JSC Rating agency of the Regional financial center of Almaty Floor 9, 136, Dostyk avenue 551, Almaty Republic of Kazakhstan RATIO ANALYSIS OF AGRICULTURE OF KAZAKHSTAN Analyst: G. Shinkeyeva Tel: (727) 224 48 41 (727) 224 48 43 shinkeyeva@rfcaratings.kz http://www.rfcaratings.kz Any form of copying, reproduction, distribution and forwarding of texts, graphs and other types of materials posted on the website of the "Rating Agency of the RFCA" must be accompanied by a hyperlink to the website www.rfcaratings.kz and indication of the author of the material. Copyright JSC Rating Agency of the RFCA 216 Almaty May 1 216
Ratio analysis of key indicators of Kazakhstan s agriculture Agriculture is the key industry of Kazakhstan s economy, almost completely providing food security. It also provides substantial agricultural output for exports. In 21-215 the value added of Kazakhstan s agriculture as a percentage of GDP was slightly changing and accounted for nearly 7%. The percentage of agriculture output to total export is relatively stable in 21-214 and accounted for merely 17.4% by medium. There was a significant increase in 215 due to an abrupt decline in total exports in nominal terms resulted from national currency devaluation. Diagram 1. Agriculture output to Kazakhstan's GDP, % 45 4 27% 35 3 18% 25 16% 16% 19% 18% 2 15 1 7% 8% 7% 7% 6% 7% 5 21 211 212 213 214 215 3% 25% 2% 15% 1% 5% % Kazakhstan's GDP, KZT bln. Agriculture to GDP, % Agriculture to total export, % Considering the total population, about 43% of Kazakhstan residents live in rural regions. This indicator tends to decrease, because in 21 the rural population accounted for 45.5% of the total. Historically, the rural population of Kazakhstan accounted for approximately 4-45% of the total population. Agriculture in Kazakhstan is the largest sphere of activity of the most of the population. Thus, in 215 more than 18% of economically active population were engaged in agriculture, forestry and fishery. It is the industry where the most of Kazakhstan s population is employed. Wholesale and retail trading with 15% of economically active population is the second industry after agriculture. And the whole industry is the third with 13% of economically active population. The number of employees in agriculture is continuing to decrease. In 21 they amounted to 2.3 mln. employees that accounted for 28% of all employed population of the republic. An abrupt decline by 3% was in 214 when the employed population in agriculture decreased to 1.6 mln. employees or 18.9% of economically active population. The number of hired employees evidenced double decrease: there were 193 thousand employees in 21 and only 98 thousand in 215. One of the reasons of decline is the lowest wage among all other industry sectors. In 215 it amounted to KZT 7,859 in nominal terms. Agriculture is the second in number of acting enterprises of the real sector of economy after manufacturing industry. As of 216-1-1 there were 8,89 enterprises agricultural manufacturers and 177,576 peasant (the farmer's) economies. 2
According to National Business, there are 9 agricultural companies listed in Ranking-5 of Kazakhstan s largest companies. Table 1. Agricultural companies on Ranking-5 of Kazakhstan s largest companies Place on Ranking- Company Industrial sector Operating income, KZT mln. 5 38 «Holding «Alibi» Ltd Grain production and sales 9,373 116 «Holding «Kazexportastyk» Grain and oilseed 27,864 JSC production 273 «Medet-Holding» Ltd Grain production and 11,63 handling 279 «Allel-Agro» JSC Finished и hatching eggs, poultry 11,275 314 «Ust-Kamenogorsk Poultry Egg production and 9,784 Plant» JSC poultry 321 «Agrofirm TNK» Ltd Grain production 9,42 414 «Malt mill «Soufflé Malt production 6,795 Kazakhstan» JSC 462 «Alatau-kus» Ltd Poultry Plant 5,67 468 «Abi-Zher» Ltd Crop production 5,61 Source: National Business The gross agriculture output continues to grow. In 21-215 the annual output averaged about KZT 2.2 trln. Structurally, two main groups of agriculture plant growing and cattle breeding accounted for about 52.5% and 47.2% of gross agriculture output. The percentage of agriculture services is extremely low and doesn t exceed.1% of gross agriculture output. The sharp increase of gross agriculture output in 211 was due to the record high grain harvest of 26.9 mln. tons that is comparable with the harvest of 1992. Diagram 2. Gross agriculture output 3, 2 5, 2, 1 5, 1, 88,3% 126,8% 82,2% 111,7% 11% 13,4% 14 12 1 8 6 4 5, 2, 21 211 212 213 214 215 Gross agricultural products, KZT bln. Gross products of plant growing, KZT bln. Gross products of cattle breeding, KZT bln. Volume index of gross agricultural products, % to the previous year (right scale) 3
In plant growing sector there was a significant increase of vegetables and vine crops growing, roots, tubers, forage and permanent crops growing. However, tobacco production decreased to that of 211. Generally, in the period of 21-215 grain production increased irregularly due to climatic and technological factors. The area of crops cultivated in Kazakhstan in 215 amounted to a little more than 21 mln. hectares. It slightly decreased by 1.4% versus 214. It is noteworthy to mention that the square of cultivated area has hardly changed for the last 7 years since 29 compared with 1997. Cattle-breeding in Kazakhstan demonstrates only upward output growth. Cattle-breeding increases by 1.4% by medium and all breeding sectors are on an increase except pig-breeding. 2 5 Diagram 3. Fixed capital of agriculture 4 2 33 35,5 35,5 34,5 31,7 35 3 1 5 25 1 18,5 15 16 17,6 2,2 2 15 5 1 5 21 211 212 213 214 Original value of fixed capital, KZT bln. Renewal ratio, % (right scale) Book value of fixed capital (less depreciation), KZT bln. Depreciation ratio, % (right scale) In 21-215 fixed capital consumption in value terms accounted for 17.5% of its original value by medium. The indicator has tended to grow slightly for the past years. Generally, we observe the increasing introduction of new fixed capital that averaged to KZT 561 mln. in the analyzing period. The 214 was an exception as the introduction of new fixed capital decreased by 3.1%. There is a quite high renewal ratio of fixed capital in agriculture compared with other real sectors of economy. Its annual renewal ratio averages 34%. Decline in fixed capital introduction correlates with decrease of depreciation ratio. In 21-215 the growth of depreciation ratio is about 17.5% and liquidation ratio is.5% by medium. Calculation of capital productivity and capital intensity was based on original value of fixed capital of Kazakhstan s agriculture, forestry and fishery instead of annual average value of fixed capital. We don t exclude inflation influence as we use KZT in calculations of fixed capital revaluation. However, the influence of such errors is infinitesimal as inflation was high only in 27. On average, without inflation of 27 it amounted to 7.2%. Capital productivity of fixed capital in agriculture demonstrates uptrend. An accelerated growth observed in 211 is an exception of the trend due to the record grain harvest and an increase of gross agriculture output as a consequence of it. 4
1,6 1,4 1,2 1,,8,6 Diagram 3. Capital productivity and capital intensity in agriculture 1,51 1,24 1,32 1,32 1,1,99,81,66,76,76,4,2, 21 211 212 213 214 Capital productivity Capital intensity Thus, in 21 1 tenge of fixed capital produced 1.1 tenge of final product and 1.32 tenge in 214. This fact reveals the efficiency of fixed capital in agriculture. Decrease of capital intensity observed in 21-214 reveals that an amount of.99 tenge of fixed capital in agriculture required generating 1 tenge of output. In 214 this ratio amounted to.76 tenge per 1 tenge of output. It should be noted that the efficiency of fixed capital in agriculture increases. 5, 45, 4, 35, 3, 25, 2, 15, 1, 5,, Diagram 4. Wage productivity и wage intensity in Kazakhstan s agriculture 32,79 43,9 33,91 38,2 37,8 37,95,3,2,3,3,3,3 21 211 212 213 214 Wage productivity Wage intensity The analysis of wage productivity reveals that 1 tenge of wage produced about 32.8 tenge of gross agricultural products. This fact demonstrates the economic efficiency of cash flows allocated for wage payments. Thus, the annual wages are capable to generate profits. Therefore, labor productivity reveals that the profit of agriculture manufacturers generated with their employees exceeds the annual wages by 37 times. 5
Invariability of capital intensity reveals that generally nominal wage increased very slightly and agriculture remains a low-wage sector for employees among other economic industries. Diagram 5. Investments and profitability in Kazakhstan s agriculture 2 18 36,5 16 14 28,2 12 24,8 1 8 17,9 17,5 6 4 2 21 211 212 213 214 215 4 35 3 25 2 15 1 5 Investments, KZT mln. Agriculture profitability, % (right scale) Agriculture manufacturers preferably use their own funds as the source of fixed capital investments, which average annual share accounts for about 73% of the total investments. The share of bank loans for agriculture is insignificant. Thus, the largest amount of loans totaled KZT 1 bln. in 214 (5.8% of total amount of loans), the lowest KZT 5.5 bln. in 215 (3.3%). The share of annual state subsidies is extremely low and has a tendency to decrease. According to the preliminary data published by the Committee on statistics of the Republic of Kazakhstan state subsidies singled out from republican and local budgets amounted to KZT 175.3 mln. or.1% of the total investments. The amount of the total investments increases, except 215 when the investments decreased by 3.6%. In 215 agriculture has got investments in the amount of KZT 167.1 bln. or USD 751.8 mln. Kazakhstan s agriculture is rather profitable compared with the other sectors of economy. Though profitability ratio is irregular in different periods. In 21-214 profitability of plant growing sector accounted for near 3%, that was significantly higher than in cattle-breeding sector with profitability ratio equaled 14%. The ratio analysis of Kazakhstan s agriculture will be reverted to during 216 as baseline data and other statistics accumulate. 6
Published by JSC Rating Agency of the Regional Financial Center of Almaty (Rating Agency of the RFCA) Any form of copying, reproduction, distribution and forwarding of texts, graphs and other types of materials posted on the website of the "Rating Agency of the RFCA" must be accompanied by a hyperlink to the website www.rfcaratings.kz and indication of the author of the material. Copyright JSC Rating Agency of the RFCA 216 JSC Rating Agency of the RFCA 136 Dostyk avenue, Floor 9 Business Center Pioneer 551 Almaty Telephone: (727) 224 48 41 Fax: (727) 224 48 43 E-mail: info@rfcaratings.kz Website: http://www.rfcaratings.kz 7