Samruk-Kazyna, one of the world’s largest sovereign wealth funds, has deposited large sums of cash at a bank run by the chairman’s son-in-law, prompting concerns about governance at the $63 billion fund.
Kazakhstan’s public accounts committee found that Samruk’s chairman, Akhmetzhan Yessimov, had allowed the fund to deposit about $350 million with ATF Bank, which is owned by his daughter’s husband Galimzhan Yessenov.
The cash deposits are in breach of Samruk’s own rules, which require the state-owned fund to hold money only at highly rated banks.
The accounts committee addressed this “ethical issue” in a recent investigation into Samruk’s finances, which also criticised Yessimov’s running of the fund amid falling profitability and low dividend payments.
Yessimov was summoned to a meeting with Kassym-Jomart Tokayev, the President of Kazkahstan, in March where he committed to a tenfold increase in dividend payments to the government.
The investigation into Samruk’s deposits at ATF Bank has brought scrutiny to the commercial relationship between Yessimov and his son-in-law.
A couple of months after Yessenov married into the family in 2008, the young businessman acquired a fertilizer company called Kazphosphate for $120 million. He was just 26 years old at the time and his new father-in-law was Kazakhstan’s Minister of Agriculture.
It has been reported that Yessimov helped finance the acquisition of Kazphosphate as well as the $500 million purchase of ATF Bank five years later.
Yessimov, 69, has held a number of high-profile positions during his long political career including deputy prime minister and mayor of Almaty.
Samruk, which was established in 2008, is modelled on Singapore’s sovereign wealth fund Temasek and its purpose is to develop and grow Kazakh companies. Among its current assets are Kazmunaigas, an oil and gas producer, Air Astana and the Kazakh postal service.
Yessimov has been running Samruk for two years, during which time the fund’s profitability has fallen, the accounts committee said.
Although Samruk recorded profits of 1,141 billion tenge ($2.6 billion) in 2018, up 534 billion tenge on the previous year, the committee found that this increase was due to accounting changes and exchange rate benefits. It said profitability actually fell without these exceptional items.
The EBITDA profit margin at Samruk has fallen from 25.3% in 2014 to just 16.5% under Yessimov’s leadership.
The committee also found that 144 billion tenge ($350 million) had been deposited with Yessenov’s ATF Bank despite it holding a credit rating of B-. Samruk’s rules require it to hold money only at banks with an A rating.
The committee report said: “According to the policies and rules of [Samruk], for the safety and reliability of the funds it is not allowed to place funds in credit institutions with a rating of B-. Funds are being deposited with ATF Bank, which has a rating of B- and is affiliated with the Chairman of the Board of the Fund.”
The committee also criticised Samruk for a lack of transparency: “There is still no transparency in procurement procedures, most of the holdings funds continue to be placed in a non-competitive way… Systemic problems have been identified, which are the reasons for the ineffective use of state resources and restraining the development of the market economy.”
Samruk sought to regain favour with the government in July by pledging to help Kazakhstan’s Covid response. It will acquire ambulances and ventilators and will provide funding for two medical facilities in Kazakhstan.