KazAgroFinance Chairman: Domestic Agricultural Producers Have the Tools to Profit

Gumar Rakhimzhanov, chairman of KazAgroFinance, the company that implements major investment projects in the agricultural sector, recently spoke with The Astana Times about the work of his financial institution and plans for the future.

front_blog_imgHow does the company participate in the programme Agribusiness 2020? 

As a financial institute, we take an active part in its implementation and work with domestic agrarians in almost all areas of the programme. This has to do, for example, with interest rates’ subsidies. Thus, the cost of leasing is 12.8 percent, the state subsidises 7 percent and, as a result, the farmer pays only 5.8 percent. I would like to note the continued support and responsiveness of the Agriculture Ministry in the implementation of the programme Agribusiness 2020.

What is the company’s contribution to the socioeconomic development of the country?

We are implementing investment projects in 14 priority areas, such as construction of feedlots, dairy farms, greenhouses, stud farms and others at the expense of the national fund. We have launched such important projects as Ordabasy Kus farm for the production of turkey meat, Rodina dairy farm and Arkharly Maibuirek stud farm. These and similar companies, due to their expert management and production experience, have become examples for the organisation of agribusiness. They clearly demonstrate the principle of our company: to invest means to organise the farm, reach production capacity and return credit. This year, we plan to launch 63 projects.

Now, we are considering projects taking into account the schemes of regional specialisation established by the Ministry of Agriculture, i.e. before issuing loans, we carefully calculate the need and quality of projects.

We also have priority areas of support not included in the list that are funded by the national fund. However, we implement them at the expense of the borrowed and equity means. This is fish farming, horticulture, pigs and poultry farming and egg production. At present, we have approved 36 projects worth nearly 6.4 billion tenge (US$35 million).

Still the focus of your company is on the leasing of agricultural machinery

Actually, due to leasing, the company has done much to upgrade the Kazakh agricultural machinery park. Of 5,500 pieces of equipment imported annually in Kazakhstan, KazAgroFinance accounts for 60 percent. Our farmers are actively acquiring equipment from global manufacturers, such as CLAAS and John Deere. We offer the most comfortable conditions for farmers. In the current year, as part of the republican quota for importing harvesters, we will buy 132 units of grain aggregates. Taking into account the fact that customs duties on this technique reduced from 26.2 to 5 percent, this significantly cheapens its cost for the end user – the farmer. Additionally, the cost of harvesters is cheapened by government subsidies, thanks to which the interest rate for leasing will be 5.8 percent. Also this year, we launched the programme Crop 2014, in which the initial fee is only 10 percent instead of 15.  These measures allow farmers to prepare for harvesting in a timely way.

Kazakhstan is a country with vast territory. How do you cover all the agricultural producers?

Together with local executive bodies, we regularly hold meetings to promote our programmes and measures of state support. These activities have already caused a positive response from the rural population. There is a concrete result already: a branch of JSC KAF will be opened in Zhezkazgan.

 In recent years there are many complaints about the unavailability of credit resources due to the large number of required documents and the time of considering the applications. How will you comment on this?

We try to optimise our business processes. The work on the list of projects financed from the national fund is carried out in collaboration with the government. From 2010, the list of documents to be submitted for consideration by KazAgroFinance for capital projects was reduced by 40 percent, for simple projects, 30 percent.

At the same time, it should be noted that our company is a public financial institution, responsible for the effective use of funds on the principles of reciprocity and transparency. Our goal is not just to give money, but allocate resources, implement the project and return the funds. Therefore, to comprehensively implement the project, we must start from the initial stage – its examination.

Also, it should be mentioned that we do not dictate to farmers what techniques or equipment to buy. The lessee himself defines the supplier based on his experience and partnership relations. We conclude contracts and draw attention to the experience, history and reliability of the supplier. At the end of 2013, we created a unified automated manufactures-supplier base in all areas of agribusiness, which is available on our website kaf.kz.

How do you assess the prospects of cooperation among Kazakhstan, Russia and Belarus in the framework of  the Eurasian Economic Union (EEU)?

We plan to sign memoranda of cooperation with the Gomel plant of harvesters (Belarus) and Rostselmash (Russia) in the framework of the Customs Union and Eurasian Economic Union, which will operate from Jan. 1, 2015.  These memoranda will specify preferences for Kazakh customers in agricultural equipment, as well as a wide range of services and cost reductions for this technique due to the single customs space and production line expansion.

What measures are taken to minimise the impact of various negative factors on agro-producers?

Actually agriculture is a risky business. Therefore, we take into account such factors as drought and crop failure and try to support agricultural producers by the programme of financial recovery. As part of the programme Agribusiness 2020, we considered 226 contracts from 78 borrowers who are in need of extending the terms of earlier-taken loans, writing off interest rates and penalties and reducing interest rates.

Also, in order to reduce the burden on farmers in connection with the devaluation of the tenge, our company made an independent decision to fix the foreign exchange rate at the level of 167.95 tenge instead of 185 tenge per dollar and 230.37 instead of 252 tenge per euro. We have signed 945 additional agreements on indexation. This measure will reduce this additionally-emerged burden on the farmer by 10 percent.

 How do you address such pressing issues as problem projects?

As any finance organisation we have under-performing projects. Today, they make up 13.1 billion tenge (US$71.8 million), or 7 percent of our portfolio. We are actively working on each of the troubled projects and hold talks with investors who are willing to invest in them.

What will be done before the end of this year?

Our priorities are supplying harvesting equipment to farmers in the frames of the programme Crop 2014, commissioning 63 projects and bringing 34 projects to full capacity. We intend to continue to seek lower rates for financial resources in the second-tier banks and foreign banks.  We will also continue our cooperation with the National Chamber of Entrepreneurs and Nur Otan party to ensure greater transparency of the company.

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