Feronia responds to L'Echo

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02.11.2016
On the 30th of October, Feronia was contacted by L'Echo to provide comments on a press release regarding a report that would be published on the company. Please find below the full response.



Whilst we believe that the intentions behind this press release are well meaning, we simply do not recognise the criticisms arising from it and refute the allegations made.
We therefore thank L’Echo for contacting Feronia and providing us with the opportunity to provide a response.
These incorrect accusations made against our company are both detrimental to our efforts to revive this business, and directly impacted both our employees and all the people who depend on the Company’s survival for their livelihood.
We fully acknowledge the fact many aspects of our operation require improvement and we are working hard to achieve this. We welcome external monitoring, particularly if it can lead to improvements and are, in fact, subject to considerable external monitoring by our DFI shareholders and lenders.
Unfortunately though, it would seem that most accusations are done without thorough fact checking or contextualization and are demonstrably untrue. In fact, it is worth noting that, apart from as a response from Grain to an email we recently sent them, in which they asked three questions (to which we duly responded in a transparent and detailed way), the NGOs involved in this report have made no attempt to contact us, conduct appropriate due diligence or ask us to answer their questions and accusations directly.
Feronia’s management has a policy of transparency and is ready and pleased to engage with any party seeking to learn more about our operations, our motivations, and objectives with regards our plantations business in the Democratic Republic of the Congo, Plantations et Huileries du Congo (PHC). We are proud of what we have done thus far with limited resources, and are determined and committed to continue building a sustainable, self-funding enterprise that has an overwhelmingly positive impact on the lives of its employees, their families, and the surrounding communities. Without Feronia’s intervention to save the business in 2009 it is highly likely that this historic company employing thousands of workers in a region where there is virtually no other formal employment would have been unable to survive. In practical terms, we’re delivering improvements such as a refurbishment of the housing and sanitation available to workers; a road maintenance programme to update the infrastructure that local people rely on; new health and safety staff and community relations representatives; and a comprehensive study of the needs of workers and the local community.
It is notable that those accusing us choose to ignore all of the positives things we are achieving, such as the 100,000+ medical consultations for employees, their families and local communities at our health facilities in 2015; the $10 million PHC paid in wages to employees and temporary staff in the DRC in 2015 alone; the independent Environmental & Social Assessment we published in 2015 which, as far as we know, was the first such exercise in the DRC; the water sources we are installing in and around our operations; the circa 9,000 people we provide employment for each year or the fact that, in the poorest parts of one of the poorest countries in the world, we are one of the few organisations making a real positive difference to the lives of tens of thousands of people through rebuilding, investing in and improving some of the only social infrastructure in the regions.
Feronia is making a huge difference to people’s lives in one of the world’s poorest places. Not only are there jobs but Feronia provides access to schools, hospitals and infrastructure for our workers and the community. We’re operating in extremely challenging conditions and there is a long way to go to rebuild a business that suffered many years of neglect, but we’re making improvements to the way we operate and to the conditions facing our people and the local community.
As we hope our answers here will demonstrate, we are happy to engage with and communicate openly and transparently about what we are doing with those that approach us. We also show some of our achievements we have made on our website and are required to publish management reports and financial statements on a regular basis as a requirement of our stock market listed status. Our plantations are also not fenced, and public roads go through them; anyone can come and see how we operate.
The stigma associated to palm oil plantations has become extreme in recent years and in many respects, for good reason. We know that irresponsible practices have led to unacceptable situations, with both social and environmental aspects, in many places around the world. However, the specifics of our situation and operating parameters are distinct - strictly no deforestation, the rehabilitation of old plantations only, no exports of production now or in the future, highly sustainability-oriented shareholders, the only provider of jobs, healthcare and infrastructure in the areas we operate and a legacy workforce and communities that are reliant upon our survival for their livelihoods. We are keen to work with those NGOs and others who want to play a constructive role in helping to improve the lives for the people who live in and around our plantations and will always welcome views and advice on how to improve things in the context of the very tough environment in which we operate.

Background

Feronia acquired its palm oil business from Unilever in 2009 after it has suffered from years of underinvestment and considerable disruption caused by conflict in the DRC. Our initial focus has been on rebuilding the business and resuming production to secure its future and the livelihoods of the many thousands of people we directly and indirectly employ. We pride ourselves on being the guardian of our 105 year-old palm oil business and its employees, communities, and environment and we have a long-term commitment to improve the living and working environment of our employees and their communities and are committed to sustainable agriculture, environmental protection and community inclusion. The areas in which we operate are very remote – several hundred kilometres from the nearest city and without substantial public infrastructure or other private-sector employment. The logistical challenges of operating in such an area are very significant but so is the possibility for having a positive impact on the many tens of thousands of people that depend on the company for their livelihoods.
There are numerous documented issues with traditional communities in the early years of Unilever and its predecessor companies’ presence in the DRC. However, the challenges we face today in revitalising the business while restoring the social infrastructure to levels that Feronia’s management, stakeholders, and communities accept and are proud of, are quite distinct from the issues caused by Unilever’s early activities in the region. We do not dismiss those historical issues but are focused on the reality of the situation we inherited after nearly a century of operation in these locations and a decade of neglect and are working hard to develop a productive and inclusive path forward.
If Feronia had not acquired this business and secured substantial international funding for the rehabilitation of the operation and its social infrastructure, there would be no employment, no medical facilities or professionals, no education, no hope. We are committed to building something that respects the community and our environment and allows people to not only survive but flourish, and benefit from everyone’s commitment and hard work.
We are pleased to engage with any party that has any constructive alternatives to our approach, particularly if they have the funding required to affect an alternative.
With regards to specific allegation in the press release we would like to state the following:

Corruption, impropriety and “shady dealings”

Feronia and its management wholeheartedly refute any suggestion of impropriety or corruption especially with regards to its relationship or dealings with Mr. Karubi or our corporate structure.
As a TSX-V listed company, Feronia is subject to the highest level of regulations, financial reporting and disclosure and operates to the highest standards of integrity throughout its operations. It has been, and continues to be, subject to the highest level of scrutiny from independent financial auditors, regulatory bodies and those undertaking due diligence as part of an investment in to the Company as well as ongoing monitoring and evaluation from our DFI investors and lenders.
We have attached a recent, detailed explanation regarding our corporate structure including diagrams, shareholding details and dates which we sent to Grain in response to their three questions arising from our email to them last week. We have nothing to hide.

Specifically with regards to Mr. Karubi:

Mr Karubi was a minority shareholder of the Company that was formed in 2008 that ultimately acquired PHC from Unilever in 2009. The acquisition of PHC was done through a competitive tender process run by KPMG (Paris) on behalf of Unilever plc. Mr Karubi had no prior role with PHC, or Unilever plc. At no point has Mr. Karubi intervened on our behalf with any level of government official. He did, however, contribute significantly by providing a Congolese perspective to the board and senior management and giving cultural context and guidance on several matters during his five-year tenure as a board member. Prior to Feronia’s IPO, Mr Karubi paid for his shares in Feronia in-kind with the transfer of $600,000 worth of real estate (in the form of a farm) to the company. This was in return for c.9,000,000 shares (not equivalent to 900,000 shares following a 10:1 share consolidation) which are worth c.$90,000 at today’s share price and represent c.0.26% of the share capital of the company.
As has been disclosed in the Group’s quarterly financial reports and accounts at the time, Mr Karubi received director’s fees as a director of Feronia Inc. from May, 2012 until he stepped down from the Board of Feronia in June 2014. His annual director’s fee was US$20,000 per annum, the same base fee paid to all non-executive directors of Feronia Inc. at that time. The total amount of directors fees paid to Mr. Karubi in his role as a director of Feronia Inc. was $43,333. Prior to May, 2012, there was no cash compensation paid to directors of the company.
In addition, in 2009 the Company decided to lease Mr. Bin Karubi’s residence in Kinshasa which he was not using, having relocated to the UK to serve as Congolese Ambassador to the United Kingdom. Feronia was able to agree terms that it considered to be highly favourable to the Company. This was also disclosed at the time as are all related party transactions undertaken by Feronia Inc in accordance with our TSX-V listing.
The residence was in what was considered a safe part of Kinshasa (where lots of embassy accommodation is) and was used to accommodate senior management (some of whom were living there for long periods of time), visitors (including investors, auditors, consultants, and board
members) and as office space for Feronia Inc. Part of it was also converted to provide office space for Feronia’s Kinshasa based staff and management. The apartment had 6 or 7 bedrooms and 2 offices and a room used as a boardroom and approximately 20 people worked there.
The Company now rents an apartment in a different part of Kinshasa for visiting manager and consultants to stay (3 bedrooms), and offices in a different, non-residential area.

Illegal land occupation

PHC does not own the land on which it operates. It operates on land which is leased from the DRC government through more than 200 fixed-term, renewable land titles. PHC strictly abides by the legal process in place for renewing these titles which is extensive and thorough. It includes considerable work ‘on the ground’, verification by government land surveyors and obtaining the necessary government permissions, which vary by province.
Many of PHC’s titles have been in place for over 100 years and the renewal process has been undertaken a number of times.
Where issues relating to land are expressed by local communities, PHC endeavours to engage with those communities to assist in achieving a fair solution within the bounds of the country’s land laws. At each of the Company’s operational sites it has a community engagement team and stakeholder engagement software. All meetings and engagement with local communities and community members, their views, issues and grievances are recorded at a community by community level so that they are lodged, reviewed, reported on to the Company’s ESG Management committee, external community development advisors and the ESG Board Committees and acted on.
Over the last two years PHC has undertaken extensive work creating digital maps of its titles. These activities are an important part of our Environmental & Social Action Plan and our commitment to implementing IFC/World Bank standards for environmental and social sustainability and achieving certification by the Roundtable for Sustainable Palm Oil (RSPO).
As detailed on Feronia’s website, the title documents are publically available to be viewed at Feronia’s London office or PHC’s Kinshasa office. Please note that each title is, on average, eleven pages long and so all the documents relating to PHC’s land usage run to thousands of pages. Our lenders and third party lawyers and experts have conducted physical verification, from both a legal perspective and to confirm copies exist and are available for viewing at said locations, and any other party is similarly welcome to do so.

Accusations of low wages

Wages vary considerably between PHC employees as there is in place a pay structure for plantation workers which has eleven grades (from unskilled labourer to Master Tradesman and Supervisor) and, as is common commercial practice globally (and mandated under Congolese law), basic wage rates vary depending upon the number of years a person has worked for the Company.
It is worth noting that our employees are unionized and in October and November 2014 the company engaged in an extensive collective bargaining process (the first in over a decade) to work with the unions to update and improve the terms and conditions of the workforce despite the very severe financial pressures that came with rebuilding a business that had been substantially destroyed.. The collective agreement included agreed hours of work, sick pay, overtime, maternity pay, holiday pay, end of service pay, bonuses and assistance towards school fees. Additionally,
employees receive free healthcare for themselves and their families, accommodation and a statutory wage increases for each full year of service. Should workers have issues they can raise them with their Union representatives who can liaise with the Company on their behalf, or they can confidentially raise the issue through the Company’s grievance mechanism.
Permanent employees receive 12 monthly wage payments each year and two additional months’ pay in December. This results in permanent employees receiving annual cash compensation of at least equal to 100% of the DRC SMIG (Salaire Minimum Interprofessionnel Garanti). This has been the case since January 1, 2015, following the agreement reached with the unions in November 2014.
In that same agreement, the Company has committed to increase wages from January 1 2017 such that the 12 monthly wage payments will be equivalent to at least DRC SMIG, with the two additional months’ payment continuing as before. This will represent a c.50% pay increase over a 2-year period.
It should be noted that approximately 80% of PHC’s employees on its plantations are paid according to a daily task rate system where pay correlates to performance. Employees are paid extra for over-performance and, conversely, non-attendance or non-performance by an employee can result in an employee’s wages being lower.
The task rate based system is used broadly in agriculture, worldwide, and can be considered an industry standard. The daily tasks set by PHC are, by industry standards, generally low and therefore easier for our workers to achieve. They are reviewed annually using industry standard methodology. The use of task rates is widely accepted and well within the DRC’s employment laws.
It is important to recognize that when we acquired the business in 2009 its future was in jeopardy having fallen into a state of severe disrepair after decades of disruption and under investment. At that time we committed to retain the entire workforce despite initially being grossly overstaffed. We also honoured all previous commitments from Unilever plc including retirement payments and unpaid wage claims related to the war years. This commitment has contributed to the financial losses we have incurred to date. It is only through securing the future of the business that we are able to increase pay and improve the lives of our employees and their families.
Casual workers are also set daily tasks but, as they do not fall under the permanent workers’ Collective Agreement nor qualify for additional benefits, they are paid at a higher base wage level which correspond with at least DRC SMIG.
The current reliance on casual staff is a result of an ageing permanent workforce who are not able to undertake some of the more physical work required at this stage in the Company’s redevelopment. It is intended that, as these older staff retire over the next few years and receive their contractual lump sum retirement benefits, we will increase our permanent workforce and aim to only have permanent workers by 2020.

Appropriateness of DFI Involvement

The DFIs exist to make a positive difference to people’s lives in some of the world’s poorest places by building sustainable businesses and creating jobs. Without the DFI investments and loans in Feronia and PHC, circa 9,000 permanent and casual jobs would likely have been lost in one of the world’s poorest countries and, with them, the hospitals and other infrastructure that the company provides for its workers and local communities.
The DFIs are highly selective about the types of organisations they deal with. Their involvement with a company quite rightly brings scrutiny at all levels and imposes requirements on such companies to operate at the highest standards and work towards internationally recognised standards in areas such as the environment, social matters and corporate governance.
We believe that the DFIs’ involvement in Feronia and PHC, and the levels of transparency and accountability it brings, is hugely positive for all stakeholders.
On a practical level, with edible palm oil as a staple good in the DRC, PHC aims to contribute to local food security by increasing the availability of edible oils and related products to people in the DRC. Increasing local production also decreases dependence on imports: fewer imports imply less transport of goods and a lower carbon footprint and has a positive effect on the DRC’s balance of trade, employment market, and local economy.
The investment in our operations also means greater efficiencies and the opportunity to invest further in the business and social infrastructure. It also makes our business more robust to withstand the challenges an organisation faces when operating in a country such as the DRC and thereby further secures its future and the livelihoods of those that depend upon it.
From Feronia’s perspective, the due diligence process undertaken by the DFIs prior to investing and lending to Feronia was substantial and robust. Additionally, their ongoing involvement and monitoring is extensive and welcome.
Furthermore, through the involvement of our DFI lenders and shareholders we have undertaken a considerable amount of work on Environmental, Social and Governance which includes:

  • Developing, implementing, continually reviewing, updating and developing an Environmental and Social Action Plan;
  • Establishing an ESG Board Committee to provide oversight on the implementation of our ESAP and ESG matters;
  • Commissioning and publishing (on our website) a hugely comprehensive Environmental and Social baseline study to assess the communities and environments in and around our operations so that we can track progress over the long-term and plan accordingly to ensure that lives are improved and the environment protected
  • Publishing our first annual sustainability report in 2017 which will include reports on progress
  • Working with our shareholders on an Impact analysis framework to track key impact indicators
  • Developing Stakeholder Engagement Plans and Community Development Plans.

Alleged Negative Impact of Feronia

We have a massive positive impact on the quality of life of people. Feronia provides all medical care, including, hospitals, nursing staff, drugs and equipment, for its employees. People in local communities also have access to these facilities. The medical facilities are undergoing an extensive programme of refurbishing, re-equipping and re-staffing and would not be operating without Feronia’s involvement – these healthcare facilities (which are the only ones for a vey significant distance) will see 100,000 medical consultations and over 2,500 births in 2016. Similarly, school facilities are built and maintained by the Company and would not be available without Feronia’s involvement. Feronia maintains an extensive network of roads, at its own expense. These roads
would not exist without Feronia and would cease to be useable if Feronia were to discontinue their maintenance. Most services of any form would simply not exist without us as there are no equivalent state provided facilities in the areas in which we operate.
We do our work with passion and the best intentions and we know that what we are doing is right and what is needed. We recognise that we aren’t perfect and do welcome constructive feedback on how we can improve as we create a sustainable commercial enterprise in the DRC which seeks to operate according to the highest standards of ethics and transparency while providing employment, social services, local infrastructure, and a staple good to our communities and the entire country. We believe that our determination will lead to success and that success will be a beacon that other like-minded individuals and organisations can follow with further investment of energy, determination, and capital into the DRC, for the good of the Country and its population.
We would like to conclude by a quick word of thanks; very few members of the media have had the consideration to contact us before publishing information about us. You did. We very much hope that this information helps you create a balanced view.

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