The clause that could reshape Kenya's sovereign wealth fund

In an earlier article, I set out perspectives on getting the basics right for Kenya's Sovereign Wealth Fund, based on comparisons with funds in other jurisdictions. This piece goes a layer deeper, examining how governance is shaped by the capital sources the 2026 Act assigns to the Fund. Sovereign wealth funds worldwide tend to originate from two sources. The first, which applies to most nations, is natural–resource revenue. For instance, oil sustains Norway's and the UAE's funds, while diamonds fund Botswana's and copper underwrites Chile's. The second is when funds are sourced entirely from elsewhere. Singapore's Temasek, for example, was created to manage the government's shareholding in state enterprises, not to bank resource windfalls. Kenya's fund, as established, is primarily anchored in mineral and petroleum wealth and comprises three components: the future generations fund, the stabilisation fund and the infrastructure fund. This represents a narrowing from earlier proposals. The bills that preceded the 2026 Act — notably the 2014 draft — envisaged a mixed commodity and non-commodity fund, drawing capital from both petroleum and mineral income and from other sources such as asset sales and dividends from State enterprises. However, the 2026 Sovereign Wealth Fund Act does not entirely close that door. Section 6(1)(h) permits the Cabinet Secretary to identify additional sources, subject to Cabinet and National Assembly approval and publication in the Gazette — a controlled, but real, pathway back toward the earlier mixed design. Factors shaping SWF performance Several factors shape how well a sovereign wealth fund performs its role: the approach to establishing and building it, informed by its capital sources and the country's social, economic, and political context. It also includes the policies, laws, and guidelines governing its structuring and use, and its broader contribution as an instrument of national development. Examples of how other countries structure fund governance around their capital source points to some clear differentiating principles. Commodity (oil and mineral-based) funds exist to manage money tied to a finite resource that is prone to price swings. Across the case studies I examined — Norway, Botswana, Chile, and the UAE's Abu Dhabi — a consistent governance pattern emerges: a binding rule that restrains withdrawals, deliberate insulation from the resource's price volatility, a depletion horizon built into the fund's design, a central bank positioned within the governance chain, and constitutional anchoring of the resource itself. Singapore's Temasek, a non-commodity case, answers an entirely different problem. Its governance rests on commercial discipline and continuous portfolio management rather than on planning for eventual depletion. However, both models share the underlying premise of a sovereign wealth fund: that a country's resources should be used fully and equitably for the benefit of its people, now and in the future. Kenya's unique path This concern about the structuring of the fund on either model is not hypothetical for Kenya. The seed capital identified for the country's infrastructure fund under the 2026 National Infrastructure Act was the partial privatisation of the Kenya Petroleum Company (KPC) — a strategic national asset that, while linked to the petroleum sector, was structurally a State-Owned Enterprise. Future sale of government stake in state-owned enterprises, or outright disposal of others, is likely to occur. Each of these needs to be positioned deliberately within the wider architecture of the country's sovereign wealth ambitions with clear justification on how the proceeds are deployed. While State-Owned Enterprises are governed by the Government-Owned Enterprises Act, 2025, and their privatisation is legislated by the 2025 Privatisation Act, any profits from their commercialised operations and sales would still be considered Kenya's non-commodity-based Sovereign Wealth. The divergence between the two models of sovereign wealth funds has direct implications for Kenya. Wealth built from profitable State enterprises would qualify for deposit in the Sovereign Wealth Fund as informed by section 6(1)(h). The governance of such enterprises, under the Government-Owned Enterprises Act, 2025, would fall within a sovereign wealth fund mandate under the 2026 Sovereign Wealth Fund Act. The dynamic here therefore becomes the harmonious construction between the various laws seeking to govern non-commodity (profits from state-owned enterprises) based sovereign wealth and ensuring there are no loopholes that lead to the non-strategic utilisation of Kenya's national wealth. The relationship between the National Infrastructure Fund, created by the 2026 National Infrastructure Act, and the Infrastructure Fund provided for in the 2026 Sovereign Wealth Fund Act remains to be observed, in view of this clause. These are matters that require close attention from everyone with a stake in Kenya's broader sovereign wealth ambitions, whether or not their interest is confined to the natural-resource fund established by the 2026 Act. The source of capital remains a decisive factor in how governance frameworks for these funds are designed, and Kenya is no exception. Considerable institutional work and due diligence on institutional governance still lie ahead if Kenya's Sovereign Wealth is to be utilised to deliver the transformation envisaged for the nation. Without clear harmonisation in the application of the relevant laws and an institutionalised ethical approach to implementing the provision in clause 6(1)(h), Kenya may face risks that could derail the noble intention of establishing a Sovereign Wealth Fund.