An exploratory research into the viability of sovereign wealth funds for Kenya

Abstract

This research focused on Sovereign Wealth Funds and why their consideration and implementation will be very useful for the Republic of Kenya. Kenya has recently discovered crude oil in an oil block in Turkana County after a 20 meter deep oil reservoir was discovered after drilling 1,040 meters by Tullow Oil Company and further exploration is currently being undertaken to determine whether or not it will be of commercial quantity. Potential commercial quantities of natural gas are also likely to be discovered off the Coast region of Kenya based on publicly available reports and similar finds along the coastlines of Tanzania and Mozambique, which lie on the same basin lend further credence to this. If this is the case, the subsequent extraction and revenues associated with the sale of crude oil need to be managed in a way that will not be detrimental to the Kenyan Economy. The research explored how Sovereign Wealth Funds work and through a series of semistructured interviews will evaluate an investment case for how a Sovereign Wealth Fund for Kenya. The research was both descriptive and made use of inferential statistics. Using examples from other countries and drawing on their implications for Kenya, the research will lay recommendations on the structure and governance of a sovereign wealth fund for Kenya. A Chi Square Test was conducted to determine which two correlated variables would be a critical success factor for the setting up of a SWF especially for Kenya. The research recommends the creation of a Kenyan Sovereign Wealth Fund to channel this wealth to productive purposes and act a store of wealth for future Kenyan generations.