By Murugi Ndai
The Cabinet’s approval of Kenya’s Infrastructure Fund Policy and Sovereign Wealth Fund Policy has sparked both excitement and scepticism. Central to the debate is a striking figure: Ksh.5 trillion. For many Kenyans, the immediate question is obvious—where will the government get this money, especially at a time of fiscal pressure and high public debt?
Let me attempt to expound here. The Ksh.5 trillion is not the cash the government intends to raise or set aside at once. Instead, it represents a long-term capital mobilisation target, built gradually through public assets, leverage, and private investment, with the government acting as a catalyst rather than the sole financier.
The Infrastructure Fund Policy is designed to finance economically viable infrastructure projects without relying entirely on the national budget or expensive sovereign borrowing. Rather than funding roads, ports, energy or water projects as pure public expenditure, the fund will invest in infrastructure as an asset, expecting returns over time.
The Sovereign Wealth Fund (SWF) Policy, on the other hand, focuses on long-term national wealth creation. Unlike traditional oil-based sovereign funds, Kenya’s model is expected to draw value from state-owned assets, strategic investments, and professionally managed portfolios. The goal is to preserve and grow national wealth while supporting economic resilience.
Together, these policies mark a shift from infrastructure as a fiscal burden to infrastructure as an investable development tool.
The figure should be understood as a medium- to long-term fund size, likely built over 10–20 years. Globally, large infrastructure and sovereign funds are capitalised through stacking and leverage, not through budgetary allocations.
First, government will likely provide seed capital, spread over time. This may include modest budgetary allocations, proceeds from privatisation, or transfers of selected state assets. Importantly, this seed money is meant to crowd in other investors, not dominate the fund.
Second, public assets will play a critical role. Kenya owns vast underutilised assets—land in strategic corridors, energy and transport infrastructure, and equity in state-owned enterprises. These assets can be injected into the fund as equity, leased, concessioned, or used to raise long-term financing. In many successful sovereign funds, asset value—not cash—is the backbone.
Third, domestic institutional investors such as pension and insurance funds are a major potential source. These institutions manage trillions of shillings and require long-term, stable investments. Well-structured infrastructure projects match their needs. Over time, they could contribute Ksh.1–2 trillion through bonds, fund units, or co-investment arrangements.
Fourth, the fund is expected to issue long-term infrastructure bonds, both locally and internationally. Unlike traditional borrowing, these instruments are often project-backed, with risks shared and mitigated through strong governance and, where necessary, limited guarantees.
Finally, development finance institutions and private capital will be critical. Multilateral lenders such as the African Development Bank and the World Bank typically provide anchor investments and risk mitigation, which then attract global infrastructure funds and sovereign investors—particularly from the Middle East and Asia.
In Africa, Nigeria’s Sovereign Investment Authority (NSIA) stands out. Despite operating in a challenging environment, it has successfully invested in infrastructure, stabilisation funds, and future generations’ portfolios.
Morocco’s Mohammed VI Investment Fund provides another example, using public capital to crowd in private investment for infrastructure and industrial development.
Across the continent, over 20 African countries—including Ghana, Botswana, Rwanda, Senegal, Egypt and Angola—have established sovereign or national investment funds. Results have been mixed, largely depending on governance quality rather than ambition.
The success of Kenya’s Infrastructure and Sovereign Fund will be determined by how the executive is clear in curbing corruption within the funds through the independency of the governance of the institutions, clear separation between politics and investment decisions, a pipeline of bankable projects and lastly transparency and accountability.
If executed well, the fund could reduce reliance on short-term debt, unlock long-term capital for national and county infrastructure, and turn idle public assets into productive investments. If poorly governed, it risks becoming another expensive public entity. The policies set the framework. Execution will determine whether this becomes a landmark reform—or a missed opportunity.
