Kazakh SWF chief looks to increase pace of privatisation
Kazakhstan's sovereign wealth fund, Samruk-Kazyna, is looking to finally privatise many of its assets, after a series of false starts. The fund's newly appointed managing director for strategy and portfolio investment, Baljeet Kaur Grewal, talks Jacopo Dettoni through the plans.
Q: Kazakhstan’s government has long tried to slim down the state’s participation in the economy, but with little success so far. What is happening with the privatisation plan outlined in late 2015?
A: The current privatisation push entails the transition of assets currently belonging to [the country’s sovereign wealth fund] Samruk-Kazyna towards a more competitive environment. The 44 largest companies in our portfolio will be largely privatised through initial public offerings [IPOs], in both the local and foreign markets. The percentage of capital on sale will vary case by case. It could be about 20% to 25%; although for assets where foreign investors are already part of the ownership structure, as is the case with [flagship air carrier] Air Astana, we will be looking to become minority shareholders.
A second group is made up of 172 companies, mostly small and medium-sized enterprises and some non-core assets, which will be privatised through digital auctions or even liquidated as non-core assets.
Q: What has Samruk-Kazyna achieved so far?
A: We have established the privatisation office and found the main architect of the programme, the Boston Consulting Group. Over the past six months we have gone through a preparation process to understand the route we want our privatisation process to follow, which companies should go to the market first, how should we value these companies, and what kind of investors we want.
Q: Have you got an agenda for the privatisation of the 44 largest companies?
A: These largest companies will be privatised from 2018 onwards. Most likely the first ones will be Air Astana, [uranium producer] Kazatomprom and Kazakh Telecom, because there is already significant foreign investment in these companies. Other bigger companies such as [national oil company] KazMunayGas will start their IPO process from 2020. They are currently going through a transformation process where we are enhancing their value before taking them to the open market. The privatisation programme should maximise its economic impact because these are national companies, and their preparedness is the issue we are addressing at the moment.
Q: A lack of transparency hindered previous privatisation programmes in Kazakhstan. How are you ensuring that things will be different this time?
A: The most important thing here is that the fund itself is managing the privatisation process. Everything is transparent. We want to welcome international scrutiny and international investors and technology, we want our companies to be internationally managed against international benchmarks. In order to do that, we want our companies to be able to attract the best investors.
Q: The fund itself is going through a deep reorganisation…
A: We now combine a clear portfolio strategy with active portfolio management. This is critical in determining how the company will fare in the medium to long term. From a people and technological perspective, the optimisation has been staggering. We have achieved cost savings of Tg800m ($2.35m) in 2016 so far – we expect total cost savings of up to Tg17.5bn through to 2020.
Q: How will Samruk-Kazyna become a more active investor?
A: The investment strategy of the fund involves dynamic allocation into three main building blocks: a performance-seeking portfolio; a liability-lending portfolio; and an industry-building portfolio, which aims to reduce the fund’s dependence on the main source of wealth, and basically diversify out of resource-based industries into new industries such as in IT, integrated systems, agriculture value chain, healthcare, and the environment and green technologies. Kazakhstan is a very resource-dependent economy, so we need to diversity, and to diversify we really need a catalyst investor. An investment budget of Tg250bn for the 2016-20 period is a feasible figure.
Source: Financial Destination