Parliament seeks bigger say in control of Kenya's Sovereign Wealth Fund

The proposed Sovereign Wealth Fund  will collect and invest part of the government’s revenues from oil and mineral resources. [File, Standard]

MPs are pushing for stricter oversight of the proposed Kenya Sovereign Wealth Fund (SWF) to prevent unconstitutional withdrawals. The National Assembly committee on Finance and Planning has recommended that any withdrawals from the Fund should require approval from the Controller of Budget (COB) and Parliament to ensure proper oversight of government spending.

In its new report, the Committee proposed that the COB should have the final authority over withdrawals from the Fund. The proposed SWF will collect and invest part of the government’s revenues from oil and mineral resources, with the aim of preserving the benefits of these finite resources for future generations.

In its current form, the Bill only requires the Cabinet Secretary for Treasury to write to the Fund’s board, indicating the amount it needs to withdraw and a justification for a withdrawal. The Fund’s board is then required to write to the Central Bank of Kenya (CBK) requesting for the transfer of the money from the different components of the SWF into the Consolidated Fund. The government will operate a Holding Account at CBK that will hold all proceeds of the Fund. 

The Finance and Planning Committee however wants to limit Treasury's control and has recommended that the COB and the National Assembly be consulted whenever the government is making withdrawals from the Fund.

It also noted that withdrawals from such a Fund without approval from the Controller of Budget could be unconstitutional.  The Constitution requires that money can only be withdrawn from public funds only after an explicit sign off by the COB.

“The Committee observed that the Bill does not provide for approval of the Controller of Budget for any withdrawals from the Fund. This may contravene Article 228(4) of the Constitution,” said the Committee in its report on the SWF Bill 2026, recommending the amendment of clauses that prescribe how withdrawals from the Fund will be done. The Bill was published on May 19 and read for the first time in Parliament on May 26, after which it was committed to the Committee. 

In the report, the MPs also proposed a requirement that the Fund’s board be mandated to submit quarterly finance and investment performance statements to COB at the close of each quarter.

“The Office of the Controller of Budget should also be furnished with the report prepared by the Board in reference to monies standing to the credit of the Fund at least three months before a general election. Further, this report should be submitted to the National Assembly at least three months before the general election,” reads the report by the Committee. 

The Committee also noted that Parliament should approve all investment policies of the Fund after approval by the Cabinet.

The Bill provides a road map for investing and multiplying earnings from oil and mining as well as sale of public assets. Kenya expects to start oil production in Lokichar, Turkana County by the end of this year and begin its exports by 2027. 

 The country is also betting on resurgence of the mining sector, which though tipped to have immense potential, has always posted a lucklustre performance. The mining sector has in recent years posted a drop in earnings following the exhaustion of the titanium mines in Kwale, which for about a decade accounted for more than two thirds of the sector’s earnings.

According to the Bill, the Fund will receive the government's share of profit derived from upstream petroleum operations, royalties and bonuses from petroleum and mining activities as well as “monies from other sources as may be determined by the Cabinet Secretary and approved by the Cabinet”. 

The latter could include proceeds from the sale of state owned entities, part of which, the government has in recent past said would be deposited into the Sovereign Wealth Fund. This is a departure from earlier proposals where the Fund was to exclusively get money earned from the extractive sectors. 

The Bill creates three components within the Fund - stabilisation, infrastructure and future generations components. The stabilisation component will use returns from investments to cushion the economy from unforeseen shocks while the strategic infrastructure investment component will provide funding for infrastructure projects, also from the returns on investment. 

The most critical arm will be the future generations component, which is aimed at building a savings base for future generations. The Bill prescribes where the different components will invest money, largely high quality foreign assets and denominated in major currencies such as the US dollar.