Czech Wealthy Magnate Secures PM Role, Pledging to Cut Commercial Empire

Tycoon Andrej Babis has taken office as the nation's new head of government, with his government anticipated to be appointed shortly.

His confirmation came after a fundamental condition from President Petr Pavel – a formal assurance by Babis to relinquish command over his vast food-processing, agriculture and chemicals group, Agrofert.

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

"A leader who will work to transform the Czech Republic the best place to live on the entire planet."

High Aspirations and a Far-Reaching Business Presence

These are high-reaching aspirations, but Babis, 71, is used to large-scale thinking.

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

If a product – for example, frankfurters from Kostelecké uzeniny or packaged bread from Penam – belongs to an Agrofert company, a thumbs-down symbol shows up.

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

The Pledge of Withdrawal

If he honors his vow to divest from the company he founded and grew, he will cease to profit from the sale of a single Agrofert product – ranging from processed meats to agricultural chemicals.

As prime minister, he states he will have no information of the conglomerate's financial health, nor any capacity to influence its fortunes.

Administrative decisions on government procurement or subsidies – whether national or EU-funded – will be made without regard to a company he will no longer own or gain financially from, he adds.

Instead, he explains that Agrofert, worth an estimated $4.3bn (£3.3bn), will be placed in a fiduciary structure managed by an third-party manager, where it will stay until his death. Upon that event, it will pass to his children.

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

Outstanding Issues

The legal nature of this trust has yet to be clarified – a domestic trust, or one established overseas? The legal framework of a "fully independent trust" does not exist in Czech legislation, and an team of legal experts will be necessary to devise an arrangement that is functional.

Criticism from Observers

Watchdog organizations, including Transparency International, are still skeptical.

"Such a trust is an inadequate measure," stated David Kotora, the head of Transparency International's Czech branch, in an statement.

"There's no separation. [Babis] undoubtedly is acquainted with the managers. He knows Agrofert's range of businesses. From an position of power, even at a European level, he could possibly act in matters that would affect the sector in which Agrofert operates," Kotora warned.

Wide-Ranging Interests Beyond Agrofert

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

In the outskirts of Prague, a medical facility stands near 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, controlled by Babis.

Hartenberg also runs a network of reproductive clinics, as well as a flower shop network, Flamengo, and an underwear retailer, Astratex.

The footprint of Babis into every facet of Czech life is extensive. And as prime minister, for the second time, it is about to get more extensive.