How low production is slowing down jobs in the wholesale and retail sector

Stephen Muhoma a Jua Kali trader at Bama Market in Nakuru on June 13, 2019. [File, Standard]

Kenya’s weak performance in the manufacturing and agricultural segments of the economy has been termed the genesis of slowed job creation in the wholesale and retail trade sector.

A report by the Kenya Institute for Public Policy Research and Analysis (Kippra) notes that employment in the wholesale and retail trade sector has been declining post Covid period.

This phenomenon has raised concerns on the sector’s contribution to the overall economy.

The Kenya Economic Report 2025 explains that the reduced pace in jobs created in wholesale and retail stems from slumped local production. This has forced businesses to rely on imports, an expensive venture considering the involved taxes and foreign exchange fluctuations.

According to the report, growth in total employment has shown a consistent upward trend in the past decade. It adds that the wholesale and retail trade sector is a major employer, with its contribution averaging 50 per cent.

The report quotes the Kenya National Bureau of Statistics (KNBS) 2025 Economic Survey, saying employment in the sector increased by two per cent from 272,800 in 2023 to 278,800 in 2024.

“Employment in Kenya’s wholesale and retail trade sector has been declining post-2020, raising concerns about its contribution to the economy. The decline may be linked to the weak performance of its key supply sectors (agriculture and manufacturing), which are essential for ensuring a steady flow of locally produced goods,” the report says.

Growing employment

The report says that with domestic production constrained to meet demand, the sector has been increasingly relying on imports that are associated with higher prices due to inflation. Consequently, customers’ purchasing power has reduced.

“The sector has been lagging in recovery, reflecting constraints faced by traders, especially among the micro and small enterprises (MSEs),” the report says.

It adds that the reliance on physical stores, informal setups, and limited access to capital has constrained new businesses’ ability to sustain operations.

“This means that while the wholesale and retail trade sectors have the potential to create more job opportunities, they face vulnerabilities to shocks that dampen job prospects,” the report says.

The report shows that total employment – both formal and informal – has been growing steadily and is projected to hit 10.8 million in 2025. The share of the wholesale and retail trade sector to total employment stood at 49.7 per cent in 2024.

This is compared to 49.9 per cent in 2023, 50.1 per cent in 2022, 51.1 per cent in 2021 and 52.4 per cent in 2020.

In the wholesale and retail trade sector, informal employment is said to account for 80 per cent of the numbers. This portion of employees has been increasing over the years.

“However, formal employment has been relatively stagnant, with minimal growth over the past ten years. This indicates that while the sector’s overall capacity to generate more jobs has expanded, the informal segment has been predominant,” the report says.

Kippra says informality in the sector is driven by regulatory constraints, high compliance costs, and labour market flexibility.

The State think tank observes that strict regulations and taxation discourage MSEs from formalising due to administrative burdens. Further, firms often prefer informal labour arrangements to maintain flexibility and reduce compliance costs.

Policy interventions

“The ease of entry and exit in informal markets and low capital requirements further sustain informality, allowing businesses to operate without the legal obligations,” the report says. “This raise concerns over the creation of decent jobs in the wholesale and retail trade sector and the need for policy interventions to promote formal job growth and improve labour security for decent jobs in the sector.”

While the wholesale sub-sector has fewer job opportunities, more of these are formal compared to retail which holds the most opportunities but they are informal.

A breakdown of this sub-sector shows wholesale of food, beverages, and tobacco account for 24.0 per cent of jobs, reflecting the sector’s dependence on agriculture for supply of staple and processed goods.

“Wholesale household goods contribute 21.3 per cent, which is largely driven by imports and manufacturing sectors that produce durable consumer goods such as furniture and textiles,” the report says.

In the retail sub-sector, employment opportunities are dominant in the labour-intensive areas, particularly food and beverage which holds the largest share of workers through specialised (17.17 per cent) and non-specialised (17.25 per cent) while e-commerce and mail-order operations contribute 13.54 per cent.

Pharmaceutical and healthcare sectors contribute 8.85 per cent while employment in second-hand goods has a share of 6.26 per cent. Home and lifestyle products, including carpets and furnishings, contribute 3.16 per cent as information and technology sector, represented by sales of computers and related accessories, accounts for 0.75 per cent.

“This shows that a shift towards more innovation and technology will increase the number of jobs in this trade,” the report says.

The agriculture sector, combined with fishing and forestry, grew by 4.6 per cent in 2024 as manufacturing expanded by 2.8 per cent, according to the Kenya National Bureau of Statistics (KNBS) 2025 Economic Survey report.

The report shows wholesale and retail sector contribution to the country’s gross domestic product (GDP) has shifted from 8.1 per cent in 2020 to 7.5 per cent in 2024.

Similarly, manufacturing has dropped from 7.6 per cent in 2020 to 7.3 in per cent in 2024 whereas agriculture, forestry and fishing has remained relatively stable with 22.5 per cent in 2024 compared to 22.7 per cent in 2020.