Kenya Unveils KSh 200 Billion Sovereign Wealth Fund to Manage Natural Resource Revenues and Secure Economic Future

The Kenyan government has published the Draft Kenya Sovereign Wealth Fund Bill, 2025, a landmark piece of legislation that establishes a comprehensive national fund designed to manage revenues from oil, gas, and mineral resources. Treasury Cabinet Secretary John Mbadi announced that the fund will require an initial capitalization of KSh 200 billion before it can become operational, representing one of the most significant fiscal policy initiatives in Kenya’s recent economic history.

Through this ambitious fund, which will be managed by the Central Bank of Kenya (CBK) as the custodian, the Kenyan government seeks to stabilize the economy against commodity price volatility, finance strategic infrastructure projects, and build a substantial savings base for future generations when the country’s mineral and petroleum resources are eventually exhausted.

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Three-Pronged Investment Strategy

Kenya’s proposed sovereign wealth fund will operate through three distinct components, each serving specific economic and developmental objectives. The Stabilization Component will act as a buffer to offset global oil price swings and protect the national budget from volatile commodity markets. The Strategic Infrastructure Investment Component will provide dedicated financing for public projects that foster inclusive growth and development. Finally, the Future Generation Fund, known as the Urithi Fund, will ensure long-term savings and investments that benefit Kenyans long after current natural resources have been depleted.

This tri-partite structure mirrors best practices observed in successful sovereign wealth funds globally and reflects lessons learned from other African nations that have established similar mechanisms. The fund aims to shield Kenya’s economy from commodity price shocks, secure savings for future generations, and attract foreign investment by demonstrating responsible stewardship of natural resource revenues.

Joining African Peers in Resource Revenue Management

Kenya’s initiative places it alongside Nigeria and Ghana, which have already established sovereign wealth funds to manage revenue from the extraction of natural resources, including crude oil and natural gas. The Nigeria Sovereign Investment Authority (NSIA), established in 2011, currently manages approximately $2.4 billion in assets and operates through three distinct windows similar to Kenya’s proposed structure—focusing on stabilization, infrastructure development, and future generation savings.

Ghana established its petroleum funds following the Petroleum Revenue Management Act, creating both the Ghana Stabilization Fund (GSF) and the Ghana Heritage Fund (GHF) to manage revenues from its oil sector. These African precedents demonstrate both the potential benefits and challenges of establishing sovereign wealth funds in resource-rich developing economies, providing valuable lessons for Kenya’s implementation strategy.

Constitutional Framework and Public Participation

According to the Draft Kenya Sovereign Wealth Fund Bill, 2025, the fundamental purpose of the fund encompasses three primary objectives. First, it will provide the national government with a financial buffer from fluctuations in resource revenues or extraordinary macroeconomic shocks that could otherwise destabilize government finances. Second, it will provide dedicated finance for strategic infrastructure investment priorities to foster strong and inclusive growth and development across all regions of Kenya. Third, and perhaps most importantly for intergenerational equity, it will build a substantial savings base for future generations when minerals and petroleum resources are exhausted.

The National Treasury has invited public participation in the development of this legislation, consistent with Articles 201(a) and 232(1)(d) of the Kenyan Constitution, which emphasize openness and public participation in matters involving public finances. Members of the public, county governments, civil society organizations, private sector players, professional bodies, and religious groups have until Friday, November 7, 2025, to submit their views via email or through hard copies addressed to the National Treasury at Harambee Avenue, Nairobi.

This consultation process reflects the government’s commitment to transparency and accountability in the management of what will become one of Kenya’s most significant financial institutions. The involvement of diverse stakeholders in the legislative development process aims to ensure that the fund’s governance structure incorporates checks and balances that protect against mismanagement and political interference.

Governance Structure and Board Composition

The Sovereign Wealth Fund will operate under the oversight of a Board of Directors with carefully structured membership designed to ensure both expertise and accountability. The board composition includes a Chairperson appointed by the President, the Principal Secretary to the National Treasury, the Governor of the Central Bank of Kenya, four independent persons appointed by the Treasury Cabinet Secretary based on their relevant expertise and experience, and the Chief Executive Officer who shall serve as an ex-officio member without voting rights.

This governance structure aims to balance political accountability with technical expertise and independence. The inclusion of the CBK Governor ensures monetary policy considerations are integrated into investment decisions, while the independent members bring private sector perspectives and specialized knowledge in areas such as investment management, risk assessment, and international finance.

The Board will bear ultimate responsibility for the fund’s investment strategy, risk management framework, and compliance with the legislation’s requirements. Members appointed to the board must demonstrate high levels of professional competence, integrity, and experience in relevant fields such as finance, economics, law, or public administration.

Investment Guidelines and Prohibited Activities

The proposed law establishes strict investment guidelines designed to protect the fund’s capital and ensure prudent management of public resources. The legislation explicitly prohibits the fund from investing in speculative derivatives, unlisted real estate, private equity, art, commodities, or any other instrument not prescribed by the Cabinet Secretary. These restrictions aim to limit exposure to high-risk or illiquid assets that could jeopardize the fund’s stability or make it vulnerable to valuation controversies.

Furthermore, the fund is categorically prohibited from lending to any national government entity, state corporation, county government entity, county corporation, or any other legal or natural person. This provision prevents the fund from being used as a backdoor financing mechanism for government operations or as a means of circumventing normal budgetary processes and parliamentary oversight.

The fund also cannot serve as collateral for any borrowing by national government entities, state corporations, county government entities, county corporations, or any other legal or natural person. This restriction ensures the fund remains insulated from Kenya’s broader public debt challenges and cannot be pledged to secure loans that might compromise its independence or long-term sustainability.

Investments from the fund will be subject to a rigorous risk management framework, with particular emphasis on debt instruments and deposits in internationally recognized financial institutions. The stabilization and strategic infrastructure investment components have specific investment guidelines that prioritize capital preservation and steady returns over aggressive growth strategies that might expose the fund to excessive volatility.

Electoral Safeguards and Audit Requirements

In a provision designed to prevent political manipulation during election periods, the legislation stipulates that all monies held by the fund shall be frozen three months prior to General Elections. During this freeze period, the fund will be audited by the Auditor General, with a comprehensive report handed to both the incoming President and Parliament. This mechanism aims to ensure that the fund cannot be raided or misused for political purposes during the sensitive pre-election period.

This safeguard addresses a common concern in African sovereign wealth funds, where electoral cycles have sometimes coincided with irregular withdrawals or politically motivated investment decisions. By mandating a freeze and audit process, the legislation seeks to institutionalize transparency and prevent the fund from becoming a tool for electoral advantage or patronage politics.

Revenue Sources and Capitalization Strategy

The fund will draw its capital from multiple revenue streams associated with Kenya’s natural resource sector. Primary sources include the government’s share of profits from petroleum operations, royalties from mining and oil extraction, income from government participation in energy and mineral projects, and proceeds from the divestment of state interests in petroleum, energy, and mining enterprises.

The 2025 draft Bill introduces significant amendments that broaden the fund’s potential revenue streams beyond what was contemplated in earlier versions of the legislation. Notably, it adds proceeds from the sale or divestment of government interests in petroleum, energy, and mining projects as eligible sources of capitalization. This provision could potentially allow funds from the partial privatization of state-owned entities such as the Kenya Pipeline Company to be channeled into the sovereign wealth fund.

President William Ruto announced in October 2025 that proceeds from the Kenya Pipeline Company divestment, estimated at approximately KSh 130 billion (roughly $1 billion), could provide substantial seed capital for both the sovereign wealth fund and a complementary infrastructure fund. This privatization-linked funding strategy represents an innovative approach to capitalizing the fund without immediately imposing new fiscal burdens on the national budget.

All financial resources designated for the fund will initially be deposited into a special Holding Account at the Central Bank of Kenya. At the start of each financial year, the Treasury Cabinet Secretary will determine the allocation of funds among the three components, with the legislation mandating that at least 10 percent must be preserved for the Future Generation Fund to ensure intergenerational equity.

Windfall Revenue Management

The Bill includes specific provisions for managing windfall revenues—unexpected income that exceeds budgetary projections. These provisions establish a hierarchical framework for utilizing such windfalls in a fiscally responsible manner. First priority goes to reducing government debt, recognizing Kenya’s substantial public debt burden which currently absorbs a significant portion of ordinary revenues. Second, windfall funds support economic stabilization during periods of volatility or external shocks. Finally, remaining windfall revenues can be channeled toward strategic infrastructure development projects that generate long-term economic benefits.

This prioritization framework reflects fiscal conservatism and a recognition that Kenya’s debt sustainability challenges must be addressed before the country can fully realize the benefits of a sovereign wealth fund. The approach also acknowledges that infrastructure investment, while important, should not come at the expense of fiscal stability or debt reduction when the government has substantial existing liabilities.

Comparison with Global Sovereign Wealth Fund Leaders

To place Kenya’s initiative in global perspective, it’s instructive to examine the world’s largest sovereign wealth funds. According to the Sovereign Wealth Fund Institute, the three largest wealth funds globally, measured by assets under management, are Norway’s Government Pension Fund Global with a balance sheet size of approximately $2.04 trillion, China Investment Corporation worth approximately $1.3 trillion, and Abu Dhabi Investment Authority with approximately $1.1 trillion in assets.

Norway’s fund, established in 1990 and financed by revenues from North Sea oil and gas production, has become the gold standard for sovereign wealth fund management globally. Its success stems from transparent governance, strict ethical investment guidelines, professional management insulated from political interference, and a long-term investment horizon that prioritizes intergenerational equity. The fund invests broadly across global equities, fixed income, and real estate, with ethical screening that excludes companies involved in certain controversial activities.

Kenya’s proposed KSh 200 billion ($1.5 billion) initial capitalization would be modest by global standards but significant within the African context. For comparison, Nigeria’s NSIA currently manages $2.4 billion, while Angola’s Fundo Soberano de Angola oversees approximately $3.99 billion. Ghana’s petroleum funds collectively held around $1.4 billion in early 2025. Kenya’s fund would therefore launch at a scale comparable to established African peers, with potential for substantial growth if oil, gas, and mineral extraction scales up as projected.

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Understanding Sovereign Wealth Funds

A sovereign wealth fund is fundamentally a state-owned investment vehicle that manages a country’s financial assets for specific policy objectives. These funds are typically established to manage foreign exchange reserves accumulated through trade surpluses, save revenues from finite natural resources for future generations, fund pension obligations, support infrastructure development, or stabilize government budgets against external economic shocks.

Sovereign wealth funds differ from traditional foreign exchange reserves managed by central banks in several important respects. They typically have longer investment horizons, can accept greater risk in pursuit of higher returns, invest in a broader range of asset classes including equities and alternative investments, and serve multiple policy objectives beyond simply maintaining currency stability or import cover.

The establishment of sovereign wealth funds has become increasingly common globally, particularly among resource-rich nations seeking to avoid the “resource curse”—the paradoxical phenomenon where countries with abundant natural resources often experience slower economic growth, greater corruption, and worse development outcomes than countries with fewer natural resources. By saving and investing resource revenues wisely, sovereign wealth funds aim to transform finite underground assets into permanent financial assets that generate returns indefinitely.

Political Context and Economic Rationale

President Ruto’s announcement of plans to establish both a Sovereign Wealth Fund and an Infrastructure Fund came during a period of intense scrutiny of Kenya’s fiscal management and public debt levels. Kenya’s debt service absorbed 68.3% of ordinary revenue in FY 2023/24, up from 58.8% the previous year, representing one of the most onerous debt burdens on the African continent. This unsustainable fiscal position has prompted the government to seek alternative financing mechanisms that reduce reliance on expensive commercial borrowing.

The timing of the sovereign wealth fund initiative coincides with ongoing negotiations between Kenya and the International Monetary Fund regarding the country’s economic reform program. The establishment of a well-governed sovereign wealth fund could signal to international financial institutions and investors that Kenya is committed to fiscal discipline, transparent resource management, and long-term economic planning—potentially improving the country’s creditworthiness and access to concessional financing.

Treasury CS John Mbadi, who presented his first official budget in June 2025 proposing national expenditure of KSh 4.239 trillion, has emphasized the government’s commitment to fiscal consolidation and debt sustainability. The sovereign wealth fund represents a key element of this broader strategy, providing a mechanism to save and invest resource revenues rather than using them to finance current consumption or plug budget deficits.

Criticisms and Concerns

The proposed sovereign wealth fund has not been without controversy. Some critics have questioned whether Kenya should establish such a fund given the country’s substantial infrastructure needs, persistent budget deficits, and high public debt levels. They argue that resource revenues would be better utilized to address immediate development challenges rather than being saved for future generations who might never materialize if current needs are not met.

Justina Wamae, former Roots Party presidential running mate, has been particularly vocal in her criticism of the timing. In an October 2025 post on social media platform X, Wamae questioned how Kenya could establish a sovereign wealth fund while running persistent budget deficits and struggling with food insecurity. “How do we set up a sovereign wealth fund when we keep running a budget deficit?” she asked, pointing out that countries with successful wealth funds typically have well-managed natural resources and budget surpluses.

Wamae further noted that nearly half of Kenya’s ordinary revenue is consumed by debt repayment and pension obligations, leaving minimal fiscal space for new financial ventures. She argued that Kenya should prioritize achieving food sovereignty and fiscal balance before attempting to establish a sovereign wealth fund, citing the Norwegian model which was built on decades of disciplined fiscal management and substantial resource revenues that far exceeded government spending needs.

Other concerns center on governance and potential for mismanagement. Kenya’s track record with state-owned enterprises and public financial management includes numerous examples of corruption, inefficiency, and political interference. Critics worry that without robust safeguards and genuine political will to maintain the fund’s independence, it could become another vehicle for patronage or be raided during fiscal emergencies, as has occurred with similar funds in other African countries.

The prohibition against political use during election periods, while commendable, may be insufficient if the fund’s board lacks true independence or if there are mechanisms to circumvent the restrictions through creative accounting or reclassification of withdrawals. Ensuring that the fund operates according to its stated objectives rather than becoming a slush fund for government spending will require sustained vigilance from civil society, media, and oversight institutions.

Implementation Challenges and Success Factors

Successfully establishing and operating a sovereign wealth fund in Kenya will require overcoming several significant challenges. First, the government must actually generate the KSh 200 billion in initial capital, likely through the proposed Kenya Pipeline Company divestment and other asset sales. This privatization process itself may prove contentious, with debates about valuation, strategic buyers, and whether selling national assets is prudent given Kenya’s long-term interests.

Second, the fund must develop sophisticated investment capabilities and governance structures. This requires recruiting highly skilled investment professionals, establishing robust risk management systems, implementing transparent reporting mechanisms, and creating a culture of professionalism and integrity. Kenya lacks a deep pool of domestic sovereign wealth fund expertise, necessitating either expensive recruitment of international talent or substantial investment in capacity building.

Third, the fund must maintain its independence and resist political pressures to make suboptimal investments or premature withdrawals. This requires not just sound legislation but also strong institutions, active civil society oversight, and political leadership committed to long-term thinking over short-term political gains. The freezing of assets during election periods helps, but sustaining independence between elections when spending pressures mount will test the fund’s governance framework.

Fourth, Kenya’s natural resource sector must develop sufficiently to generate meaningful revenues for the fund. While Kenya has discovered commercial oil deposits and possesses various mineral resources, the country is not yet a major oil or mineral producer. Scaling up extraction while managing environmental impacts and ensuring local communities benefit requires careful policy design and strong regulatory oversight.

Regional and International Context

Kenya’s sovereign wealth fund initiative should be understood within the broader context of African economic development and natural resource management. Across the continent, there is growing recognition that resource wealth has too often failed to translate into broad-based prosperity, with corruption, mismanagement, and the “resource curse” undermining development potential.

Sovereign wealth funds represent one tool for breaking this pattern, but their track record in Africa is mixed. While funds like Botswana’s Pula Fund have been relatively successful, others have struggled with poor governance, political interference, and disappointing investment returns. The Africa Finance Corporation and various national sovereign funds have achieved some successes in catalyzing infrastructure development, but challenges remain substantial.

International organizations including the International Monetary Fund and World Bank have generally encouraged the establishment of sovereign wealth funds in resource-rich developing countries, provided they are accompanied by strong governance frameworks and fiscal discipline. The Santiago Principles, developed by the International Forum of Sovereign Wealth Funds, provide voluntary guidelines for transparency, governance, and accountability that Kenya would be well-advised to adopt.

Kenya’s initiative also comes at a time of increased global attention to the energy transition and how resource-dependent economies should navigate the shift away from fossil fuels. A sovereign wealth fund focused on oil and gas revenues carries an inherent tension: how can such a fund support long-term sustainability when its revenue source may become obsolete or diminished as the world transitions to renewable energy? This question will require careful consideration as the fund develops its investment strategy.

Sector-Specific Revenue Expectations

For the sovereign wealth fund to achieve its KSh 200 billion initial capitalization and generate ongoing revenues, Kenya’s natural resource sector must deliver substantial income. The country’s petroleum sector, while promising, remains in relatively early stages of development. The Turkana oil fields have proven commercial viability, but infrastructure challenges and logistical constraints have limited production volumes. Scaling up oil extraction while ensuring environmental protection and community benefit-sharing will be critical to generating meaningful petroleum revenues.

Kenya’s mineral sector, including titanium, gold, soda ash, fluorspar, and other resources, has potential for expansion. However, attracting investment in mining infrastructure, navigating complex land rights issues, and ensuring environmental compliance while maximizing government revenue share presents ongoing challenges. The sovereign wealth fund’s success will depend partly on the government’s ability to create an enabling environment for responsible resource extraction.

Revenue projections from natural resources remain uncertain, making it difficult to forecast the fund’s long-term trajectory. Commodity price volatility, geological uncertainties, infrastructure requirements, and regulatory complexities all introduce substantial risk into any revenue forecasts. The fund’s design must therefore remain flexible and adapt to actual revenue realizations that may differ significantly from initial expectations.

Infrastructure Development Mandate

The Strategic Infrastructure Investment Component of the sovereign wealth fund represents an attempt to address Kenya’s substantial infrastructure gaps while maintaining fiscal discipline. Kenya requires massive investments in transportation networks, energy generation and distribution, water and sanitation systems, telecommunications infrastructure, and urban development to support economic growth and improve living standards.

However, using sovereign wealth fund resources for domestic infrastructure investment involves trade-offs. Such investments may generate lower financial returns than international portfolio investments, potentially reducing the fund’s long-term growth. Domestic infrastructure projects also carry political economy risks, with potential for politically motivated project selection, cost overruns, corruption, and white elephant investments that fail to deliver anticipated benefits.

The fund’s investment guidelines must balance development objectives with prudent financial management. Projects should be selected through rigorous cost-benefit analysis, subject to competitive procurement processes, monitored carefully during implementation, and evaluated post-completion to ensure accountability. International experience suggests that sovereign wealth funds work best when focused primarily on financial returns, with infrastructure financing handled through separate mechanisms subject to appropriate budget oversight.

Future Prospects and Timeline

While the Draft Kenya Sovereign Wealth Fund Bill, 2025, has been published and public consultation is ongoing, several steps remain before the fund becomes operational. The National Treasury must review and incorporate stakeholder feedback, finalize the bill’s language, and submit it to Parliament for debate and passage. Parliamentary approval will likely involve extensive discussion and potential amendments, given the fund’s significance and the various interests at stake.

Once legislation is enacted, the government must complete the Kenya Pipeline Company divestment or identify alternative sources for the initial KSh 200 billion capitalization. The board must be appointed and confirmed, investment policies and procedures developed, custodial and fund management arrangements established, and initial investments executed. This implementation process will likely take 12-24 months from legislative passage, meaning the fund may not be fully operational until 2027.

Kenya’s sovereign wealth fund represents an ambitious attempt to transform natural resource wealth into permanent financial assets that benefit current and future generations. Success will require not just sound legislation but sustained political commitment, professional management, robust governance, active oversight, and favorable commodity markets. The coming years will reveal whether Kenya can join the ranks of countries that have successfully harnessed sovereign wealth funds for national development, or whether implementation challenges and governance weaknesses will undermine the initiative’s potential.

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By: Montel Kamau

Serrari Financial Analyst

28th October, 2025