Explanations of "KazAgro" Holding for SFSI funds
Information about retirement of bonds of “KazAgro” National management holding” JSC for KZT 60 billion from the funds of the State fund of social insurance (SFSI) was the subject of discussion in society and mass media. In this regard the Holding considers it necessary to give some explanations on this issue.
In Kazakhstan there are long standing challenges with providing of fundamental sources of economic growth, one of which is long-term liquidity provision. At the moment the funds of the National Fund, the United Accumulative Pension Fund and the State fund of social insurance may be these sources. These funds may be used for development of Kazakhstani economy.
It should be noted that KazAgro gives loans to agricultural producers in tenge. As the agrarian sector of the country requires long-term financing in tenge, the SFSI may be one of the largest investor in Kazakhstan holding long-term financial resources. At present, investing of agricultural sector through the state companies is the most optimum alternative:
1) Borrowing on market terms of money (in this case with 11% per annum) will bring profit to investor (SFSI);
2) Will provide benefit to Kazakhstani economy and serve for sector development;
3) The funds are secured: the issuer is under the state control.
The external rating of “KazAgro” Holding according to Fitch (BBB-) and Standard and Poor’s (BB-) that reflects the sufficiently reliable level of solvency of the company. KazAgro meets the requirements for issuers applicable by the Government of the Republic of Kazakhstan and the National Bank for SFSI funds investing. Consequently, given the external rating and credit quality of the Holding, the funds are being invested in sufficiently conservative infrastructure and requirements.
It should be noted, that investment of the funds’ assets including which are under state management, into the national economy is a world-wide practice. For example, investing of pension funds’ assets in the Russian Federation besides significant growth of stock market development, allowed to bring long-term funding into the different economy sectors and preserve the rates of growth in conditions of the closed foreign markets of liquidity. This practice, also exists in European countries, when the different funds including sovereign ones, acquire financial instruments of the state agencies to support a definite sectors. For example, pension fund in France purchased securities of Credit Agricol or the Fund in Russia purchased securities of the state Rosselkhozbank.
The funds attracted from SFSI, KazAgro intends to direct to intervention on grain market through “Food corporation” NC” JSC. Such practice already has shown a positive effect to domestic wheat prices for domestic producers and assists in solving the seasonal problem with freight traffic and rolling stock, i.e. the challenges which were told by agricultural producers, sectoral unions of the republic. The purchased wheat will be sold during the favorable prices on domestic and foreign markets that will allow to recover the funds in full.
It should be noted that “KazAgro” National management holding” JSC never breaches its obligations. This applies both to the funds allocated by the Government of the Republic of Kazakhstan and attracted on foreign capital markets. For example, during 2013 – 2017 from the Republican budget to finance spring field and harvesting works the Holding was allocated more than KZT 273 billion. The whole amount of cash assets was reimbursed to the budget in time.
Also the Holding timely and in full pays remuneration to the majority bondholders of the Holding – the “Unified Accumulative Pension Fund” JSC that from the moment of bonds circulation (29.12.2014) amounted to about KZT 31.6 billion. Remuneration also was paid by the Holding to minority bondholders timely and in full in sum of about KZT 457 million.
Total volume of agro-industrial complex financing by “KazAgro” Holding since 2007 to 2017 amounted to more than KZT 2.6 trillion, of which 55% is financing from own funds of the Holding, 36% - from the funds of the Republican budget, 6% - attracted funds, 3% - the funds of the National Fund (including reused ones). In total volume of lending the share of small and medium-sized business comprises 92%. Investment portfolio of KazAgro includes 570 investment projects with total cost of KZT 376 billion, of which 530 projects are commissioned with cost of KZT 334.4 billion. Over 10 years 196 thousand people were employed, 44 thousand new jobs were created. In average 17.9 thousand people are employed annually.