Business Environment Constraints, Productivity, and Job Creation in East Africa
DOI:
https://doi.org/10.65655/ocp.2026.0089Keywords:
Enterprise Surveys, business environment, firm productivity, job creation, constraint networks, East Africa, B-READYAbstract
Background: East Africa’s employment deficit is, at root, a productivity deficit: firms must scale, upgrade, and withstand shocks to absorb the region’s rapidly growing labour force. Yet most diagnostics still treat obstacles—electricity, finance, regulation, corruption—as isolated factors, masking the compound frictions that stifle growth. Purpose: This article develops and tests the Constraint-Interaction Capability Model (CICM), which recasts the business environment as a network of interacting constraints whose joint effects are mediated by firm capabilities and governance integrity. Design: A convergent-parallel design combines (i) a PRISMA-2020 systematic review accelerated with natural-language processing, and (ii) comparative analysis of World Bank Enterprise Surveys for Rwanda 2023, Tanzania 2023, and Kenya 2018. Network metrics identify leverage points; seemingly unrelated regressions estimate marginal impacts; results are triangulated with causal studies. Results: Outage incidence ranges from 34 percent (Tanzania) to 81 percent (Kenya), and a one-standard-deviation reduction in outage hours predicts a 6.8-percentage-point increase in annual sales growth (p < 0.01). Access to external finance raises employment growth, especially among micro- and small enterprises, but its effect is halved where outage exposure is high. Network centrality scores place electricity reliability (0.34) ahead of finance access (0.27) as the most influential constraint. Cross-country profiles reveal distinct “constraint configurations,” underscoring the limits of one-size policy packages. Conclusions: Constraints act as an interacting system; reforms that ignore these interactions deliver muted productivity and job dividends. CICM offers a replicable framework for selecting reform bundles—reliability, finance deepening, and polycentric governance—that maximise joint gains in sales and employment while enhancing resilience to climate-linked shocks. The approach aligns with the World Bank’s B-READY agenda and provides an evaluative template for future Enterprise-Survey waves.
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Copyright (c) 2026 Lugero Titus, Sixbert SaNGWA, Stanley Mukasa (Author)
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