Igor Mazepa : “Ukraine needs a privatization”

John Cardinger
Nov 26, 2018 · 9 min read

In the Ukrainian stock market, Igor Mazepa is one of the key figures, the bright and extraordinary personality. Contrary to the predictions of detractors, Igor Aleksandrovich was able to conduct his company through all the difficulties, and today Concorde Capital, as before, occupies a leading position in the market.

Igor Mazepa is young enough, energetic and versatile. He is not afraid to try himself in completely new directions and, by the way, quite successfully.

For example, when he was the chairman of the stock exchange council of the Ukrainian Exchange, he joined the jury of the reality show on ICTV, where he personally invested in projects he liked.

In addition, in recent years, Igor Alexandrovich devotes a lot of time to train young people who want to try their hand in the financial field.

But he treats money very securely. He has other values and priorities.

«Wealth is not in money, but in life experience»

“Money gives a certain freedom and opens easier access to some opportunities. This is one of the tools to achieve the goal, but for me money is not a measure of anything in life. Wealth is not in money, but in life experience, in the pleasure of results, in relations with people”, said Igor Mazepa in an interview.

But despite this, he takes an active position in the life of the country and important changes for Ukraine. Igor Mazepa, CEO of investment company, Concorde Capital, believes that privatization can help the Ukrainian economy.

«Privatization is important in terms of budget revenues»

According to him, for 27 years of independence, Ukraine has fulfilled the privatization plan only 3 times. This is 2 times when they sold the same “Kryvorizhstal”, “Ukrtelecom” to Akhmetov. The rest of the year, underfunding the budget for the item of privatization was catastrophic. For example, currently in 2018, the privatization receipts plan is 22 billion UAH. According to Mazepa, state-owned companies are the greatest misfortune for Ukrainian society, especially in the context of corruption. These places are like black holes through which many tens of billions UAH are washed out.

Mazepa believes that privatization is important in terms of budget revenues, and also no less important in terms of the acquisitions by these enterprises of a normal, transparent and efficient private owner. Which will even out the situation and make these companies profitable, able to pay taxes, decent wages, and other compensations for their employees, etc.

It happened so since the time of early Kuchma that the government has always traded with its allies and those who vote in parliament by various state companies. Unfortunately, the events of the 14th year did not change this practice in any way, and still state-owned companies remain very often a bargaining chip in an agreement between the authorities and the opposition, with other possible allies, etc. Igor Mazepa does not believe that some kind of mass privatization will occur in the near future.“Like the topic of gas prices or land reform, this has become a rather politically sensitive story. It became not popular, unfortunately, in our society. And from here is such a pitiful result from the point of view of the real work on the sale of state-owned companies,” says Igor Mazepa.

According to the director of the investment company Concorde Capital, the only thing that officials are now hoping for is the sale of Centrenergo literally in the near future, before the end of the year. “I do not believe that an asset that hypothetically could cost 200–250 million dollars can be sold within a month or a half,” says Igor Mazepa, “To sell it, you need to do a lot of effective work in terms of attracting potential investors . Then they have to do their job — do an analysis, check the company in terms of legal purity, accounting purity, and operational prospects of this company. And then go through all the negotiation procedures within yourself — approval by the board of directors, supervisory boards, etc. And then find 200–250 million dollars to pay. The time which is set by Centrenergo, I think it is not realistic to implement.”

Mazepa also recommends selling land to those owners who need such a deal. “We at Concord believe that at the first stage the price of land will not be fair, i.e. low,” says Mazepa. “Therefore, for Ukrainians who have any savings and funds ready for investment, I would advise to invest. Well, the obvious operators in this market will be the existing agricultural holdings, farmers, etc. And they are likely to be buyers too. ”

As for the rest of privatization, it is scheduled for the 19th year. But most likely it will be the same story as the last 27 years of the existence of our state. If something happens, it will be the exception and not the rule. — says Igor Mazepa.

Igor Mazepa

Igor Mazepa about reforms

“My advice to the presidential administration is to carry out the reforms that need to be carried out,” — says the general director of Concorde Capital. Unfortunately, in Ukraine it turns out that the biggest and most significant changes are occurring under the pressure of Western creditors. Not the officials of the IMF and the European Union, but the State Department need these reforms and the increased incomes of Ukrainians.

We, Ukrainians, need these reforms. Therefore, the recommendations are the same: a free land market, pension reform, and the introduction of really honest medical insurance. (And not this so-called reform that was accepted recently, just for a tick). And a number of ordinary basic things, through which the whole world has already passed.

Medical and educational reforms are “ours”, native reforms initiated by activists from within the country, by the government. To introduce them, we do not need to reinvent the wheel. We can and should take into account the successful experience of other countries.

But the pension reform and energy are other matters. They were imposed on us by the EU and the IMF. Pension reform will not solve problems today and now, but will help to minimize problems in the future — in conditions when the population of Ukraine is aging, and more and more pensioners are employed per worker. The change horizon is 5 to 10 years. Be patient. And as we already understood, the pension will need to be earned.

Some facts:

The spending of the pension fund is 300 billion UAH per year, and revenues are 150 billion UAH. That is, our pension fund is subsidized to UAH 150 billion from the budget. And who subsidizes it? Right! We subsidize it — taxpayers, and twice: the first time — when we pay in the Pension Fund as payroll deductions and the second — as taxpayers.

The main goal of medical and educational reform is to obtain better services with a slight increase in funding. I expect that the effect will be noticeable for 3–4 years.


Mazepa is also confident that the issue of the hryvnia exchange rate against the dollar is also becoming very politically sensitive. “The President, the Head of the National Bank, the Head of the Cabinet of Ministers, businessmen, every Ukrainian, Western investors are concerned about this topic here … In general, everyone is concerned.”

In fact, according to Mazepa, the devaluation of one currency to another by 15–20% over the course of a year is a common practice. And no one is surprised. If the pound falls against the dollar by 20% in England or in Europe, everyone notices.

Concorde Capital analysts have done quite an interesting study on this topic. Since the introduction of the hryvnia into circulation in 1996, during these 22 years, the hryvnia has fallen by an average of 12% every year. Therefore, probably, many businessmen historically based on this fact, when calculating their budgets, drawing up financial plans and in general, they take a devaluation level of 10–12% from the market. But as Nassim Taleb, the famous author of many world bestsellers, claims, past experience is not a good enough reason to make reliable predictions for the future. We proceed from the fact that from the 14th year after the revolution, the National Bank declared and actually headed for inflation targeting. “I can now praise the National Bank a little. From the 15th year, the law on the independence of the National Bank was adopted. Neither the head of government, nor neither the minister nor the president can influence it now. And at least for the last 4 years, the National Bank has been pursuing its course, and its promises, and declarations,” says Igor Mazepa.

Gontareva, the head of the National Bank, promised all the people. And it starts to give results. Inflation on the results of the 18th year will most likely be within 10%. This is an absolutely normal reasonable figure. In the 19th year, we expect a decrease in inflation to 7–8%, and in the 20th year — 5–6%. This means that when we talk about the dollar / hryvnia exchange rate, the hryvnia is falling or rising, economists most often look at the difference in inflation. In Ukraine, because we are talking about the hryvnia on the one hand, and in America, because we are talking about the fall of the hryvnia, on the other hand. The average inflation rate in America is 2%.

If the National Bank manages to keep inflation in the region of 6–8%, then in principle this difference between 7% and 2% will be an economically justified level of hryvnia devaluation against the dollar. Those in contrast to the historical statistics for the past 12 years, which say that the hryvnia devaluates every year by 12%, Concorde Capital analysts expect hryvnia devaluation of 4–5% every year. Of course, this does not exclude possible fluctuations of the hryvnia against the dollar, hryvnia against the euro or other currencies.

For this purpose, the National Bank keeps its reserves or tries to keep them at the level of 3 months of import. Now they amount to $18 billion. And it is precisely these reserves that are a cushion with a buffer in order to smooth out here such unforeseen seasonal or possible conjunctive fluctuations of the hryvnia against the dollar. “Therefore, from the point of view of the hryvnia exchange rate, we feel comfortable with Concorde Capital analysts. And we do not agree with the panic that is found in the business or political environment,” says Igor Mazepa.

The founder and CEO of the investment company Concorde Capital, Igor Mazepa, is also convinced that the attitude of foreign investors to Ukraine will depend on other foreign donors: “We work more with the markets, with real investors, mainly with Western ones, because my personal conviction is: that money that are spinning here in Ukraine bank capital, (private capital) is not enough. Therefore, there will be real changes in the investment climate, in the life of every Ukrainian, when big, huge western capital comes in — billions of dollars, tens of billions of dollars. How, in principle, it happens in the western market. ”

«The cryptocurrency has already lost its reputation»

The fact that not everything in the world lends itself to the logic of numbers, the cryptocurrency market shows us. This is a tool for which there are absolutely no fundamental or at least understandable assets. A tool that grew only because it became fashionable to be bought. This fashion was reinforced by the expectations of quick earnings, and the expectations themselves were based only on the fact that the Bitcoin rate rose by hundreds of percent over the past year (or even a month). But as soon as this “asset” showed that it could lose in price just as quickly, the demand for it began to fade. That is, the cryptocurrency has already lost its reputation as a reliable method for increasing capital. This loss may be followed by the fall of the fashion for Bitcoin and oblivion, with all the ensuing consequences for the price, Igor Mazepa is convinced.

“It would seem that in our open world, where any information about a business or economy can be obtained in an instant, it’s the numbers and facts that should determine the value of any asset. But in reality, as in past centuries, fundamental indicators are not necessarily decisive for business value. Empirical studies continue to show that up to 50% of the value of the largest companies is determined by something other than their profit, revenue, or the presence of tangible assets. While in the world investment decisions are made by people, with their complex system of motivation, fears and ambitions, the role of such an intangible concept as reputation will be important,” he says.