Why Do We Need Samruk-Kazyna?

A few statistics for assessing the performance of Samruk-Kazyna (SK) in 2013:

SK's organizational structure includes two deputy chairmen, 12 managing directors, 28 departments and directorates, and two representative offices.

SK's net profit for 2013 was KZT 485 billion, of which KZT 546 billion came from joint ventures and associates, where the state's influence is limited. In other words, if we remove profit from associates from the group's net profit, we get a loss. Perhaps this suggests that it would make more sense to hand everything over to private owners, keeping only an accounting department, and get a better result?

The loss from asset impairment in 2013 was KZT 232 billion. It would be interesting to know what was written off, to the tune of $1.5 billion.

In 2012 the figure was roughly the same. The fund's goal is supposedly asset growth, yet for some reason our assets are being impaired.

Administrative expenses in 2013 totaled KZT 379 billion, or $2.5 billion, which is 10% higher than in 2012. The main increase came from the "Salaries and other expenses" item. Incidentally, consulting expenses amount to KZT 21 billion a year, or $140 million. Quite a budget...

A little about innovative development, based on data from SK's website.

Among the projects completed to date under the State Program of Accelerated Industrial and Innovative Development:

1. The North Kazakhstan–Aktobe Region power transmission line. I do not know what is accelerated, industrial or innovative about this project. It looks more like an infrastructure project.

2. Production of tantalum powders at the Ulba Metallurgical Plant (UMP). In 2011, 216 tons were produced, in 2012 – 213 tons, in 2013 – 203 tons, and the plan for 2014 is 169 tons. An impressive trend for a new enterprise.

3. Production of cotton textile products. I can say nothing about this project; I could not even find a website.

4. Construction of the North–South Kazakhstan power transmission line. See item 1.

5. The locomotive assembly plant. This could probably be called an innovative enterprise, but as a finance professional I am troubled by one question: why do we need loss-making innovative enterprises? The loss for 2012 was KZT 1.1 billion, and for the first five months of 2013 it was KZT 0.5 billion. On top of that, SK's total loss on the sale of its stake in this plant was KZT 2.2 billion. Quite a result, isn't it?

There is much more that could be written, but one thing is clear: it is quite difficult to assess the performance of SK's top managers and of the structure itself, because the very existence of the Samruk-Kazyna fund raises many questions.