NUR-SULTAN — Kazakhstan’s largest sovereign wealth fund, Samruk Kazyna, underwent a major transformation this year as part of recently announced reforms on building a new state policy.
The Samruk Kazyna is one of the main players in oil and gas companies, energy, national railways and post offices.
Implementation of reforms
President Kassym-Jomart Tokayev announced the need for a transformation of the Samruk Kazyna during the plenary session of the Mazhilis (a lower house of parliament) on January 11.
“In order to create long-term value for future generations, we have defined the key pillars for the development of the fund. The fund sees itself as a strategic holding company for sustaining Kazakhstan’s social and infrastructural development over the next five to eight years. The fund will be gradually transformed into an investment holding company using advanced business practices and corporate management principles,” Samruk Kazyna fund CEO Almassadam Satkaliyev told the Astana Times recently.
“We will focus on investments in the country’s real sector and on infrastructure development,” Satkaliyev explained. “Strategic asset management is another key priority. It will be based on the principles of transparency and accountability. It is important that all portfolio companies, despite IPO plans, adhere to the best corporate governance rules for listed companies. Reducing the carbon footprint and ensuring compliance with ESG principles by all stakeholders will be our main priorities.
The fund recently adopted new procurement procedures to remove bureaucratic barriers to business, ensure transparency and minimize corruption risks. The new procurement procedures include measures to support businesses, especially local manufacturers and small and medium enterprises.
The reduction of the fund’s share in the country’s GDP will be achieved through the implementation of the privatization program.
“In the end, it is the people who are going to implement these reforms,” Satkaliyev said, referring to the challenges of the implemented reforms. “Therefore, the main challenge is to ensure that all relevant employees understand the reforms and are working towards their implementation. The fund approved a detailed roadmap with key deliverables, owners and timelines to execute the reforms. »
To increase transparency and accountability, the fund launched the Public Council in 2021. As a platform, the council will immediately respond to incoming constructive proposals. Citizens can share their ideas, responses, offers and remarks on the fund’s reforms via an online questionnaire.
On March 18, the public council meeting dedicated to reducing the share of the fund in the economy was held to discuss the strategy, approaches and lists of assets proposed for privatization.
Representatives of stock exchanges (AIX, KASE), of the association of minority shareholders (QAMS), of the association of financiers, members of the National Council of Public Trust, investment bankers (Jusan, BCC, Halyk, Freedom Finance), public figures and experts participated in the meeting.
“We have received some interesting new offers. For example, we received an offer to promote the employee share ownership program in privatized companies, which will allow us to increase the number of individual customers and unite management, shareholders and workers for the realization of common goals. Moreover, it will be a response to the demand for a fair distribution of well-being among the population,” Satkaliyev said.
The Fund also cooperates with the Anti-Corruption Agency to implement the anti-corruption policy in the activities of the fund and its portfolio companies. As a result, the measures to automate and digitize controls on compliance risk management in business processes have been put in place.
“We pay attention to issues related to the prevention of corruption and ensure that the activities of the group of funds comply with the requirements of anti-corruption legislation,” he said.
Overview of Fund Activities
Samruk Kazyna Group recorded positive results of key financial indicators in 2021 indicating the resumption of business activities of the fund, which even exceeded the results of the pre-pandemic year 2019. Net profit is expected to be around 1, 6 trillion tenge ($3.4 billion). Growth was facilitated mainly by higher prices for oil and petroleum products, which still account for a large share of income.
“We should also mention an improvement in indicators in other areas, such as air passenger transport and rail freight transport, which increased by 100 and 11%, respectively, compared to last year,” he said. said Satkaliyev. “This is largely due to the resumption of commercial activity and the easing of quarantine measures after 2020. The demand for electricity is growing, which is having a positive effect on the performance of our portfolio companies. in this area, as evidenced by the preliminary results of Financial Statements. Electricity sales and transmission revenue growth was 31% and 10%, respectively, compared to 2020.”
Fund activities can dorisks related to the recent sanctions imposed on Russia. It includes logistical risks, the extension of sanctions to certain Russian banks that discourage the execution of mutual settlements with Russian foreign exchange contractors, and IPO risks.
“We are monitoring the risks closely and have mitigation plans at hand to address the risks,” Satkaliyev said.
The fund is actively involved in charitable activities with an emphasis on regional social investment programs. Between 2016 and 2021, 265 social projects totaling 57.1 billion tenge ($127 million) were implemented.
The total number of beneficiaries of charitable assistance during this period amounted to approximately more than 2 million people belonging to socially vulnerable groups.