As "KAZEXPORTASTYK" from a small economy became a world exporter, a turning point and built relationships With the Fund of problem loans

KAZEXPORTASTYK group of companies has been producing agricultural crops on the territory of Kazakhstan for more than 20 years. However, despite advanced business planning and the use of international experience, financial difficulties arise in the work of system-forming enterprises.

Muratbek Kasabekov, acting General Director of KAZEXPORTASTYK Holding, doctor of Economics, told about the causes and consequences of the crisis in agriculture for the country's export economy, the relationship with the Fund of problem loan and the prospects for the sale of legumes and oilseeds.

 

How did the history of KAZEXPORTASTYK holding start?

In the late 90's, it was obvious that it was agriculture and its workers who suffered the most during the transition from the Soviet economy to the market economy. In those years (in the period from 1991 to 2000), the area of cultivated land in Kazakhstan decreased significantly. Unemployment reigned in the villages, and people who had worked on the land for years moved to the cities in search of work.

During this period, believing in the great potential of our land, we decided to start a difficult path in the field of agro-industrial production. Over the decade after gaining sovereignty, Kazakhstan has seen a steady trend of economic growth, and we were ready to devote ourselves to the revival of the aul (village).

Thus, in 1998, a small farm "EXIMNAN" in the Tayynshyn district of North Kazakhstan region with an area for crops of about 30 thousand hectares marked the beginning of the Foundation of the agricultural holding-the group of companies "KAZEXPORTASTYK".

For ourselves, we have identified priority tasks - the development of new fallow lands and creating favorable conditions for attracting and retaining rural specialists. We started working on the land from scratch, creating infrastructure: we were building New facilities for cleaning and drying grain, - approx. ed.), warehouses, purchased new equipment, invested in the construction and maintenance of roads, kindergartens, schools and hospitals in rural areas.

As a result, the holding has increased its acreage several times over the past few years, and over the period from 1998 to 2005, we have developed more than 300 thousand hectares of fallow land.

How did the company's development affect the social side of the village and its population?

Every year the Group of companies developed, with the development of new lands, the area of arable land and production volumes increased, and the number of employees grew. Today, we employ about 6.4 thousand people, and during the spring field and harvest periods, the company provides additional work for up to 1.5-2.5 thousand seasonal workers. Shares are paid annually to 17.4 thousand shareholders.

All these years, despite the financial situation of the group, the farms that make up the group bear an additional financial burden, improving the lives of rural residents in the villages. For example, for Northern regions, in winter, the problem of clearing roads from snow and ice between rural localities and highways is always relevant. So, our farms take care of these problems themselves. When the snow melts, our farms participate in spring flood control events and assist in the repair of road graders.

Farms provide financial support to cultural centers, medical and midwifery centers, schools, kindergartens and some children's rehabilitation centers, as well as to WWII veterans and home front workers, newlyweds, students, school children, and anniversaries. Since 2007, children have been transported to schools from remote villages to district centers.

We have always tried to adopt the world's experience and advanced technologies in working with the earth, so one of the company's priorities is to improve the professional level of our employees. To exchange experience, we invite foreign experts from Canada, Germany and Austria. By training employees, we also try to show rural youth an example of opportunities and prospects for their development in their native village. This is especially important in the context of the outflow of local population from the Northern regions of Kazakhstan to neighboring countries.

What difficulties did the company face during the years of development?

Difficulties in agriculture can not be avoided. We understand this now and when we started building our business. Geographically, all the farms of the KAZEXPORTASTYK group are located in the zone of risky farming, and the result of our work directly depends on the climatic conditions from the beginning of sowing operations to harvesting of agricultural crops. Droughts in 2010 and 2012, and heavy rains in 2018 showed how high the risk of a decline in production due to a low harvest, and as a result, an increase in the price of final products.

There are other factors that negatively affect the result. For our company, the export ban in 2008 and the subsequent sharp drop in wheat prices played a negative role in achieving the goals.

A sharp decline in financing of the agricultural sector of Kazakhstan by second-tier banks, starting from 2013, led to the fact that difficulties in refinancing and servicing expensive short-term loans in foreign currency, led to an increase in the debt load.

What prompted KAZEXPORTASTYK to apply to second-tier banks for loans?

Development of new fallow lands and investment in infrastructure required long-term financing. Unfortunately, at that time, up to 2005, there were no institutions like JSC NUH "KazAgro", ready to provide funding.

The holding company had to attract expensive short-term loans from second-tier banks. We were credited in dollars with an annual rate of 15% to 22% and went for it, since the cost of wheat in those years allowed us to pay back Bank interest and service these loans.

What did the company spend its borrowed funds on?

We had to cultivate fallow lands, establish production infrastructure, and, accordingly, update the Technopark for harvesting and soil treatment, as new crops such as flax, sunflower, rapeseed, and lentils appeared in our crop rotation.

At the same time, we traveled around the world and studied the experience of other countries in the field of technologies and methods of crop production. In the world, there are different ways of processing land: "water-saving technology", "zero technology", "minimum technology", and all of them are effective and suitable for implementation in our realities.  Having studied the experience of colleagues from Canada and Europe, over time we began to introduce canadian technologies, and this of course required capital investments.

Initially, we purchased Russian equipment, as we grew mainly wheat. Subsequently, gradually introducing new technologies and crop rotation, we began to acquire Western-made equipment.

 "The first company that brought Western equipment to Kazakhstan was our company»

It is now fashionable to talk about diversification in the agricultural sector. What do you think about this?

It is very important to follow the path of diversification. The whole of Kazakhstan is working with monoculture.

I usually cite the province of Saskatchewan in Canada as an example – they sow oilseeds, legumes, and grains. Grain crops make up only 40% of the total crop rotation, and in Kazakhstan, grain occupies 90% of the total volume.

KAZEXPORTASTYK group of companies is the first company in Kazakhstan that switched to the classic crop rotation.

According to the concept of crop rotation, we must have legumes in the structure of crops. Our choice settled on the lentils.  Lentils are a very good precursor for cereals. Sowing lentils gain from biological nitrogen in the range of 60-70 pounds. After lentils, wheat yields a very high yield.

Thanks to the large-scale production of lentils in 2017, our country entered the top 5 lentil producing countries in the world. We are also ranked fourth in the world in terms of lentil exports. I would like to note that 80% of the export volume was produced by our holding company.

Being a pioneer in Kazakhstan in the field of introducing new crops in crop rotation, our company is the first in Kazakhstan this year to sow soybeans in the Northern regions of our country.  Despite erroneous claims that soy depletes the land, this crop enriches the soil.

For soy, the most important process is innoculation-the introduction of live bacteria. Processing soy seeds, fixing nitrogen from the air, it turns out biological nitrogen, which is well absorbed by plants.

After soy, you can get 100 kilograms of biological nitrogen, which is equivalent to 300 kilograms of mineral fertilizers in physical weight. In addition, soy converts phosphorus into a digestible form. This is the only culture that so enriches the earth.

If you do everything according to the right technologies, then in the climatic conditions of Northern Kazakhstan, soybeans grow well.

Thanks to this, we were able to reproduce the classic crop rotation. Cereals make up 45%, oilseeds-30-35%, legumes need to be brought to 25% of the total volume.

 

What factors affect yield?

Now we can confidently say that we own almost all the world's technologies that allow us to get a high yield. But we don't have enough funds to implement them. KAZEXPORTASTYK group is currently working on attracting a strategic investor.

Kazakhstan has a great potential, and this is evidenced by the examples of our colleagues from Europe. So, in the Eastern regions of Austria, when precipitation falls at the level of Northern Kazakhstan, the yield is 45-50 quintals per hectare, and today we get an average of only 12.5 quintals per hectare. as we see, Kazakhstan has a lot to strive for.

In order to reach a yield of about 30 quintals per hectare of land, certain conditions must be met. First of all, you need to change the seeds used for seeds of foreign selection that are resistant to extreme weather conditions. Also important is the introduction of a sufficient amount of fertilizer. A small amount of fertilizers is the main reason why Kazakhstan's yield is lower than that of neighboring CIS countries. If Ukraine contributes 80-100 kilograms of fertilizers per hectare of land, Russia-39 kilograms, then according to official statistics in Kazakhstan, only 5 kilograms of fertilizers per 1 hectare are added to the soil.

Unfortunately, without proper funding, we will not be able to resolve these issues in the near future, but we are working in all areas and will definitely reach the planned targets.

This year, many agricultural producers in Kazakhstan found themselves in a difficult financial situation. What allowed your Company to cope with the crisis situation?

Current external factors influencing the work of farmers, and a reduction in financing for the agricultural sector, has led to increased debt burden of our holding. 

Today, we would like to highlight the "Fund of problem loan" JSC, which supported us after they bought out the debt of the KAZEXPORTASTYK group from the second-tier Bank. The terms of debt restructuring allowed to solve a big problem in servicing loans received earlier in the Bank in foreign currency by converting the debt into tenge.  

We are grateful To the government of the Republic of Kazakhstan and the problem loans Fund for timely and invaluable support of the holding and preservation of jobs in rural areas.

How exactly did the state support in the face of the Fund of problem loans affect your activities and social side?

The support Of the government of the Republic of Kazakhstan gave an opportunity for further improvement and development of the group of companies.

In most areas, our farms are city-forming and we understand that we have a great social responsibility to tens of thousands of people who directly or indirectly depend on us. This includes employees and their families. For the well-being of the villagers, it is important that the company works. And if not for timely state support, all these people could be left without earnings, and many without a single source of income in the family. Despite the difficult financial situation, we have not reduced our production volumes or the number of our employees.

Thanks to this support, this year the KAZEXPORTASTYK group of companies became the flagship of the implementation Of the state program "Northern soy" by sowing 14,000 hectares of soybeans, for the propagation of the seed Fund and for the subsequent expansion of areas for sowing in the Northern regions of Kazakhstan. This culture is high-margin, promising and in demand on the international market.

 

What prospects do you see in growing legumes and oilseeds?

Neighboring China is the largest importer of soybeans in the world. With a global soybean market of 165 million tons, China buys 90 million tons of them. At the same time, 90% of them buy genetically modified soy. This means that there is a great need for organic soy.

Currently, only Russia, Ukraine and Kazakhstan remain producers of organic soy, while the rest have switched to GMOs. If we produce organic soy, we will occupy a niche on the world stage. We can reach the production of two to three million tons of soybeans per year, which will bring export revenue of more than one billion dollars. China, which is interested in soy, is also ready to buy sunflower and rapeseed from us. I believe that all agricultural producers in Kazakhstan need to move in this direction and in three or four years it will be possible to raise the export potential of Kazakhstan.

Interviewed By: Aida Zhurgenbayeva