Strategic agri-sector stewardship is essential
November 4, 2011
In an earlier post I highlighted the likely scramble for raw materials over next decade by a small group of upstream and downstream global and national oligopolies to control the pool of agri-commodities. This brings into sharp focus the need for New Zealand farmers to actively participate in the value chain beyond the farm gate if they wish to maximise prices and maintain a fair share of the supply chain value generated.
Given recent world population estimates, it is not surprising that New Zealand is experiencing heightened foreign direct investment interest in our agriculture sector and we do have to be mindful of the need to strategically deploy the physical and productive resources of one of the few segments of our economy where we are truly competitive on the international stage. The quality of stewardship (not just in the context of the individual ‘farm’ but, more importantly, at a policy level) of our natural agricultural resources is critical to New Zealand’s long term prospects. This means responding ‘strategically’ to what will likely be an ever increasing number of foreign investors lining up to buy our productive land or stakes in the downstream agricultural value chain.
Foreign ownership of land has been a rather hot topic of late – with interest heightened by the Crafar Farms and South Canterbury Finance debacles and media headlines like “Land grab or boost for NZ?” It has never been easy for any non New Zealand resident to buy rural property (at scale here) without demonstrating that the transaction will benefit New Zealand. The Overseas Investment Act represents a pretty tough obstacle for any prospective offshore investor. What seems to be lacking from the debate is how we ensure that both the legislation is implemented effectively and our political appointees exercise clear strategic insight and direction to those charged with adjudicating on applications (i.e. the Overseas Investment Office).
It does seem rather short-sighted to sell any productive land to overseas investors. Despite strenuous efforts by successive governments over the past 30 years to diversify New Zealand’s export base, our economy is still largely reliant on exporting agricultural commodities. Whilst this is not an ideal situation, the fact is, by geographic location, we enjoy some distinct comparative advantages and our farms are arguably the most efficient in the world. We grow products the world wants and we grow them very well. It follows then that it would be strategically devoid for any government to allow the gradual erosion of one of the few truly internationally competitive advantages we have as a nation through incremental consenting of applications to buy productive land.
So where does that leave current owners of rural assets who want to sell up? It leaves them with exactly the same options they have long had under the legislation governing foreign ownership. If foreign investors are keen to invest in New Zealand, there are more strategic ways this can be facilitated. By way of example, foreign investors could acquire a minority interest in a property or business, or they could acquire a leasehold interest in the land. In this way, access to foreign capital remains available as needed, but ownership (or at least majority control) remains local. We need to think creatively about how we can manage property rights and attract capital to retain control for our future generations. The major religious institutions didn’t accumulate their massive wealth by selling property. They leased it for productive use by others. New Zealand take note!
