Sovereign Wealth Fund: What new Treasury Bill means for Kenya and its debt problem

The first bill of 2014 envisaged a Kenyan Sovereign Wealth Fund with three distinct mandates: savings, stabilization and infrastructure sector development akin to the Nigerian Sovereign Investment Authority. 

The source of its capitalization would be from varied sources, including natural resource royalties from new coal fields in the coastal areas and oil fields revenue to the north of the country. The new coastal coal fields ran into strong headwinds, and the northern oil fields, despite all their promise and potential, just fizzled out. The bill eventually lapsed.  

What is a Sovereign Wealth Fund?

A Sovereign Wealth Fund (SWF) is a state-owned investment fund primarily comprising government-generated capital. The target funds for SWF are often created using surplus national reserves, such as revenues from exports, natural resources, or budget surpluses. 

These are then managed to achieve long-term financial objectives for the country. Whenever a country is in a situation where it has excess revenues, it uses the SWF mechanism to channel the extra funds into economic impactful areas and at times use a portion of the funds to invest in stable high-return portfolios.

International Forum of Sovereign Wealth Funds (IFSWF)

The International Forum of Sovereign Wealth Funds (IFSWF) is the international voluntary body of global sovereign funds committed to ensuring good governance and prudent investment practices through dialogue, research and self-assessment. 

The IFSWF exists to promote a deeper understanding of sovereign wealth fund activity amongst government and financial services institutions. It is generally the custom for all national sovereign wealth funds to be members of the IFSWF. 

The IFSWF says that despite governance challenges, a good number of African SWFs have succeeded in placing themselves strategically as implementers of investment in critical sectors like infrastructure, renewable energy, and private sector development. 

A majority of the countries that use sovereign wealth funds (SWFs) have their economies heavily reliant on one or two major streams of income, such as oil revenues in Nordic countries and the Arabian Peninsula according to the World Economic Forum (WEF). 

However, Africa is blessed with varied and valuable natural resources, therefore a majority of the SFW’s in Africa are not employing traditional savings funds to manage fiscal surpluses, however, the majority of these SFW’s in Africa are strategic investment funds, in light of scarce resources. 

Why create a Sovereign Wealth Fund?

The principal purpose for the creation of a SWF is to protect a country’s economy, in this case Kenya’s economy, from unforeseen and unpredictable events, such as a pandemic, or random wars that disrupt supply chains around the world such as the Russia/Ukraine war. 

However, even though the broad objective is the same, the reasons for establishing sovereign wealth funds vary from country to country. 

For example, for oil-rich countries, the surplus revenues generated by their oil export activities become the key input for their respective SWFs; in turn, these state-supported pools of money help protect these countries’ economies from external shocks that may have a direct or an indirect bearing on the global oil industry.

Kenya’s second stab at a Sovereign Wealth Fund

On October 24, 2025, the National Treasury Cabinet Secretary (CS), John Mbadi, called on members of the public together with other stakeholders in Kenya to submit their views on the draft Kenya Sovereign Wealth Fund Bill, 2025, which seeks to provide a legal framework for the management of natural resource revenues in Kenya responsibly. 

This will be the second time in Kenya’s history to introduce a Sovereign Wealth Fund (SWF) through the newly introduced SWF Bill, 2025. The Fund will be managed and invested for the benefit of current and future generations of citizens of Kenya.

In comparison to the first SWF Bill of 2014, the SWF bill of 2025 is coming back after ten years seeking to satisfy three broad purposes as listed:

(a) the Stabilization

(b) the Strategic Infrastructure Investment

(c) the Future Generation (Urithi) or savings for the public.

How the SWF will be funded

The SWF bill proposes to raise revenues from profits derived from the government’s share of profit as a result of trading in upstream petroleum operations. 

The government also proposes to channel to the sovereign wealth fund all bonus payments on grants, payments on assignment of a mining rights; earnings from direct or indirect participation interest of the government in minerals and petroleum operations; and proceeds from divestment from petroleum and mining interests held by the government.

Further, the government proposes to direct to the SWF revenues from diverse minerals and other petroleum revenue or funds from other sources as may be determined by the Cabinet Secretary through a notice in the Gazette. 

President William Ruto, speaking early October, was upbeat about creating an infrastructure fund as well as the Sovereign Wealth Fund which will ensure fewer new debts, in the long term, which have put the country’s debt portfolio on the precipice.

The State reckons the seed fund will be drawn from the approximately Ksh.200 billion in mineral-sector income will seed the fund, drawn from royalties, licenses, and acreage leases. Oversight will rest with the National Treasury, while the Central Bank of Kenya will maintain the holding account that receives, invests, and distributes earnings.

This year promises to be the year of reckoning, at long last, for the rolling out of the Sovereign Wealth Fund. This will fulfill the dawn of a long held and desired aspiration to reality. 

It comes on the back of a decade that has been marked by fiscal fatigue in the country and on the other hand, an array of possibilities driven by new digital technologies and government positioning as seen at the Konza Techno-polis.

The 3-pronged SWF for maximum value for money

The current Kenya Sovereign Wealth Bill, 2025 is a three pronged approach targeted to hedge the country against volatility, support finance infrastructure and ensure generational wealth is preserved for future generations. 

The first component, stabilization, will provide a cushion that absorbs shocks resulting from erratic inflows from resource revenues as well as global commodity disruptions. The second component, strategic infrastructure investment, will seek to fund projects of national importance in key sectors such as Information Technology hubs, energy, urban planning (housing), transportation (roads, rail and air facilities). 

However, this component will have to align closely with players within the private sector so as to maximize on Public-Private Partnerships (PPPs). The third component, Urithi, is a savings pool designed to cushion value for posterity once the natural resources which today are laying the golden eggs start waning.

The proposed law blocks investment of the fund in local securities, unlisted real estate, and speculative assets to safe guard against conflict of interest, loss or misuse of the funds. 

On the other hand, the SWF proposes to direct public funds towards foreign currency instruments such as bonds and deposits in offshore banks which operate mainly in tax havens and attract very low or zero taxation. This, by extension, will cushion the country’s economy against internal economic turbulence such as that caused by drought.

Successful SWF in Africa and beyond

One of the trail-blazing Sovereign Wealth Funds globally is the Norwegian Government Pension Fund Global. Government Pension Fund Global (GPFG) is the world's largest sovereign wealth fund, established to manage Norway’s oil and gas revenue for current and future generations. 

The fund invests globally in equities, fixed income, and other assets to achieve the highest possible return. It is managed by the Norges Bank Investment Management, and is wholly owned by the Norwegian people. The fund’s mission is to protect Norway's national wealth even as it supports critical funding for public services such as healthcare and education. 

Singapore has three state owned investment entities; these are Temasek, GIC and Monetary Authority of Singapore. All have distinct mission investment strategists and governance structures. Temasek and GIC use artificial intelligence and sustainability analytics to evaluate long-term risks. Abu Dhabi’s ADIA secures global transactions through financial technology systems. These cases show that a credible sovereign fund is one that is not only capitalized but also digital and visible.

In Africa, Gabon’s FGIS and Angola’s FSDEA are struggling with low confidence due to opaqueness and political interference, while Rwanda’s Agaciro Fund, on the other hand, keeps growing in value for the citizens of Rwanda. Others have struggled. Angola’s FSDEA and Gabon’s FGIS have faced criticism for a lack of transparency and political entanglements. Rwanda’s Agaciro Fund, by contrast, stands out as a citizen-backed model of national savings.

SWF obstacles and good practices

Sovereign wealth funds easily get derailed by poor governance, political interference, and a lack of transparency, which result in corruption, suboptimal investment decisions, and the eventual depletion of funds.  

Ultimately, SWFs require sophisticated, professional management talent; a lack of in-house expertise could easily lead to poor performance. Primarily, economic factors play a role in their success; however, domestic political and governance weaknesses are the most critical factors towards a fatal blow in the existence of sovereign wealth funds.

Kenya must therefore come to the scene ready to walk clearly above board, as its singular most important opportunity will hinge on trust driven by technology strategies.  

Globally, all sovereign funds have embraced data transparency and technology-driven oversight as the cornerstone of integrity. 

Kenya would need to publicize the performance of its fund, make available its holdings and the fund’s audited financials at near real time. When the wealth fund begins linking fiscal accountability to digital access, this could embed transparency into its fundamental governance, a strong sign of good governance. 

The Urithi element, configured to amass huge savings for the public, would do Kenyans a big favor if only they would see what the fund earns and where the funds are channelled to.

Kenya Sovereign Wealth Fund is being mooted at a time when there must be both restraint and a deep desire to ensure its success. 

It is the hope in Kenya that this fund will correct and mitigate against debt dependence while laying the foundation for generational savings.  

The fund’s enduring significance will depend on its ability to dive deep into Kenya’s high digital adoption that has been consistent over the years, as opposed to traditional reliance on the volume of its assets. 

A transparent, tech-enabled fund could become the country’s most important fiscal innovation since mobile money — not because of how much it earns, but because of how openly it shows what it earns for everyone.