April 2 (Bloomberg) -- Kenya plans to set up a sovereign wealth fund to invest revenue from future output of oil that Tullow Oil Plc and Africa Oil Corp. expect to start pumping as soon as 2016, central bank Chairman Mbui Wagacha said.
The country’s attorney general is “fine-tuning” a draft framework for the fund, which will shield the economy from cyclical changes in commodity prices, build savings for future generations and be used to invest in infrastructure, he said.
“We are unique in Kenya in that we are setting up our sovereign wealth fund prior to the phase of exploitation of natural resources,” Wagacha told reporters today in the capital, Nairobi, according to a live television broadcast. “The resources that we own today also belong to our future generations.”
Tullow, which together with partner Africa Oil found Kenya’s first crude in 2012, said in February the government considers the start of production and exports as a “national priority.” The companies are working with the government on a plan to start field development and export pipeline construction as soon as next year.
Kenya is also seeking to develop its mining potential to derive more income from an industry that represents less than 1 percent of gross domestic product, according to government data. The country is the third-biggest producer of soda ash and it has deposits of minerals including coal, gold and gemstones. Explorers include Base Resources Ltd., Goldplat Plc and Cortec Mining Kenya Ltd., a unit of Pacific Wildcat Resources Corp.
The government will announces changes to income tax laws that will target the extractive industry in the next budget for the financial year through June 2015, Treasury Secretary Henry Rotich said today at the same briefing.
Kenya began reorganizing its tax rules to raise revenue by broadening the number of goods subject to the 16 percent value added tax last year and streamlining customs procedures with other members of the five-nation East African Community, said Rotich. The next phase of the tax-system review in 2014-15 will also focus on “cleaning up” excise levies, he said.
“On the income tax what we are doing is to include some of the things that have been missing there; the target is to include the extractive industries and we have not finalized the design of that,” he said. “Some of these things we will be introducing in the next budget.”
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