Private firms want say in use of gold, petroleum cash

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Investment of pooled cash expected from oil and other mineral resources should be put solely in hands of independent firms to reduce political interference, a leading fund manager said Tuesday.

The draft Sovereign Wealth Fund Bill 2019, published by the Treasury in February, proposes creation of a special account where cash from upstream oil profits, petroleum licence fees and royalties as well as mining royalties will be deposited for investments in instruments such as bonds and real estate.

The proposed law gives the Treasury Secretary powers to disregard the appointment of fund managers to run the sovereign fund, which is expected to control $1.5 billion (Sh150.96 billion) at its peak.

Now, experts reckon the role of the fund manager should be the preserve of fund managers from the private sector.

“You will find that with a state corporation, the government has a leeway to appoint not just members of the board, but officers like the CEO,” Britam Asset Managers chief executive Kenneth Kaniu told reporters in Nairobi yesterday.

“What we are recommending is that we then have external, independent investment managers to be the ones who are responsible for taking investment decisions on this fund within the parameters of the investment mandate.”

The proposed law says 60 percent of cash from the fund should go to infrastructure development while 15 percent will be used for budget stabilisation in event of shocks which leads to cash flow challenges and 10 percent to savings.

President Uhuru Kenyatta said Thursday last week the Treasury will be tabling the bill in Parliament before end of the year, setting the stage for a legal framework for investment and use of proceeds from Kenya’s natural resources.

The draft law gives a proposed eight-member Kenya Sovereign Wealth Fund Board powers to appoint fund managers through “an open, competitive and transparent process”.

Treasury Secretary, however, has authority to disregard the board and appoint the Central Bank of Kenya as fund manager for such a period he deems necessary.

British explorer Tullow, which started trucking crude oil to Mombasa from Lokichar basin in South Turkana in May 2018, has estimated it will be pumping out some 50,000 to 100,000 barrels daily when full production starts in 2022.

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