Samruk’s Poor Performance Puts Pressure on Akhmetzhan Yessimov

Samruk Kazyna, one of the world’s largest investment funds, has produced “deplorable results” and is an “extremely ineffective investor and business manager”, according to a leading financing analyst.

The damning analysis of Kazakhstan’s $63 billion sovereign wealth fund will heap further pressure on Samruk’s boss Akhmetzhan Yessimov, who has also faced mounting criticism from politicians over the fund’s governance standards.

Samruk Kazyna holds some of Kazakhstan’s largest assets including oil and gas companies, the national postal service, telecoms and even the country’s airline Air Astana.

But Murat Temirkhanov, a former financial analyst at Halyk Bank and Alfa Bank, believes that many of Samruk’s investments are poorly performing and the fund is badly managing these assets

Temirkhanov has published a detailed investigation into the performance of one of Samruk’s largest divisions, Tau-Ken Samruk (TKS). This company was established in 2009 and holds Samruk’s mining assets including Tau-Ken Mining and Masalksy GOK.Its most valuable asset is a 29% stake in Kazzinc, a mining operation that is owned by Glencore.

According to Temirkhanov, TKS’s share of profits from Kazzinc has allowed the company to hide poor results from other mining assets and it would be loss-making without the Kazzinc dividends.

Since Akhmetzhan Yessimov took over running Samruk, the profits at TKS have fallen from 44.1 billion tenge($105m) in 2018 to 40.2 billion ($96m) in 2019. During the same period, dividends from the Kazzinc stake rose from 46.6 billion to 51.6 billion. This implies that all of TKS’s other assets produced a loss of 2.6 billion tenge in 2018 and a loss of 11.4 billion tenge in 2019.

Temirkhanov said: “Tau-Ken Samruk hides its deep unprofitability due to its share in the profit of a private company Kazzinc… Without Kazzinc, Tau-Ken Samruk has deplorable results.”

“Tau-Ken Samruk is very ineffective and this state of affairs is hidden due to the successful private business [Kazzinc]. In many respects, the situation is similar in the parent national holding NWF Samruk-Kazyna.”

Temirkhanov’s criticism of Samruk’s poor performance echoes concerns raised by the finance committee of the Kazakh Parliament last year.

The committee found that Samruk’s profitability was inflated by accounting measures and the fund had probably lost money in recent years. Its EBITDA profit margin had consistently fallen since Akhmetzhan Yessimov took over the fund.

In the first nine months of 2019, Samruk delivered no dividends to the Kazakh government prompting anger that the fund’s poor performance was impacting the state’s ability to deliver services. Yessimov, a former mayor of Almaty, was summoned to a meeting with President Tokayev and was ordered to increase dividend payments.

The Parliamentary finance committee has also raised concerns about Samruk’s governance standards. Yessimov has faced criticism for permitting Samruk to place cash deposits valued at more than $350 million with ATF Bank, which was run by his son-in-law Galimzhan Yessenov. The deposits were in breach of Samruk’s own rules, which prohibit the fund from keeping money with poorly-rated banks.

In January, ATF was merged with Jysan Bank, which is owned by former President Nursultan Nazarbayev. Former President Nazarbayev established Samruk after visiting Singapore in 2003 and meeting executives from Temasek, the successful Singaporean sovereign wealth fund.

Samruk was established to help develop state-owned companies in preparation for them being listed on the emergent Kazakh stock exchange.

Yessenov said recently that Samruk was planning to become an investment holding vehicle by 2024, meaning that it would sell large stakes in its operating companies and would no longer directly manage them. This change of strategy is thought to be a reaction to criticism of Samruk’s poor management of these assets.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes