A Czech Wealthy Magnate Takes PM Role, Vowing to Sever Corporate Holdings

Tycoon Andrej Babis has been sworn in as the Czech Republic's new head of government, with his government slated to be appointed in the coming days.

His confirmation was contingent upon a central condition from President Petr Pavel – a formal commitment by Babis to cede command over his vast food-processing, agriculture and chemicals group, Agrofert.

"I commit to be a prime minister who champions the interests of all our citizens, at home and abroad," declared Babis following the swearing-in at Prague Castle.

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

High Aspirations and a Far-Reaching Business Presence

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

Agrofert is so thoroughly integrated in the Czech economic fabric that there is even a mobile tool to help shoppers bypass purchasing products made by the group's over two hundred subsidiaries.

If a product – for example, frankfurters from Kostelecké uzeniny or sliced bread from Penam – is part of an Agrofert company, a thumbs-down symbol appears.

Babis, who previously served as prime minister for four years until 2021, has adopted more right-leaning positions in recent years and his cabinet will feature members of the right-wing SPD party and the EU-skeptical "Motorists for Themselves" party.

The Promise of Divestment

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

As prime minister, he asserts he will have no knowledge of the conglomerate's fiscal condition, nor any ability to sway its prospects.

Governmental decisions on public tenders or subsidies – whether national or EU-funded – will be made independently of a company he will have relinquished ownership of or profit from, he further notes.

Instead, he explains that Agrofert, worth an estimated $4.3bn (£3.3bn), will be placed in a trust managed by an autonomous trustee, where it will remain until his death. At that point, it will be inherited by his children.

This arrangement, he commented in a Facebook video, went "exceeded" the demands of Czech law.

Clarification Needed

The specific type of 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 statutory law, and an team of legal experts will be necessary to craft an arrangement that works.

Skepticism from Watchdogs

Skeptics, including Transparency International, are still skeptical.

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

"There's no separation. He obviously knows the managers. He knows Agrofert's range of businesses. From an high office, even at a EU level, he could potentially influence in matters that would impact the industry in which Agrofert is active," Kotora advised.

Extensive Influence Extending Past Agrofert

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

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

Hartenberg also manages a chain of fertility centers, as well as a florist chain, Flamengo, and an underwear retailer, Astratex.

The reach of Babis into multiple areas of Czech life is broad. And as prime minister, for the second time, it is about to get broader.