Kazakhstan’s commitment to its privatisation programme has been called into question by investors and fund managers. Central Asia’s largest economy rolled out plans to privatise a huge swathe of its largest state-run enterprises in October 2015, prompted by sharp falls in the global price of oil and its rate of domestic growth. Since then, the nation’s $67bn sovereign wealth fund, Samruk-Kazyna, has sold more than 120 assets via electronic auction, mostly small and mid-sized firms.
At a roadshow last month in London Berik Beisengaliyev, Samruk’s head of assets optimisation, pledged to halve the number of firms the fund owned by end-2017, to around 300. That would be followed in 2017 or 2018 by the IPOs of Air Astana and uranium producer Kazatomprom, netting the state $6bn.
However, investors and analysts have warned the privatisation process will be far more painful and drawn-out than government officials claim. They said some assets, particularly the larger ones, might never get sold.
Michael Carter, founder of Almaty advisory firm Powerhut, said the key stumbling block was the layers of vested interests that stood to lose in the event of a major asset sale. “There is a lot of institutional and local resistance to this process,” he warned.
Stalled sales
An example is Air Astana, a profitable carrier that should garner huge interest if it realises plans to sell shares on the Almaty market, with a secondary listing in London. Beisengaliyev said investors had shown “huge” and “positive” interest in both Air Astana and Kazatomprom.
Carter said officials in Astana “keep putting stumbling blocks in the way that just make it harder to sell state assets”. He pointed to a recent law enacted that requires any major domestic firm to be at least 51% owned by a Kazakh company or individual.
That requirement “makes it hard to value assets properly”, said an Almaty-based banker. “The drive to sell assets starts in the office of [president Nursultan] Nazarbeyev. But there are too many oligarchs living off things in public hands, and who don’t want things to be upset. They will block and delay as long as possible. If real privatisation happens, it will only do kicking and screaming.”
Carter added that when Kazakhstan first floated plans to sell off state-run firms in 2011, the aim was to complete six large privatisations within 24 months. In the end, it took four years to complete the IPOs of just two firms, fuel transporter KazTransOil and national grid operator KEGOC.
Clemente Cappello, founder and CEO of Sturgeon Capital, said that Kazakh politicians were “waiting for stronger market conditions” before tackling the sale of major state assets. “There is a clear political willingness to do this at the highest level, but getting it executed is taking forever,” he said.