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Czech Billionaire Risks Helping Communist Comeback

Photographer: Martin Divisek/Bloomberg

Billionaire Andrej Babis, chairman of Agrofert Holding AS. Close

Billionaire Andrej Babis, chairman of Agrofert Holding AS.

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Photographer: Martin Divisek/Bloomberg

Billionaire Andrej Babis, chairman of Agrofert Holding AS.

Andrej Babis, a self-made Czech billionaire, may inadvertently help the Communists grab a share of national power for the first time since the 1989 revolution.

Babis, 59, has propelled his ANO party into the frontline of Czech politics and to second place in opinion polls by slamming his rivals as inept liars out for personal gain. His caustic style has alienated the rest of the country’s political class and risks pushing the poll-leading Social Democrats into an alliance with the Communists after the Oct. 25-26 election.

“This dynamic plays straight into hands of the Communist Party, as they increasingly look like the most reliable partner for the Social Democrats,” Otilia Dhand, an analyst at Teneo Intelligence, a London-based political consultancy, said in a telephone interview.

It was the demise of communism 24 years ago that gave Babis a chance to build an $11 billion agrochemical business on the ruins of the centrally planned economy. As a self-made man, he’s now tapping into the anger of a population following a spying and bribery scandal in June that brought down the government of former Prime Minister Petr Necas.

“We have a pseudo-democracy, in which you can go to elections once in four years, select four names from the list of candidates, and that’s it,” Babis said in an interview as he snapped commands at his campaign staff hustling to respond to a rival’s attack. “After the election, the politicians disappear and all they care about is themselves.”

Establishment Fatigue

Dismissing his role in a possible Communist comeback as “speculation,” Babis says voters tired of the establishment should vote for him rather than allowing the heirs of the Soviet-backed dictatorship to become a stronger force.

Babis is pledging to fight corruption and streamline the government to upend a system he says produces inept leaders fixated on personal benefits.

That line resonates with voters in a political climate dominated by the discontent over austerity policies, which ensnared the Czech Republic in its longest-ever recession, and catapulted anti-establishment parties across Europe, including Italy’s Five Star Movement led by former comedian Beppe Grillo.

ANO’s support in the polls, below the 5 percent threshold for entering parliament four months ago, shot up to 16.1 percent in a survey by the polling company Stem published Oct. 18, trailing only the Social Democrats with 25.9 percent and ahead of the Communists at 13.3 percent. ANO had 16 percent in a poll by TNS Aisa for the public broadcaster Ceska Televize published yesterday, behind Social Democrats with 23 percent.

Babis Rejected

The Social Democrats are rejecting Babis as a possible partner. While the party said it won’t take the Communists into a ruling coalition, they are considering striking an agreement with them on parliamentary support for a single-party cabinet.

Deficit reduction has helped the Czech Republic secure the highest credit rating among the European Union’s post-communist members at Moody’s Investors Service and Standard & Poor’s, on par with Estonia, which adopted the euro in 2011. The next Czech cabinet will also inherit the lowest borrowing costs in emerging Europe, with the yield on 10-year koruna bonds at 2.4 percent, trading below comparable U.S. Treasuries.

Babis, a member of the Communist Party before 1989, is eroding voter backing for center-right parties, with almost half of his new supporters migrating from the Civic Democrats and TOP09, according to a Sept. 30 study by Jan Herzmann, a statistician analyzing opinion polls.

Communist Turnaround

That dynamic plays into the hands of the Communists. Their ascent marks a turnaround in their political fortunes 24 years after the party’s predecessors were ousted in the bloodless Velvet Revolution.

The Soviet-backed Communist Party seized power in a 1948 coup, proceeding to nationalize assets, persecute critics and send dissidents to labor camps. Four decades of centrally planned economy resulted in shortages of basic goods, including toilet paper, fruit and vegetables.

After the 1989 revolution, the Communists condemned the Soviet-led military invasion of 1968 that crushed efforts to soften the dictatorship.

As the regime limped to its demise in the late 1980s, Babis worked as a foreign trade official, including a stint in Morocco. Private enterprise blossomed as the country transitioned to free-market capitalism, giving an opportunity to build his empire.

$2 Billion

The 59-year-old Czech entrepreneur, whose fortune is estimated at $2 billion by Forbes, points to Bidzina Ivanishvili as an example of someone who succeeded in making the transition from business to politics. An opposition alliance led by Georgia’s richest person upset President Mikheil Saakashvili’s party in last year’s election.

Memories of government bickering over posts and money were lingering in a downtown Prague ballroom on Oct. 3, when more than 500 ANO supporters cheered Babis’s vow to fight “stealing and lying” in politics.

“What’s important for me is that he’s rich enough to finance his life and his campaign with his own money and won’t be under anyone’s influence later,” Eva Jindrova, an 89-year-old pensioner who previously voted for the Civic Democrats, said at the rally.

Babis’s Agrofert is the country’s biggest private employer, with 34,000 workers, according to company data. With assets ranging from forestry to food producers, it had unconsolidated revenue of 205 billion koruna ($11 billion) in 2012, according to the latest financial statement.

Infrastructure, Energy

The billionaire, who began trading fertilizers in 1993 with $5,000 of capital, promotes cutting the value-added tax, spending more on infrastructure and lowering energy prices.

While ANO’s pledge of no tax increases is in line with positions taken by the Civic Democrats and TOP09, they along with the Social Democrats rejected cooperation with Babis, who said he won’t settle for less than finance minister if invited to government.

“This state has no strategy in anything, from energy, to family support, to transportation, to health care,” Babis said. “I feel that people are beginning to believe that someone else may come.”

To contact the reporter on this story: Peter Laca in Prague at placa@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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