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State reserves 10pc of minerals, petroleum wealth for future generations
President William Ruto’s administration is banking on the Sovereign Wealth Fund (SWF) and the National Infrastructure Fund (NIF) to deliver Sh5 trillion worth of projects over the next 10 years.
The government targets to set aside 10 percent of its planned sovereign wealth fund (SWF) for future generations as it races to establish a national investment vehicle through which it will manage windfalls from Kenya’s petroleum and mineral resources.
The proposal is contained in the Sovereign Wealth Fund Bill, 2026, which seeks to create a structured framework for collecting, saving, and investing income generated from the country’s extractive industries.
The Bill, tabled in the National Assembly by Majority Leader Kimani Ichung'wah, states that the sovereign wealth fund will be designed to achieve long-term fiscal sustainability and intergenerational wealth sharing, ensuring that revenues generated from non-renewable resources such as oil and minerals benefit both current and future citizens.
The proposed law requires the Treasury Cabinet Secretary to consider setting aside at least 10 percent of the fund’s deposits for future generations when allocating revenues among the fund’s components.
This savings component — known as the Future Generations Fund — will act as an endowment that accumulates income over time and supports national development after mineral and petroleum resources are depleted.
“The object and purpose of the Future Generations Component is to build a savings base for future generations when minerals and petroleum resources are exhausted,” reads part of the Bill.
Kenya is following in the footsteps of several countries that operate sovereign wealth funds to invest surplus revenues — often from oil, gas, minerals, or trade surpluses — for long-term national benefit.
By 2010, the International Monetary Fund (IMF) estimated that there were more than 50 sovereign wealth funds in operation across over 35 countries, including Brunei, Kiribati, the United Arab Emirates (UAE), and the United States.
Some of the most prominent sovereign wealth funds include Norway’s Government Pension Fund Global, the largest, with assets of more than $1.5 trillion. Most of the fund’s wealth comes from the country’s oil and gas revenues.
Funds in the Middle East, Norway, and Russia have invested proceeds from oil and gas exports. Asian countries have funded their SWFs using trade surpluses generated as net exporters, while Botswana — the only African country with a well-established sovereign wealth fund — has invested revenues from diamond mining.
Oil discoveries in Turkana were among the first triggers for Kenya to consider building a war chest against economic shocks amid spending pressures and dwindling revenues. Kenya is banking on oil production from Turkana and has recently revived plans to launch new oil and gas exploration blocks.
State-funded geological studies have also shown that Kenya’s potential for mineral production runs into trillions of shillings, with the government recently lifting the moratorium on mining licences.
The need for a sovereign wealth fund was heightened by the Covid-19 pandemic, which exposed the economy’s vulnerabilities as millions lost jobs and poverty levels surged.
President William Ruto’s administration is banking on the Sovereign Wealth Fund (SWF) and the National Infrastructure Fund (NIF) to deliver Sh5 trillion worth of projects over the next 10 years.
The Future Generations Fund will generate additional income through investment returns, which will be reinvested to build a long-term financial buffer for the country.
According to the Bill, the sovereign wealth fund will be financed through revenues derived from natural resource exploitation, including the government’s share of profits from petroleum operations, mining royalties paid to the State, bonuses paid under petroleum agreements, and payments for mining rights or concessions.
These revenues will first be deposited in a holding account at the Central Bank of Kenya before being allocated to the various components of the sovereign wealth fund.
While part of the money will be saved for the future, the Bill proposes that the sovereign wealth fund will also serve two additional functions — economic stabilisation and infrastructure financing.
The proposed law states that a portion of the fund will be set aside to cushion the economy against fluctuations in commodity prices or unexpected economic shocks. Another portion will finance strategic national projects, including investments in agriculture, housing, energy, water, education, and health.
To protect the fund, the Bill restricts the types of investments it can make, barring it from speculative financial instruments such as derivatives, private equity, or commodities trading, and focusing instead on relatively stable investment assets.
It also prohibits the use of the fund to provide loans, guarantees, or credit to government entities, a move aimed at preventing political misuse of the savings.
