joshua Arap Sang, were also indicted as conspiring to incite violence.

The violence after the 2007 elections and the ICC’s investigation hovered over Kenyan politics and strongly influenced the 2013 elections. The presidential contest pitted the outgoing Prime Minister Raila Odinga, leader of the newly formed Coalition for Reforms and Democracy (CORD), against his deputy prime minister, Uhuru Kenyatta, the leader of the National Alliance. In a pairing of fellow ICC indictees, Kenyatta campaigned with William Ruto as his vice presidential running mate, although the two had been indicted for inciting violence between their two ethnic groups. They jointly appealed to citizens to register their votes against the ICC’s interference in Kenyan affairs. In a disputed result, Kenyatta emerged the victor with 50.7 percent of the vote, slightly above the threshold to avoid a run-off with Odinga, who received 43.5 percent. Ruto also won. To avoid further violence, Odinga appealed for calm as he contested the results in court based on testimony of electoral fraud. (International and domestic observers reported improvements in electoral procedures since 2007 but also noted significant irregularities.) In the end, both the electoral commission and the Supreme Court determined that the fraud being reported did not affect the outcome and confirmed Kenyatta’s and Ruto’s victories. They were inaugurated on April 9, 2013. Parliamentary and regional elections were highly competitive between the two main electoral blocs. The Jubilee Coalition joining Kenyatta’s and Ruto’s political parties won 167 seats in the National Assembly, 30 Senate seats, and 14 gubernatorial races, while Odinga’s CORD alliance won 140 seats in the National Assembly, 28 Senate seats, and 23 gubernatorial races.

Current Issues

In September 2013, the National Assembly voted to withdraw Kenya’s signing of the Rome Convention that established the ICC. But unlike the Sudanese leader Omar Hassan al-Bashir, who has continued to evade arrest under an international warrant on charges of genocide in Darfur (see Sudan Country Study), Kenyatta and the three others indicted from Kenya submitted themselves for arraignment and actively defended themselves in initial proceedings. Over the course of proceedings the cases were weakened by the withdrawal or disappearance of a number of witnesses who were reported to be intimidated or bribed. In December 2014, the indictment against Kenyatta was withdrawn, but the trial of Ruto has continued as prosecutors attempt to keep the original testimony of witnesses in the record.

The security situation in Kenya became acute. Beginning in September 2013 with an attack on a Kenyan shopping mall, Al-Shabab, an Islamist extremist group from Somalia affiliated to al Qaeda, has carried out an ongoing terror campaign in retaliation for Kenya’s leading involvement in the African Union peace keeping force in Somalia that helped remove Al-Shabab from strongholds in Mogadishu and other cities. In the September 2013 attack, 67 persons were killed. Attacks continued throughout 2014 and 2015, the worst being a grizzly attack in April 2015 at al Garissa University in which the terrorists targeted Christians among 700 hostages for execution, killing 147 people total. Among the government responses to the attacks was Operation Usalama, which rounded up large numbers of refugees from Somalia and forced them into crowded camps. In December 2014, a new Securities Law was passed giving the government broad powers of surveillance, search, and seizure, as well as powers of long-term detention without charge. Anti-terrorism actions have resulted in charges by Freedom House and Human Rights Watch of human rights violations. Many refugees are being deported on grounds of “emergency security” and Kenyan citizens of Somali descent are being targeted for investigation, arrest, and searches. The Anti-Terrorism Task Force is accused of being involved in extrajudicial murders, disappearances, and torture. In addition, the government has de-registered many NGOs for not complying with a new law requiring full financial disclosure documents, including humanitarian organizations seeking to help refugees.

Many Kenyans, as well as foreign investors, express doubts about the security forces’ ability to maintain public safety. Such doubts were strengthened when the Journalists for Justice revealed in October 2015 that the Kenyan Defense Forces was implicated in a wide-ranging corruption scandal in the illicit trade of sugar carried out with Al-Shabaab militants in Somalia. Reports implicate security forces in other corruption involving Al-Shabaab. Indeed, the country’s level of corruption is pervasive and affects the lives of citizens on a daily basis. The courts, whose judges are often appointed on political and ethnic grounds, tend to reinforce the system of corruption.

In general, Kenya observes basic free market mechanisms, allows private property and businesses, and encourages trade. The conservative Heritage Foundation in Washington, DC ranks Kenya as “mostly unfree” (115th out of 184 countries) due to a poor regulatory environment and corruption, but its Canadian counterpart, the Fraser Institute, ranks it higher (66th of 157 countries). Overall, Kenya’s economy has improved greatly since the end of Daniel Arap-Moi’s rule. The Kibaki-Odinga unity government stabilized the economy and launched a number of major infrastructure projects financed by China that President Kenyatta has continued. These include the LAPSSET transport and gas pipeline connecting South Sudan and Ethiopia to Kenya’s second largest port at Lumu; a new railway line and modern highway connecting Nairobi to Mombasa; investment in technology; among others. Growth averaged between 5 and 6 percent for the period 2011–15, allowing Kenya to rejoin the developing world.  In the economy, agriculture still dominates the economy and half of Kenyans still work on the land. Land distribution remains highly concentrated and many of the recommendations from the Kibaki-Odinga commission remain unfulfilled.

Kenya’s development is affected by the HIV/AIDS crisis. According to UNAIDS, roughly 1.5 million Kenyans were living with HIV in 2014. As many as 1.2 million children have been orphaned due to their parents’ deaths from AIDS. The government’s efforts to combat the spread of HIV have been among the most successful in the world. The total infection rate in the adult population dropped from 13 to 5.3 percent, and new cases decreased to less than 100,000 per year. However, HIV/AIDS remains the country's leading killer and has lowered life expectancy to 47.5 years of age.