France

There's less than meets eye in Macron's €10 billion future fund

President Macron wants France to be the nation for innovation and start-ups.
President Macron wants France to be the nation for innovation and start-ups.
Photo: AFP

(Bloomberg) Emmanuel Macron’s plan for a €10 billion “innovation fund” for France may not be quite what entrepreneurs understood it would be.

The fund is to be created from the proceeds of the sale of the state’s stakes in several companies. Pushed to explain how exactly the fund of the future would work, Martin Vial, the head of the state’s company-stakes holding agency, conceded that the eventual funds available to finance innovative technological and industrial projects may amount to just a few hundred million euros.

“The target is to create a 10 billion-euro fund, returns from which will be devoted to innovation,” Vial, the head of Agence des Participations de l’Etat, or APE, a body that manages state assets, told lawmakers at the National Assembly’s Finance Committee on Wednesday in Paris. “I don’t know if it will be 500 million euros or somewhere between 300 and 500 million euros, which won’t be sufficient.”

Some opposition members, concerned that the fund could be a ploy by the administration to sell stakes in state-controlled companies, have been pushing for details of what was one of the campaign cornerstones of France’s youngest president’s plan to overhaul the economy. Macron’s platform was ambiguous on the financing of the fund, which the government now says will support areas such as battery technology, artificial intelligence and transportation.

To some lawmakers, like the New Left party’s Valerie Rabault, the fund makes no sense.

“Many people believed that 10 billion euros will be invested, and that’s wrong,” Rabault told Bloomberg. “Vial clearly said only the returns of the 10-billion fund will be invested. This is a complex way to do things.” She added that instead of selling the stakes, the state could invest the dividends it earns from its holding in future industries.

Frittered Away

According to the French Senate’s latest report, the state earned 3.9 billion euros in dividends for 2015, of which 3 billion euros was in cash and 900 million euros in additional shares. The 2017 budget estimates that the state may have collected 3.6 billion euros in dividends for 2016. Dividends peaked in 2008 at 5.6 billion euros.

The state auditor has criticized various French administrations for the way they managed earnings from the assets, noting that the state spent more on recapitalization and other forms of support for the companies than it earned in dividends over the past five years.

Lawmaker Rabault pointed out that it will take several years for Macron’s fund to reach its 10 billion-euro target and that the returns from the fund won’t represent a major financial resource for companies. She said companies can currently count on the existing state program PIA or Investments for the Future Program, first implemented as part of a stimulus plan in 2010. Vial concurred that the PIA is a good resource for innovative companies.

The Finance Ministry confirmed Vial’s statement that the exact workings of the yet-to-be-created fund haven’t been ironed out. The president’s office didn’t respond immediately to a message requesting details on the presentation of the new fund.

State Divestments

Finance Minister Bruno Le Maire told Bloomberg last month that the French government’s divestment program will take years to execute and said he’s working on identifying assets that will be sold.

The state raised 1.53 billion euros this month with the sale of 111 million shares in utility giant Engie, the first such asset sale on Macron’s watch. The state still retains 24.1 percent of Engie and 27.6 percent of its voting rights.

According to APE, the French government owns about 100 billion euros worth of stakes in 81 companies, of which 13 are listed on the French stock market. Its investments include Aeroports de Paris, telecommunications group Orange SA, carmakers Renault SA and PSA Group, Air France-KLM, as well as utilities Engie SA and Electricite de France SA.

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