In the second of a four-part series on Felda Global Ventures, KiniBiz goes to a Felda settlement and talks to its inhabitants about what FGV’s listing means to them.
While some are happy with the cash payment of RM15,000 they are unsure if 800 shares in FGV will make much difference to their predicament.
It is a drizzly afternoon in Serting, Negri Sembilan and AM Talib Harun and a group of middle aged men, all Federal Land Development Agency (Felda) settlers are chatting animatedly over coffee and keropok lekor.About nine months ago, a truck dropped off stacks and stacks of Felda Global Ventures Holdings (FGV) prospectuses at this Felda Raja Alias settlement for them to read, and now these men are minority shareholders in the government flagship.
The allocation of shares were part of the deal which Prime Minister Najib Abdul Razak, the minister in charge of Felda, said was the benefits from the listing for settlers. The “windfall” also includes RM15,000 per settler, paid in three installments.
Felda had made RM5.5 billion from its divestment, and RM1.7 billion or roughly a third of that went back to the settlers in the form of the windfall cash. It is unclear what the remainder will be used for.
“You know (the PM) said that it’s supposed to secure our future until the end of the world. I don’t see how,” AM Talid said.
“It’s 800 shares. If it was 180,000, like what was offered to some who have never even worked on a Felda land, I may change my mind.”
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| Mohamad Isa Samad |
According to the prospectus, settlers make up only 2.5 percent of those allocated shares, while Felda employees fared slightly better at 3 percent. The largest portion of the shares, 41 percent, was allocated to “other institutional investors” while 11.5 percent or a whopping 419.6 million shares were for Ministry of International Trade and Industry (Miti)-approved bumiputera investors.
Feel good
Lifting the 1000-page prospectus, the second generation settler from Felda Raja Alias said that he believes that he is probably one of the few settlers who actually read it. The others, he reckons, either could not understand it or did not bother to.
“They were told that Felda is now a global entity, that we are special, and they felt good about it,” he said.
But Felda Lui Timur settler Rahim Karidin is not feeling too great.
“This FGV has put me in debt for nothing!” he said.
The men estimate that about 90 percent of settlers had taken up loans to purchase the 800 shares, which at initial public offering price of RM4.55 would have cost a total RM3,640. The loans were initially to be taken with a commercial bank, but Felda had post-listing stepped in to offer soft loans.
According to the loan agreement, settlers now have to pay Felda RM50 per month. Although a relatively small amount, this would mean six years of debt for returns which are uncertain at best. With the CPO price dip slashing settler incomes, RM50 less a month still stings.
Sitting under water most of 2013, FGV shares have not had an inspiring run with analysts either calling for the stocks to be sold or held for a longer term. Investors who cashed out at its peak of RM5.55 would have raked in profits, but how much?
Profits for whom?
If only half of the Miti-allocated shares were sold then, the investors whose identities the ministry said are “confidential” could have pocketed collectively a cool RM 210 million. For the settlers, however, the profits are negligible.
The settlers from Serting say they know of only one person who sold off his shares and the person managed to gain RM500 after all the fees were accounted for.
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| AM Talib |
Indeed this was one of the reasons cited by settlers who opposed the listing, who said they would rather hang on to their KPF shares than to swap them for FGV shares for the sake of the listing.
The short term outcome of the listing for settlers were foreshadowed by the initial resistance to the listing, at least on the part of eight KPF members who took the matter to court. KPF had in the 11th hour prior to listing successfully held an extraordinary general meeting where it voted overwhelmingly for the listing to go ahead.
KPF’s approval was required as it shares the golden egg Felda Holdings Bhd with FGV. FGV had bought 49 percent of Felda Holdings in 2009, and the entity remains its most profitable holding. KPF holds the remaining 51 percent.
The validity of the EGM is, however, now in question following a High Court decision to delete Mohamad Isa’s KPF membership. This may affect his chairmanship of the cooperative. KPF is valued at RM3 billion.
The initial plan was to swap the settlers KPF shares for FGV shares, although details on this were murky all the way to the June listing, resulting in much uncertainty. The court case involving the eight KPF members had halted plans for FGV to buy KPF’s stake in Felda Holdings, to boost its listing value.
By April, a new listing structure was devised, placing Felda and a special purpose vehicle as “trustees” to care for the settlers interest in FGV. It was said then that settlers would earn new dividend allocations from the special purpose vehicle and Felda. This would be on top of the fifty percent of group profits which FGV promises shareholders.
Generations in poverty
KiniBiz submitted questions to FGV CEO Sabri Ahmad for the purpose of this series of articles. They are as yet unanswered.
However, speaking at the Palm Oil Conference 2013, Sabri said that the listing would “improve the (settler) living standards and develop communities with better benefits for the scheme, along with improved corporate governance”.
For the Serting settlers, however, the FGV listing has done nothing for the children of Felda settlers, some of whom are living in dire straits. AM Talib said that the listing has altogether lost sight of the agency’s raison d’etre—lifting people out of poverty.
“Even if one child from each Felda household falls between the cracks, that is 110,000 more poor families in the future. Today when you go to Felda settlements, you see (adult) children of settlers living in huts in the middle of plantations, fighting over abandoned homes,” he added.
He claims that the “luckier” of these children of Felda settlers would be hired as labourers on the plantations, but others are left foraging or fishing from the rivers for a livelihood.
“The
Felda Plantation land of 330,000-ha should not be used to prop up the
FGV listing. It should be used to help people out of poverty. The only
way out is through land or the children of Felda settlers will be poor
and their children’s children more so,” he said.PAS-linked Children of Felda Settlers’ Association (Anak) economic advisor Rosli Yaakop also believes that settlers have a stake on the Felda Plantation land, as it was developed from
contributions made by Felda settlers. These contributions, he said, are among the many “cuts” made to the proceeds from their crops sold to Felda for processing.
He argues that there is also a legal argument against the use of Felda Plantation, which land is now leased for 99-years to FGV.
“The land was given by the state governments to Felda for the benefit of the settlers and KPF. By including the lands in the listing, Felda is by-passing the Land (Group Settlement Area) Act 1960,” he said.
Additionally, more than 40,000ha of the land involved in the listing exercise is Malay reserve land, raising further questions by critics.
For now, the settlers say they have no choice but to hang on to their 800 shares and pay their
RM50 a month, but with commodity prices on the slide, the bright future promised by the listing is hardly on the horizon.
Source - http://www.kinibiz.com/story/issues/8332/the-fgv-listing-and-the-felda-settler.html
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