A Czech Wealthy Magnate Assumes PM Office, Vowing to Cut Corporate Holdings

Wealthy businessman Andrej Babis has officially become the Czech Republic's new premier, with his complete ministerial team slated to be appointed in the coming days.

His appointment was contingent upon a fundamental demand from President Petr Pavel – a formal commitment by Babis to cede control over his vast food-processing, agriculture and chemicals group, Agrofert.

"I vow to be a prime minister who champions the interests of the entire populace, at home and abroad," affirmed Babis following the swearing-in at Prague Castle.

"A prime minister who will work to transform the Czech Republic the top destination to live on the face of the Earth."

Grand Visions and a Far-Reaching Corporate Footprint

These are grandiose goals, but Babis, 71, is accustomed to ambitious plans.

Agrofert is so firmly entrenched in the Czech business landscape that there is even a dedicated app to help shoppers bypass purchasing products made by the group's numerous subsidiaries.

If a product – for example, frankfurters from Kostelecké uzeniny or packaged bread from Penam – is part of an Agrofert company, a negative symbol is displayed.

Babis, who held the role of prime minister for four years until 2021, has adopted more right-leaning positions in recent years and his cabinet will incorporate members of the far-right SPD and the EU-skeptical "Drivers for Themselves" party.

The Pledge of Separation

If he honors his vow to withdraw from the company he built from scratch, he will cease to profit from the sale of any Agrofert product – ranging from processed meats to agricultural chemicals.

As prime minister, he claims he will have no insight of the conglomerate's fiscal condition, nor any capacity to affect its fortunes.

State decisions on state contracts or subsidies – whether Czech or European – will be made without regard to a company he will have severed ties with or profit from, he emphasizes.

Instead, he explains that Agrofert, valued at $4.3bn (£3.3bn), will be placed in a trust managed by an autonomous trustee, where it will remain until his death. Upon that event, it will pass to his children.

This arrangement, he stated in a online address, went "well above" the demands of Czech law.

Clarification Needed

The legal nature of this trust remains unclear – a domestic trust, or one in a foreign jurisdiction? The legal framework of a "fully independent trust" does not exist in Czech legislation, and an army of lawyers will be required to devise an arrangement that is legally sound.

Doubts from Watchdogs

Watchdog organizations, including Transparency International, remain unconvinced.

"Such a trust is not the answer," argued David Kotora, the head of Transparency International's Czech branch, in an statement.

"There's no separation. He is familiar with the managers. He knows Agrofert's holdings. From an executive position, even at a European level, he could theoretically intervene in matters that would affect the sector in which Agrofert functions," Kotora advised.

Broad Reach Extending Past Agrofert

But it's not just food – and it's not just Agrofert.

In the eastern suburbs of Prague, a medical facility towers over the O2 arena. While it is owned by a company called FutureLife a.s, that company is controlled by Hartenberg Holding, and Hartenberg Holding is, in turn, majority-owned by Babis.

Hartenberg also runs a network of reproductive clinics, as well as a florist chain, Flamengo, and an lingerie store chain, Astratex.

The footprint of Babis into all corners of Czech life is broad. And as prime minister, for the second occasion, it is set to grow broader.