November 16, 2020 admin 0 Comments

Akhmetzhan Yessimov, the chairman of Samruk-Kazyna, has been criticised by Kazakhstan’s public accounts committee over ethical issues at the $63 billion sovereign wealth fund.

Kazakhstan’s accounts committee said that the huge state-owned fund lacked transparency and its profitability was falling in real terms.

Samruk was established in 2008 to help develop the Kazakh economy but under chairman Yessimov the fund has seen its earnings before tax, depreciation and amortisation (ebitda) margin fall from 18.7% in 2017 to 16.5%.

“There is still no transparency in procurement procedures, most of the holdings funds continue to be placed in a non-competitive way,” the committee’s report said. “Systemic problems have been identified, which are the reasons for the ineffective use of state resources and restraining the development of the market economy.”

The accounts committee also raised concerns about Samruk’s 144 billion tenge ($350 million) of cash deposits with ATF Bank, which is run by Yessimov’s son-in-law Galimzhan Yessenov.

The committee highlighted that Samruk’s rules require it to hold cash only at financial institutions with an “A” credit rating but ATF has a rating of “B-“, which is considered junk status by analysts.

A Samruk subsidiary, Kazmunaygas, holds a further 80 billion tenge ($190 million) in deposits at ATF, also in breach of credit rating requirements.

The committee noted that Samruk’s chairman, Yessimov, is the father-in-law of ATF’s boss Yessenov – a revelation that has raised concerns over governance and possible corruption at the giant sovereign wealth fund.

The cash deposits were among a number of “ethical issues” raised by the accounts committee in its annual assessment of state-owned enterprises.

According to the committee, Samruk claimed profits of 1,141 billion tenge ($2.6 billion) in 2018, up 534 billion tenge on the previous year. However, the committee said that this increase in profits was inflated by a non-cash change for subsidiaries consolidated into its accounts, an increase in oil prices and positive exchange rate movements.

“Without considering these factors, the factual profits even decreased,” the committee said. “This is confirmed by a significant deterioration in the EBITDA indicator with margins falling from 18.7% in 2017 to 16.5% in 2018.” The margin was 25.3% in 2014.

Yessimov has been under pressure from Kazakhstan’s government to increase the dividends paid out by Samruk. Following scrutiny of Samruk’s poor profitability and the illegal deposits at ATF Bank, Yessimov was forced in July to increase its dividend payments to 120 billion tenge, 10 times more than in 2017.

Samruk has also agreed to help with Kazakhstan’s Covid response and has bought personal protective equipment, ambulances and ventilators.

Yessimov, 69, has held a number of prominent roles in Kazakhstan’s government including deputy prime minister and mayor of Almaty. He is a close ally of former President Nursultan Nazarbayev and it is thought that his wealth stems from his political connections.

In 2007, Yessimov helped his son-in-law, Galimzhan Yessenov finance the $120 million acquisition of a fertilizer company called Kazphosphate.

Samruk’s assets include the Kazakh postal service, and rail network, the oil and gas producer Kazmunaigas and Air Astana. The fund was founded to mirror the success of Singapore’s sovereign wealth funds, Temasec and GIC, in developing national business champions.

“Ethical Concerns” Raised At Kazakhstan’s $63bn Samruk-Kazyna Fund was last modified: November 16th, 2020 by admin

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