Tough Decisions, Investments By FNPF Paying Dividends

Tough reform decisions and investments undertaken by the Fiji National Provident Fund are surely paying dividends – literally. FNPF has already announced that their members have been credited with 6.25
09 Jul 2016 09:06
Tough Decisions, Investments By FNPF Paying Dividends
FNPF and ATH chairman, Ajith Kodagoda.

Tough reform decisions and investments undertaken by the Fiji National Provident Fund are surely paying dividends – literally.

FNPF has already announced that their members have been credited with 6.25 per cent interest added to their fund balance – the highest since 2006.

How has this been possible?

The reforms which ensured the balance sheet of the fund reflected the true nature of the fund, and has the required actuarial certification, assisted in the management and board in taking crucial decisions to invest in areas.

These are areas which were initially hyped up as major risk by some ‘commentators’.

Tough decisions were taken by the Government of the day in the face of opposition of all sorts, some very personal and vindictive.

The ultimate aim was to save the largest and the most important financial institution of the country, from bankruptcy. All indications now are that this is no longer a threat.

FNPF has a clean and a strong balance sheet and continues to pay higher than average interest to its members which is not seen anywhere in this part of the world.

This includes buying out Vodafone UK’s share in Vodafone Fiji as well as financing Fiji Airways for the purchase of its aircraft and also the  purchasing  of shares of ATH from the Government of Fiji.

So how does this add up to the interest rates that got paid out recently?

Firstly Vodafone Fiji in the past week handed over $33 million as dividend payouts to FNPF and ATH. In addition, Telecom Fiji delivered the best profits for the past few years, and so has FINTEL.

FNPFs decision to purchase the shares of Vodafone UK, was a sound investment decision, as not only does the profits of Vodafone remain in the country, all of it ultimately flows back to FNPF and the members.


Understanding the fundamentals

Some may still wonder how Vodafone Fiji’s performance or even non-performance would make a difference in their lives. It all links to your funds in the FNPF.

It is important to understand that every dollar you spend using Vodafone services , ultimately improves the profits of Vodafone.

This flows down to the FNPF members as it is handed to FNPF in the form of dividends which forms part and parcel of the interest payment that gets credited to each and every FNPF member.

It is this fundamental that the chairman of Vodafone Fiji who is also the chairman of Fiji National Provident Fund, Ajith Kodagoda, is trying to push for people to understand.

Mr Kodagoda stressed at the end of the day, Vodafone Fiji is not only a Fijian-owned company, but also through FNPF, every Fijian o is a member of FNPF owns a share of Vodafone.

Thus, he said there was a need to build a sense of pride when we use Fijian made goods and also Fijian made services, there is almost a civic responsibility to use Fiji made products and Fijian owned services.

“I want people to get the feeling that when they get a phone on Vodafone or use their network services, they are helping themselves too,” Mr Kodagoda said.

“Sometimes we have seen, some Fiji based corporate moving their business to competition, to save a few thousand dollars.

“While Vodafone may not be the cheapest, it’s certainly the best service provider in the country in the area of Mobile Telecommunications.

“May I also say that the same principal applies to the use of Telecom Fiji, and FINTEL, there companies are 100% Fijian owned, and ultimate beneficiary is FNPF.

“On the other had, we also have some very loyal corporate customers, who continue to use Vodafone, Telecom services, in spite of being offered much cheaper rates from foreign owned companies.”

Mr Kodagoda said it is not only about Vodafone or Telecom but generally supporting all other investments of FNPF.

This also includes the ONLY Local Bank, which is HFC, which is again owned by FNPF and Unit Trust of Fiji and ultimate beneficiaries are the ordinary Fijians.

“So please support our own institutions, and help them to grow, which will ultimately help you to grow your balances with FNPF,” he urged.

“Overall, you should feel good when you spend money at InterContinental Fiji Golf Resort & Spa and the Holiday Inn Suva.”


Expansion plans

As a result of the successful reforms and investments undertaken by FNPF, it now has the strength to invest further.

Mr Kodagoda revealed they are now looking at acquiring telecommunications companies within the Pacific and will even look outside the Pacific.

“This enhances the ability of FNPF to start generating foreign exchange. It also gives opportunity to our staff, who are comparable to the best in the world to expand their working horizons outside of Fiji,” he said.


Support Fiji Airways

As mentioned earlier, FNPF’s decision to loan money to Fiji Airways to purchase a brand new aircraft was turned into a political agenda.

But the results of the success of this decision are out there now whereby Fiji Airways has kept its end of the bargain and has not defaulted the loan repayments in fact they settled some of their loan much earlier than scheduled.

Mr Kodagoda said their decision to provide Fiji Airways finance was made after careful considerations and thorough research and professional advice.

“Decisions were well-thought. It’s not like someone just got up and said let’s go and give a loan to Fiji Airways,” he said.

“When Fiji Airways didn’t have anybody to assist them with the purchase of their aircraft, FNPF took a big risk and assisted them, in the face of much opposition.

“Tourism is a main stay of the economy, and Fiji Airways is the biggest player, and it was critical that we support them in their growth plans.”

“The negativity that got attached to it is well known. We took all the precautions that was required, and the interest that Fiji Airways paid on those loans were market rates, and was not subsidised at any stage. They were treated like any other borrower.

Members and the public at large needs to realize that a proportion of the interest of 6.25 that is being paid to all the members is reflective of some of these investments and loans.

We would not be able to pay such dividend back to members if such loans were not facilitated.

But more importantly, Mr Kodagoda has publicly acknowledged Fiji Airways for continuing to do business with FNPF now despite being in a better financial position to negotiate better interest rates with other commercial banks.

“Fiji Airways now has the strong profitability and balance sheet to go to some of the other commercial banks and negotiate new loans, probably at better rates for their other aircraft,” he said.

“But they have not done this to save a few thousand dollars, because they feel FNPF helped them when they needed the money, and also because FNPF is a local institution, and any profits they make ultimately end up in the members hands.

Mr Kodagoda confirmed they are currently in talks with Fiji Airways for financing a new aircraft for Fiji Link and stressed this is how partnerships are built.


Promoting Fijian services

Just like Government is pushing for Fijian Made Buy Fijian, Mr Kodagoda said they are pushing for Use Fijian Services in the form of supporting Vodafone Fiji and Fiji Airways for example.

“It should be travel Fiji Airways, use Vodafone. Get your family and friends to stay at Inter Continental or Holiday Inn, and bank where ever possible with HFC” he said.

Their scope will be expanded with the opening of the Marriott early next year.

Mr Kodagoda again emphasized this was another project that had been written off but now they were able to complete it and would be ready for opening early next year.


Way forward

One important factor which Mr Kodagoda has stressed is FNPF and the companies it holds shares in cannot become arrogant or complacent.

“Just because we are FNPF owned, we cannot say you have to give business to us. We can encourage you but we also need to continuously innovate and deliver value at market prices for the public use our services.

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