IN-Business March/April 2012

01www.in-business.co.nz

Succession failureKeeping the farm in the family

Inspiring IndonesiaFTA openings for New Zealand companies

Sir Robert JonesStanding up for the victims of bullying

Chris LipscombeMixing business and liquor in China

SISTER ACT

Rise of the Resthome Robots | the RisKs AND ReWARDs of NZX ListiNG

MARCH | APRIL 2012www.in-business.co.nz

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IN QUIRY

10 WE'RE NOT THERE YET P iako Gourmet Yoghur t 's Shaun Jacka i sn’ t se l l ing ou t ea r l y.

12 TO DO L IST ING Norah Bar low on New Zea land ’s booming re t i r ement indus t r y.

14 FRESH AND FRUIT Y Ste fan Lep ionka ge t s used to not be ing in cont ro l and look s fo r a new p ro je c t .

16 LUCK HAS NOTHING TO DO WITH IT S i s te r s Sa rah G ibbs and Cathe r ine de Groot t a lk about t ak ing a b reathe r & mov ing on a f te r se l l ing Tr i log y

IN CITE

19 S IR ROBERT JONES Show some sp i r i t

21 PAT TRICK SMELL IE Out o f r each

22 BRUCE SHEPPARD Keep ing i t p r i va te

23 GANESH NANA Here to s t ay

24 MICHELE A'COURT Boom boom

25 T IM PANKHURST Look ing on the b r ight s ide

26 FLY AWAY HOME I n fov i s ion d i s sec t s Kea’s la te s t su r vey o f K iw i expat s

IN FOCUS

28 SUCCESSION FAILURE A re fami l y fa rming d ynas t ie s a l l t hey ’r e c racked up to be?

32 GET T ING OUT GR ACEFULLY Prepar ing fo r the boomer s ’ mass exodus f rom the work fo rce .

34 A SHARE OF GOOD FORTUNE Ph i l Da rke sees fami l y - run K iw i da i r y fa rms as an env iab le ins t i t u t ion .

36 THEN & NOW Ret i r ement Commiss ione r D iana Crossan on chas ing the K iw i d ream and ra i s ing the re t i r ement age .

7 S X A 9 F j E C l I V E LI S T W D A T A U N I C A 8 EA S T O H 1 R K U N I P A 1 EIGDOESA7ISAT4ONhJEI S T E G O M U U N I 9 A T E6 S T O I S 9 T O N I C A G 4I S T O C O N 9 U N 1 C A T J9 S Y O U R U N I C D AT E H J3 I N F O G R A P H I C S T 5K S I N K O R 8 9 T I O N T E1 S T O 7 O N 8 U N I C H T 6I S S T R A T E G Y Y C A 7 E4 I N F O G R A P H I C S T 8I S A N D O 7 M U K I C A 9 EI Z T O C O 4 N U N I 4 f g hXS LOOKC S7 IV9LYGTEI S K O 7 T 6 V I S U A LI S K O 7 T 6 V I S U A LC S T O T H R O U G H C AT EQ S H 3 C O 5 M U N I f g h WI H L I K E ? U S 6 J H N C K T EI S T O S T R A T E G Y C A T EE S 3 1 4 M E A N S I C A T EK S 4 J U L M B U N I C A T E6 8 6 O K 9 L M U N I C A T ECMT2AOMMUNICATEI S T O C O M M U N I C A T EI S T O C O M M U N I C A T E

I S T O C O M M U N I C A T ET K E 8 P A L O F N I C A T E8 S T O C 7 I M 3 9 I C A T EI S T H E O 4 M U N I C A T E6 S T O A O B 5 U 7 8 C A T EI Z T O G O A L U N I C A T ED A T A V I S 1 A L I G A T H -B I W H A T R A T E 5 Y A T E7 S X A 9 F j E C l I V E L

W H A T

DOES

S T R A T E G Y

LOOK

L I K E ?

Y O U R

IN SIDE

10

19

28

Sarah Gibbs & Catherine de Groot photographed for the cover by Sabrina Hyde


1. In a 2011 NZ Herald poll what percentage of New Zealanders had zero interest in rugby and the World Cup? a) 10%, b) 25% or c) 45%

2. What was the title of Horomia Parekura’s autobiography?

3. What are the Pope’s standard opening address words to visiting groups of priests?

4. What is the key difference between Silvio Berlusconi and Dominique Sleaze Kahn?

5. What award is Gareth Morgan in line for?

6. Why is Chris Carter being sent to Afghanistan to advise on corruption?

7. Will he be greeted effusively?

8. Who is the Mayor of Wellington?

9. What do Hone Harawira and Albert Einstein have in common?

10. What will be Sir Geoffrey Palmer’s major legacy?

ANSWERS

1. c. ( 45%).

2. “I fought anorexia and won.”

3. “Let us prey.”

4. Silvio pays for his tarts.

5. Show-pony of the year.

6. Because they’ve had a tough time and need

a good laugh.

7. Not if they value their heads.

8. No one knows.

9. They respectively represent the extremities of

human intellect.

10. Starting a war between Turkey and Israel.

IN GENIUS

39 R ISE OF THE RESTHOME ROBOTS A re s thome in Auck land i s t r ia l l ing an unconvent iona l h igh - te ch nu r s ing p rog ramme.

4 4 THESE ARE INTERESTING T IMES A rea l i t y check fo r s c ience & te ch companie s look ing a t l i s t ing on the NZ X .

48 FROM THE L AB OF . . . Rober to Pe reg r ina o f F re s su re Foods

50 EVERY THING HAS ITS USES A su r p r i s ing l y log i c a l ene rg y sou rce and the p ro je c t s p ionee r ing i t s use .

52 V ICKI HYDE Through a g las s da rk l y

IN ASIA

55 A MAT TER OF FAC TS A sian e conomies by the i r number s

56 OTHER PEOPLE'S MONEY China’s cu r renc y i s be ing ha i l ed as the nex t a l te rnat i ve in t rade , inves tment and re se r ve cu r renc y.

60 INSPIR ING INDONESIA The Indones ian e conomy remains la rge l y unt apped by K iw i bus iness .

63 A ROAD LESS TR AVELLED Lombok o f fe r s the chance to bu i ld a new Ba l i w i thou t the mis t akes .

64 T IM GREEN NZ TE’s Gene ra l Manager, I n te rnat iona l t akes a se cond look a t I ndones ia .

66 ROOT REVIVAL Hami l ton - based g inseng g rower Marae roa C i s mak ing waves in the luc ra t i ve Ch inese marke t .

68 FROM THE DESK OF . . . Dav id Cat t y

70 CHRIS L IPSCOMBE Embrac ing the moon’s r e f l e c t ion

IN SIDE IN QUIZITOR

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THEN 40% OF THEM GET KEYED BACK INTO A COMPUTER

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IN PARTNERSHIP

IN-Business magazine is a quarterly publication focused on New Zealand business with an international context. We know that busy people are inspired by stories of real people doing extraordinary things. This is a unique initiative supported by partners with a shared goal: to stimulate and support Kiwi business growth. We acknowledge our foundation partners – HSBC and Opus International Consultants – and associate partners – Invest Hong Kong and ASEAN New Zealand Combined Business Council. We also appreciate support from New Zealand Trade & Enterprise.

“The future of New Zealand’s economy is more dependent on developments in Asia than at any time in the past – coupled with the shift in the economic centre of gravity of the world from west to east, the opportunities this presents for New Zealand businesses to trade in Asia are tremendous. Across Asia Pacific, HSBC has a presence in 21 countries and territories, and more than 100 branches in China. HSBC New Zealand has its finger on the pulse of the latest trends and research that is coming out of Asia and we are proud to partner with IN-Business magazine to bring you the Business in Asia section”

Noel McNamara, Chief Executive, HSBC New Zealand

Associate Partners – Business in Asia

Foundation Partners

“Invest Hong Kong is the Hong Kong SAR Government’s department for attracting foreign investment. We provide businesses with a free and confidential service to help them successfully enter the Hong Kong and China markets. Our teams in Sydney and Hong Kong regularly travel to New Zealand, and partnering with IN-Business recognises its enviable position as the only developed country to have free trade agreements with both Hong Kong and China.”

Cameron Boardman, Head – Australia & New Zealand, Invest Hong Kong

“ANZCBC is a member-based multi-lateral business council, which promotes and facilitates trade, investment and good business relationships between New Zealand and the 10 ASEAN nations. ANZCBC is New Zealand’s gateway to doing business in Southeast Asia. Partnering with IN-Business recognises its understanding of the importance of ASEAN as a trading region, its enthusiasm to provide coverage of good opportunities and to highlight success stories.”

David Catty, Director, ASEAN New Zealand Combined Business Council

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MANAGING EDITOR Katie Foley

INCOMING EDITOR Ellie van Baaren

JOURNALISTS Carolyn Brooke, Greg Bruce, Susan Edmunds, Katherine Edmond, Nina Fowler, Tim Fulton, Dawn Tuffery

PHOTOGRAPHY Justin Aitken, Tessa Burrows, Isaac de Reus, Sabrina Hyde, Glenn McMahon, Aaron Sami

CONTRIBUTORS Tim Green, Vicki Hyde, Infovision, Chris Lipscombe,

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ISSN 1179-4852 (Print) ISSN 1179-4860 (Online)

IN CREDIT


THERE’S A SAYING in journalism that if it bleeds, it leads. Two of our lead profiles this edition deal with the protagonists of recent high profile New Zealand company exits – Trilogy, which sold for $20 million to listed New Zealand company Ecoya in September 2010, and Charlie’s which sold for $129.3 million to Japanese company Asahi in July 2011.

The headlines surrounding in particular this second sale say more than the brev-ity of the words would justify – “Charlie’s Ripe For Asahi Picking”, “Asahi Swallows Charlie’s”, “Charlie’s Founders Selling Out To Japan’s Asahi Beverages”.

And while on the surface it shows news subeditors enjoying a good pun, I think it’s important to note the adversorial under-tone that business sales like this involve, naming victims and perpetrators rather than entrepreneurs and opportunities.

As long as everyday Kiwis continue to see hard-won business success as “sell-ing up and running away”, we will always struggle to give business the standing it deserves.

So the theme of this edition of IN-Business is “Exit”, a nod to the fact that last year saw the first wave of baby boomer 65th birth-days, which will herald an increase in New Zealanders wanting to exit, scale back, or otherwise manoeuvre themselves sideways out of their businesses.

We’ve taken a look at many different

kinds of exit strategies, including sales to foreign and local companies, listing and holding out. We’ve looked at what the coming rush for retirement could mean for our economic backbone – agriculture and farming – in “Succession Failure” (page 28).

On a global scale, our infographic on page 26 uses the latest data from the Kiwi Expatriates Association (Kea) to paint a picture of the average New Zealander who has exited our shores for greener pastures overseas.

And on page 39 we take a look at a cross-border technology collaboration develop-ing the robot nurses that will care for the next generation of retirees in their old age, before they make the biggest exit of all.

In keeping with the theme of exit, it’s pertinent to announce mine – I write this from Fudan University in Shanghai, China, where I have moved to study Mandarin full time this year.

I’ve been privileged to be this magazine’s editor for the past two years, and along the way I’ve been given license to interview and speak with people who’ve inspired me to make this move. They’re business people from all over the country and in a myriad of different industries who are doing boundary-pushing work all over the world.

Ellie van Baaren now takes the reins of all our publications. I know she will do them justice.

IN TENT

AFTER FOUR AND a half years as a contract editor and communications specialist, the challenge of taking over at IN-Business Media was enough to tempt Ellie back into the permanent workforce. Magazines have always been her passion, and while she has waxed lyrical on everything from sport and entertainment through to marine search and rescue, business journalism has become a fascinating area to settle into. Ellie will be putting her 12 years’ of magazine experience – both in New Zealand and the UK – to good use at IN-Business from next issue onwards.

ELL IE VAN BA ARENManaging [email protected]

K ATIE FOLEYManaging editor

IN TRODUCING

EXITING GRACEFuLLY

IN-BUSINESS March/April 201210

BUYERS STARTED KNOCKING just months after Piako Gourmet Yoghurt’s small factory opened in January 2009. Some serious, some not but the bigger the company got, the bigger the callers were. Owner Shaun Jacka says selling just isn’t an option yet. “I’ve always had a strategy in mind, I’ve always wanted to get it to a certain level and then look at my options,” Jacka says. “It’s basically a four point strategy and we’re just starting stage three/ending stage two.”

Flying under the radar as much as possible was an initial strategy but proved difficult when Fonterra tapped Jacka on the shoulder. “When they come calling you don’t ignore them.” Fonterra liked what they saw and were keen to get involved. “They recognised we were young guys, making mistakes and finding our way but who also didn’t just want to sell out.”

A distribution deal with the dairy giant was a year in the making but Jacka says it is a perfect arrange-ment as Piako keeps its identity. “We do what we do well which is make a great little gourmet prod-uct and they do what they do well which is take that and get it onto as many shelves as possible and into as many mouths as possible.”

Keeping the gourmet factor is important no matter how big the company grows. Just four of Piako’s 11 flavours are sold in supermar-kets with the rest saved for gourmet stores such as Nosh Food Market and Farro Fresh Food. It’s unlikely

to change anytime soon either. “It’s a nice way to support our

small gourmet stores that have supported us – if they can have flavours that others can’t have,” he says. “We’ve worked very hard to keep our Noshes, Farros and our small gourmet stores on side. People discover us in the small stores.” Exclusive limited edition flavours and specials are also done from time to time.

Jacka started the company after licensing a recipe from the Queensland Yoghurt Company while living there. Initially he imported and repackaged it. With 250 kg going in the first weekend at the Takapuna market it became clear people were willing to pay a good price. About five other gour-met makers have also since entered the market.

“Before it was charging $4 to $5 a kilogram, we were charging $12 a kilogram and no one ever thought you could do it,” he says. “We knew the gap was there but we didn’t know just how big it was.” Jacka says it’s particularly satisfying to see the frozen yoghurt range sell-ing well as this is a product the company can truly claim.

The company’s namesake is the river that runs behind the neigh-boring farms in Ngatea where Shaun and head yoghurt maker Hamish Pye grew up. Shaun’s mum and brother-in-law also work in the business while Shaun’s brother Logan was initially involved too. Most of the factory workers are

also related to each other. So holding out is not just about

strategic reasons. “I can’t just look at it as taking care of myself – family and staff need to be taken care of as well.” The father of one also likes the flexibility and lifestyle of being his own boss. But looking after 20 staff, 14 here and six in the United Kingdom, along with capi-tal, bank, audit and compliance requirements can be tough going. “When you are a small, growing business you have to do it all,” he says. “As you get bigger then you bring in specific people to take care of these things and then you’re able to work more on the business.”

While the next phase is concen-trating on getting more exposure and developing the business, there is also much happening over-seas. Piako is in about 30 stores in London with sales growing 10 to 15 per cent each week on aver-age. Revenues from deals in Japan, including merchandise like cell phone covers with the brand’s ani-mated logo image, will also kick into play. The aim is for sales in New Zealand to be less than 20 per cent of total revenue in two years and less than 10 per cent in three years. “Our goal is lots of little gourmet plants around the world producing a great product run under one umbrella that is tweaked for each market place.”

But Jacka can’t completely rule out selling. “There are those offers out there – where it would just be irresponsible not to take them.” IN

Family run business Piako Gourmet Yoghurt has come a long way since it launched three years ago. What

started with repackaging imported yoghurt on a kitchen table soon grew to a small-factory operation in

Auckland. Now there is a distribution deal with Fonterra, rapidly growing sales overseas and a plant in

England. But for owner Shaun Jacka there are more mountains to climb.

stoRy by CARoLyN bRooKe

PhotoGRAPh by JUstiN AitKeN

WE’RE NOT THERE YET

IN QUIRY 10 › Shaun Jacka Piako Gourmet Yoghurt 12 › Norah Barlow Summerset Group Holdings 14 › Stefan Lepionka Charlie’s 16 › Sarah Gibbs & Catherine de Groot Trilogy

11www.in-business.co.nz 11www.in-business.co.nz

Shaun Jacka planned from the beginning to stick with the business until it was at a certain level, then look at his options.


IN QUIRY

WHEN ASKED HOW a relatively young person came to be so prominent in the retirement village industry, Norah Barlow laughs: “Relatively young is probably the right way to put it.”

The now almost-55-year-old says she is just the right age for her position as presi-dent of the Retirement Villages Association of New Zealand (RVA NZ) and CEO of retirement village operators Summerset. “I have empathy with people getting older but enough energy to keep everything happening.”

The Summerset IPO resulted in 2500 people buying shares. Thirty per cent of the company was traded and raised $50 million. “The company listed to provide strong liquidity for the growth plans we have,” Barlow says. “There are significant opportunities in our market with the large demographics coming through for both care and independent living.”

All of the money raised will be used to support the growth of the company, she says.

And that same growth was what drew people to invest. ”We have the capital, the land, and the capability to build to meet

the gap. Over time, we expect that this will underpin future share price growth.”

The IPO changes governance require-ments, policies and procedures. Barlow says being listed did bring added compliance costs but the high standards Summerset would be held to as a public firm would be beneficial. “Certainly all costs are unfortu-nate for a business, and we wish these to be lower. However, it is also important to protect the integrity of listed entities and a strong set of regulations are needed to do that.”

Barlow was drawn to the retirement industry because her initial contact was with people who were planning develop-ments, and the strategising involved in planning and designing new villages and retirement complexes appealed.

She is driven by the need to adequately meet the requirements of older New Zealanders. “There was research by the World Health Organisation that showed loneliness will be a bigger cause of health issues among the elderly than smoking in a few years.”

It is becoming increasingly easy for eld-erly people to feel very isolated, she says.

The end of 2011 saw a flurry of listings on the NZX. After only one

new listing from January to October, there came three in three months.

One of them was retirement village operator Summerset Group

Holdings. CEO Norah Barlow sees the beginning of a golden era for

the New Zealand retirement industry.

stoRy by sUsAN eDmUNDs

TO-DO LISTING

“Loneliness will be a bigger cause of health issues among the elderly than smoking in a few years.”


Families are busier and, in many cases, children have moved overseas. It’s some-thing she understands well. “I’m a mother but I’m also a daughter. Do I do all I should do? Probably not. This is an issue that’s increasingly important to me.”

Barlow started her career as an account-ant. “I didn’t qualify until I was 32. I started university and had an interruption while I married and had children.”

After starting work for the IRD, she became the tax manager at Guardian Trust before opening her own accounting firm in Petone, Barlow McCormack. One of her clients there went on to found Summerset.

The company grew from operating one village to become the third-largest retire-ment village operator in the country and Barlow made the transition from its exter-nal accountant to an internal role when she sold her practice in 1999. She became general manager, then CEO and is now managing director and CEO.

Her significant presence in the sector led to the president’s role at RVA NZ. It’s something she loves but Barlow admits her work can be all-consuming. “It takes a lot of time. And now that Summerset is listed

[her role there] is taking even more time.” Her assistant, Shelley Hunter, says Barlow works long hours. “I’ll often find emails from her that are sent late at night and on the weekends.”

Now that the company is listed, Barlow says she has to spend more time on making sure that all the new shareholders – most of whom have no regular interaction with the day-to-day running of the business – are well informed about what is going on. There are more reports to produce and extra paperwork to tackle.

The focus for the industry is the lifestyle it can offer people who live in the villages, she says. “It’s very different to life outside.” There is usually a regular happy hour, a van to take them into town, tai chi, craft groups and other activities. “Even if they are just sitting around knitting, they are doing it with others . . . it gives you sociability.” That human connection is a big driver for the industry.

Barlow says she would be happy to end up in a Summerset retirement village. “In terms of the care centre, if I had the needs I’d be happy to end up in one of ours. Would I sooner not have the needs? Yes.” Her own

mother still lives independently in a flat.The average age of people entering a

Summerset village is 80. “That’s the sort of age where people start to lose their licence . . . but people always say they should have moved in earlier.”

It is possible to live in a retirement vil-lage from 55. Barlow says many people who opt to move in at that age are single women who like the village environment for the safety it offers.

Barlow laughs: “My sister is not even 50 and she wants to move in.”

One of the biggest challenges she faces is finding the right people to do the job. “Lots of people have good empathy but equally a lot of people don’t.” Finding registered nurses is difficult.

Another concern is how the country will fund the needs of an increasingly ageing population.

“Baby boomers all think they’ll stay healthy forever but life has a way of throw-ing curveballs at you . . . We don’t know what’s going to happen but we do know it will be a strain. Something like 80 per cent of the healthcare dollar is spent on the last two years of life.” IN

Photo: Summerset Group

Norah Barlow says she has empathy with people getting older but enough energy to keep everything happening.


IN QUIRY

THIS IS A STORY with a beginning, a middle and an end. It’s just that the end comes in the middle, right before the beginning.

It’s the story of Stefan Lepionka, the juice magnate who, aged 39, with his careless hair and boyish looks, could just barely be called middle aged, and who has just ended his financial interest in the company that made him a household name. And finally, it’s the story of the new beginning that $18 million will buy him.

Let’s start with the end. It was simple when it arrived: “The offer was too good to turn down,” Lepionka says. The offer, from Asahi, was $129.3 million. His personal income from the deal alone was estimated at $18 million.

When he started Charlie’s 12 years ago, with Simon Neal and Marc Ellis, the goal had been to build a “real business”. The plan wasn’t about one day getting out; it was about getting rich. Or, as he puts it, about “building shareholder value”.

“But if the offer came that we couldn’t refuse, we always knew we would seriously look at it. And the Asahi offer was too good to be true.”

Three previous offers had been made. Two were public, one private, and on each occasion the team had seen benefit in con-tinuing to build value.

Not this time. They signed the Asahi deal in July 2011, conditional on receiving 90 per cent shareholder acceptance. That level of acceptance was reached in August. The offer closed in September. Ellis walked away with around $18 million, Neal with around $5 million. Lepionka, with his $18 million, didn’t walk away at all – not yet at least.

Lepionka famously got his start in

business as a 17-year-old selling juice from recycled milk cartons in his mother’s coffee shop. He wasn’t overly ambitious, didn’t have any “hairy, audacious goals”, didn’t even understand what business was all about. “I was a bit naïve really,” he says.

His best attribute was determination. As his business interests expanded, he worked endless hours and he slept at his factory and his first brand, Stefan’s, became a local legend. But after it was bought by the Apple and Pear Marketing Board (now Frucor) in the mid 1990s, it disappeared.

It hurt, and it helped change his approach to business.

“I was very emotionally tied to my first business,” he says. “This time around it’s a clinical thing. Your approach to business has to be clinical. I’ve done a full circle and learned how to deal with those situations.”

He had learned the pitfalls of doing busi-ness, the obstacles and pitfalls of the juice industry, and the difficulty of doing it all by himself. And he had earned a consider-able amount of money to invest in his next venture.

The result was Charlie’s, a business with a strong cash platform, a wealth of industry expertise and two other people helping him steer the ship.

But $129.3 million later, Charlie’s is no longer Stefan’s. That thing he says about being clinical and not being emotionally tied to the business now has its true test because it’s not his business any more. He is still CEO, but the CEO is just a guy that works there, and that’s a difficult situation for someone who went into business at 17 because he felt the only way to express himself was to control his own destiny.

He wants Charlie’s to succeed anyway:

wants it to keep living and breathing. He always wanted to see it go to the next level, but felt that he couldn’t take it there, since he didn’t have the capital or resources. But Asahi could. “It’s like changing the baton in a relay,” he says. “We’ve taken it to where we did and we can be proud and know it’s going to safe hands on the international stage.”

He is not done being in control of his own destiny. He has $18 million capital with which to start again. And he’s going to start again. “We are looking at business opportunities. We are cashed up and look-ing for the next thing. We’re in no rush. We’re just taking a breather to work out

what next. One thing I’ve learned is you’ve got to pick the right idea. There aren’t too many original ideas out there.

“We’re just going to bide our time and look for the right thing. It might be next year; it might be in 10 years’ time.”

It’s hard to say whether the right thing will be the beginning of the end or just the end of the beginning. Maybe, for people like Stefan Lepionka, there are no begin-nings or endings, just a series of middles.

By the time he starts his next business, he might even be middle-aged. IN

FRESH AND FRuITYStefan Lepionka and his partners spent 12 years building Charlie’s

into a valuable business, but $129.3 million proved impossible to turn

down.

stoRy by GReG bRUCe

“Your approach to business has to be clinical. I’ve done a full circle and learned how to deal with those situations.”


Stefan Lepionka started his own business at the

age of 17.


Photo: supplied


IN QUIRY

LuCK HAS NOTHING TO DO WITH ITWhat one notable New Zealand entrepreneur called his “F**k You Money”, they

diplomatically refer to as their “Lucky Money”: $10 million up front and another

$10 million mixed share/cash payment. It’s the result of 2010’s sale of Trilogy Natural

Products, the company they founded in 2003. Sisters Sarah Gibbs and Catherine De

Groot spoke to KATIE FOLEY about selling up and moving on.

PHOTOGrAPHS BY SABrINA HYDE

IN QUiRy


IT’S “LUCKY MONEY”, they say, in the sense that there was competitive tension in the sale process – three offers being negotiated right down to the end.

And also Lucky Money because the busi-ness has been a “great ride” rather than a hard slog; because they’ve worked with good advisers and mentors; and because they really identified with the buyer, listed New Zealand company Ecoya of Geoff Ross and The Bakery renown.

But whether this was luck earned, as

opposed to luck just granted, is definitely up for debate. There’s a saying that luck is what happens when preparation meets opportunity, and also another that some people make their own luck.

Having made it out the other side and seen through the 31st of December as the last day of their earn-out period, there’s time to reflect on prevailing attitudes toward high profile New Zealand company sales.

“You know interestingly enough, people

had a slightly negative tone about it [the sale],” Gibbs says. “But you say ‘well actu-ally we’ve retained a significant share-holding in the new business going forward,’ and all of a sudden their whole attitude changes to ‘Oh, have you? Oh right’.”

This brings up a common New Zealand attitude that perceives selling as abandon-ment, or an inability to recognise the dif-ference between selling up and selling out.

“They say, ‘Oh, so you’re not sort of selling out and running away and spending

Trilogy co-founders Catherine de Groot (left) and Sarah Gibbs


all your money overseas and buying your-self 10 new cars’.”

The sale process was a whirlwind – “the most fun I’ve ever had” according to Gibbs – set in motion by a common realisation from both sisters in February 2010 that it was time.

Knowing the process was likely to take a long time, and that a buyer would likely want to retain them for a while, they set about writing the information memoran-dum, assembling a team of commercial, mergers and acquisitions experts and lawyers who drew up a list of companies they thought could be interested, and then approached them.

“You don’t want to do something as big as sell your business without having some-one that really knows what they’re talking about,” Gibbs says. “Everyone that wanted to buy us really knew what they were talk-ing about as well. We weren’t selling it to our next door neighbour.”

The lively, entrepreneurial feel of that non-next door neighbour Ecoya, was a key deciding factor in the sale process with regards to their staff.

“We’ve spent the last 10 years finding all these people that are like-minded, posi-tive, giving people,” De Groot says. “Our philosophy is that you always hire givers not takers and so they’re all really giving, generous people and they’ve given a lot

to Trilogy. And you wouldn’t be a human being if you didn’t think ‘well, what was the impact on them of the sale of the business and how are you best going to give these guys a future’.”

Gibbs says the staff adjusted immedi-ately and quite thoroughly to the idea of the sale, largely because it was being sold to other entrepreneurial people and not to a big corporate.

And while Gibbs and De Groot are sisters, they never thought of Trilogy as a family business, so they never considered implementing a family succession. They always knew Trilogy was a start-up, and one that would be either sold or passed to a new CEO.

The obvious question now presents itself – what’s next? They’re both taking some time for travel and contemplation before making the next business move.

“I think we’ve got to take that oppor-tunity, it’s there for us, we’ve got the ‘free

time’ if you like and why wouldn’t you?” Gibbs says. “We had to do it. You’d be silly to climb out of bed and go work somewhere else.

“I love business, and so I think some-thing will come along, but it’s hard to force that kind of thing and make it successful so we’d prefer to let it happen. I do know I don’t want to be [involved in the] opera-tional [side of business] ever again.”

De Groot adds that plan-ning and taking a trip is a way of transiting – “If you just woke up suddenly and had nothing to do for the rest of the year it would be quite . . . It’s a way to give yourself a little project with-out making it too much.”

As for their return, they’re keeping an eye out on the changing busi-ness landscape – including the retiring baby boomers and the excess supply of tra-ditional businesses that will likely come on the market in the next few years. “It will be really interesting to see if a few do sell and fresh eyes take them and renovate them, innovate them, then maybe that becomes the new paradigm for business growth. That you get hold of an old family busi-ness, dry cleaning business or something, and turn it into this cool service-orientated luxury brand,” De Groot says. IN

“Everyone that wanted to buy us really knew what they were talking about as well. We weren’t selling it to our next door neighbour.”

Sarah Gibbs and Catherine de Groot didn’t take the sale of their skincare start-up, Trilogy, lightly.


IN CITE 19 › Sir Robert Jones on the victims of bullying 21 › Pattrick Smellie considers housing investments 22 › Bruce Sheppard ponders listing 23 › Ganesh Nana takes a long term view 24 › Michele A’Court envies the youthful minority 22 › Tim Pankhurst celebrates the good life

OVER THE YEARS IN conversation I’ve often branded my fellow New Zealanders as a timorous lot. There’s certainly plenty of evidence.

One inevitable consequence of timidity, which some might mistakenly describe as politeness and which anyone with a boxing background will confirm, is that it invites bullying. We’ve seen lots of that in recent times.

Take Alasdair Thompson. In an other-wise civil discussion on equal pay he innoc-uously ventured the opinion that, among other things, women’s periods may be a factor in their lesser incomes through feel-ing low or taking time off once a month. All hell then broke out, of a nature which can only be described as bullying, by the ever-present, offence-taking faction, always on the alert for an opportunistic crucifixion of one of their superiors, namely just about everyone.

Thompson was probably wrong with his observation although I say probably as, for reasons of decorum, women feeling down because of periods are unlikely to go into detail. I enquired with my female staff who confirmed that some women do indeed have a tough time with periods.

Nevertheless, right or wrong, the furore got completely out of hand and I have no doubt that its main cause, putting aside the print media’s beat-ups, was Thompson’s

timidity which incited the appalling bully-ing and abuse he was subjected to.

Imagine instead, if Thompson had sug-gested the opposite, namely that women take advantage of monthly periods as an excuse for days off when periods are a per-fectly natural event, without adverse effect. If he’d said that I’d wager heavily he’d have copped exactly the same abusive response from the same wankers only instead they would have argued the opposite, specifi-cally that for some women periods are an absolute hell.

The press created the Thompson situ-ation as they largely do with all of their big “stories” these days, being beaten to the punch by the immediacy of real news through computers, something the Dominion Post acknowledged recently in an editorial.

It was certainly déjà vu for me when the same old, always-reliable names were called to the barricades for their predictable comments. I say that because once in the 1990s I went through the same nonsense that Thompson cravenly went to ground over, only I gave them heaps back, and like all bullies they shrank into silence.

What happened was this. A row erupted in parliament involving the joke MP Ross Meurant and a ridiculous veiled reference to Mai Chen having “had it off” for advan-tage, or some such ludicrous nonsense. Denials flowed, outrage was expressed, Mai was at her tearful best in her favourite place, namely the news media. So to add to the absurdity of it all I feigned outrage on

her behalf in my weekly newspaper column published across the land, and wrote that given all the denials, if evidently nobody fancied having it off with Mai, then I would be delighted to fill the gap and give her a serve.

At that the focus of all of this nonsense shifted to me. Mai reappeared on tele vision to preposterously say that in the light of my remarks she would have to migrate, which was bloody well defamatory if you think about it, for although some of my exes now

live abroad, it certainly wasn’t a roll in the hay with me that inspired their exodus. The Evening Post then devoted an entire front page to predictable show-off women attacking me and it was here where I parted company from Thompson and his gutless employers in my reaction. Specifically, I gave it back to each of them in truck-loads. This induced the predictable outcome, namely they fled and the matter died.

An example; Jenny Shipley scoldingly stated that I should know better than making racist and sexist remarks. How offering to have a roll in the hay with Mai was racist or sexist is certainly a mystery as by definition it’s precisely the opposite but I shot right back (the Post boxed this response centrepiece) saying that Jenny calling me a racist and sexist was like me calling her fat, namely stating the obvious for no apparent purpose. They all shut up after these sort of responses and none of this affected my subsequent friendships with Mai and Jenny, who are both certainly not averse to a laugh.

My point is that these periodic uproars should be seen for what they are, namely press beat-ups of absolutely no impor-tance, worthy only of light-hearted banter and great fun for all.

Sadly, these episodes are all too common in New Zealand in which people are appall-ingly pilloried for throw-away comments and it all becomes blown out of propor-tion through apologetic retreats inside of firing back, all of this fuelled by the “news”-creating newspapers.

When Helen Clark’s resignation led to a by-election in 2009, the Nats chose a new MP, Melissa Lee, to con-test this safe Labour seat. In my view this was hugely unwise, solely because only a few weeks earlier Melissa had garnered

a ton of attention when a foreign agency listed her as one of the world’s sexiest MPs. Thereafter she was in every female col-umnist and reporter’s sights, to gun down and destroy.

I speak with authority as while I claim some expertise in boxing and office build-ings, by God I’m an absolute world author-ity on the madness of women. So much so it’s long overdue, on reflection, for me to receive an honorary doctorate for my enlightening and learned writing on this

Show some spiritYoung people aren’t the only victims

of bullying in New Zealand and

according to SIR ROBERT JONES

– who speaks from experience – the

only way to make it go away is to

stand up and fight.

“Sadly, these episodes are all too common in New Zealand, in which people are appallingly pilloried for throw-away comments and it all becomes blown out of proportion.”


IN CITE

subject over the years. Indeed on further reflection, given the insight I’ve offered, an honorary doctorate would verge on insult-ing. Rather, my observations are Nobel Prize territory. But I divert.

For, sure enough, they nailed Melissa. A light-hearted remark at a candidates’ meeting about a contentious new highway, that this would have the redeeming fea-ture of ensuring South Auckland criminals by-pass the electorate and they were on to her. Had she called for gassing Jews or

the daily flogging of Maoris, the reaction couldn’t have been greater. Her treatment was simply disgraceful. I’ve had Melissa on about her not kicking these fleas back, but of course it’s not in her nature, as like most women she’s not aggressively com-bative and was taken aback with shock by the vicious cruelty she copped. I’ve not the slightest doubt had I and not Melissa said this then the result would have been laugh-ter as Melissa meant it to be, and it would not even have been reported.

God knows I certainly have said worse in my day. For example, on the subject of South Auckland criminals I’ve proposed on National Radio that the Air Force carpet-bomb Auckland rugby league test audiences and in one swoop wipe out the city’s crime, (which it probably would) and the result, including I might add from my Auckland former rugby league test mates, was laughter. I could give dozens of similar examples.

Much the same applies to wealth, always a source of envy and thus apology and rationalisation by the wealthy. Well, bugger that.

A dozen or so years back I received a phone call from Radio NZ. Would I com-ment, I was asked, on a Massey University report that the rich are getting richer and the poor getting poorer? “Only live,” I said, learning from Winston. They hesitantly agreed and on the 4 pm news it went like this.

Interviewer: “Sir Robert; What do you say

to the Massey report that the rich are get-ting richer and the poor getting poorer?”

Me (elatedly): “That’s wonderful news. I’m absolutely delighted. It’s very kind of you to let me know.”

Interviewer (shocked): “What do you mean it’s wonderful?”

Me (feigning puzzlement): “Well I thought you were ringing to congratulate me. Have I misunderstood?”

Interviewer (angrily): “Certainly you have. What about the poor?”

Me (dismissively): “Oh there’s no point talking to me about them. You need to interview a poor person for an opinion on that.”

End of interview. But of course I was supposed to apologise,

or at least argue or justify it all in some way as I don’t doubt most in my position would have done. Well, again; bugger that! Leave that to the risable show-ponies of the Gareth Morgan ilk.

So reverting to my opening, predictably those craven cringers at the Employers and Manufacturers Association, bowed to the contrived beat-up and sacked Thompson for his harmless opinion, even if it was inaccurate, or at least overstated. I hope his lawyers take them for plenty.

We see the same thing with the Orwellian treatment of Don Brash, shamefully branded a racist for seeking racial equality. Turiana and Pita Sharples dealt with this in their typically civilised manner, arguing the need for Maori special treatment. Not so that screaming buffoon Hone Harawira. A man of spectacularly stupendous igno-rance, who doubtless after a lot of practice, for the first time ever, uttered a four syllable word – xenophobic – that he plainly didn’t know the meaning of.

Here’s someone who justified rip-ping off the system as “punishing white mother**kers”, therein, like all losers, unimaginatively mimicking the West’s greatest failures, namely American ghetto blacks. Someone who said he would not want his daughter to marry a European (first catch your European springs to mind, with apologies to Mrs Beeton) and yet has the gall to brand Brash and his former publicity officer John Ansell as racists for promoting racial equality, an observation

made even more absurd given both have Chinese wives.

The media gives Harawira a ludicrous degree of coverage, notwithstanding his often startling ignorance and complete irrelevance, all because of the afore-mentioned timidity of people in not lashing back at his inane and offensive remarks. The sooner Harawira’s back to holding the stop-go sign at roadworks, the better our society will be, that of course giving him the benefit of a fairly serious doubt that he’s up to the intellectual burden of this role.

Brash has to take Harawira’s crap as part of the rough and tumble of politics, but not so Ansell. He should sue the clown for heaps and subject him to cross-examination and some heavy financial punishment. That would soon sort him out. I certainly would put him through the wringer if he ever had a go at me with such scurrilous charges. But again, I expect timidity will prevail and bullyboy behaviour triumph.

Nevertheless, it’s a sad state of affairs when too many occurrences which offer wonderful scope for hugely enjoyable ban-tering and teasing, are instead treated as some sort of threat to the nation by publicity seekers always available to express con-trived outrage. And equally, when serious and valid propositions are broached, such as those by Brash, reasoned debate, which I credit the Maori Party for, and not noise and abuse should ensue.

But back to the point of this article. Now that the dust has cleared and a few months elapsed, does it not now strike you as utterly disgraceful that someone should be publicly pilloried and then sacked for simply venturing the partly correct view that women’s periods may inhibit their working performance?

This denouement was scandalous and its blame lies firmly with the aforementioned timidity of so many New Zealanders when confronted by newspaper beat-ups, fuelled by ever-ready show-ponies, always avail-able to feign outrage, simply to garner publicity as compensation for their own miserable bleak lives.

This is lowest common denominator territory whereby the flotsam of our soci-ety are setting the agenda. Shame, shame, shame.

Sir Robert Jones is a property developer and boxing afficianado.

“This denouement was scandalous and its blame lies firmly with the aforementioned timidity of so many New Zealanders.”


IN CITE

IN THE YEAR OF MY BIRTH, 1960, the average house cost about 2.5 times the average household income.

By 1972, the year of my first corduroy – Wyndham-brand long pants from Farmers – that ratio had sunk back to 2.2.

Just three years later, however, it was creeping up towards three times the aver-age income, according to figures compiled by the New Zealand Institute of Economic Research. Presumably that was the infla-tionary burst caused by the first oil crisis.

Around the mid-1980s, with the unsus-tainable Muldoon economic lockdown on wages and prices, houses sank back towards two times the average income, but the disparity was already increasing before Rogernomics came along in late 1984.

Houses went above three times the aver-age income for the first time in December 1987, just after the sharemarket crash of that September. At the time, mortgage interest rates were above 20 per cent. Imagine that – 20 per cent of your total loan due back every year, just in interest payments.

People didn’t owe so much then and either managed or foreclosed in small numbers.

The borrower of $400,000 for a house on the average income today would strug-gle with the $50,000 a year in interest pay-ments to meet such a rate. Yet that and more is what’s implied by the fact average house

prices have now blown out to 5.4 times the average income. Not only is that a huge increase in liability relative to the ability to pay, but it’s happened in the course of a bit more than one generation, and was actu-ally worse before the credit crunch hit and made everyone see some sense.

At the height of the credit boom, in June and September 2007, the average house cost 6.5 times the average income!

Through the early 1990s, a house had crept up closer to four times the average household income – a doubling in capital requirements for a young person to buy a house. Incomes weren’t keeping up with house price inflation even then.

From about 2000 came the years of debt-fuelled plenty, for which the rich world is paying today. Inflation in residential prop-erty prices was rampant.

By 2007, the average house required 6.5 times the average income to buy – a stag-gering 300 per cent-plus increase on what my parents faced when they first bought a house in 1959.

It’s tempting to think the story of the past 50 years is one of endless reward for owning residential property, irrespective of the economic conditions of the day.

But there must come a point at which ordinary individuals will regard housing as “fully priced”, and the current evidence is that point was reached four years ago. If the implied 300 per cent-plus increase in the average mortgage-holder’s debt burden is correct, you start to get people spending their whole lives past retirement paying for their homes.

That’s unattractive, to say the least.

While it mightn’t change much, it’s hard to see it keeping going without an aggres-sively large immigrant population arriving soon.

The trends above track the lives of the baby boomers, and the New Zealand real

estate market will turn on what old peo-ple’s living needs are if they/we become the largest part of society.

They/we will want to downsize, in style to the extent they/we can afford, and it will prove hard to sell a lot of homes for bigger, wealthier families – housing being expen-sive and all – for the fancy valuations they/we’ve toyed with over the past decade.

For those baby boomers who’ve assumed the inflated value of their home is part of their retirement strategy, it’s worth consid-ering that unsustainable levels of debt are the issue underpinning the problems of the whole developed world at the moment.

The statistics suggest a micro-cosmic equivalent has been happening in New Zealand, and we’re so far bloody lucky we haven’t seen the savage debacle visited on tens of thousands of American home-owners, struggling to sell homes they couldn’t service the debt on. Another year of foreclosures looms there, before a pos-sible turnaround, says investment strate-gist Andrew Pease of Russell Investments. In New Zealand, ASB thinks there could be a bit of an upside, thanks mainly to the absence of new home starts in the absence of a green light to rebuild Christchurch. Even so, land valuation agency Terralink reported near-record levels of mortga-gee sales just before the November 26 election.

Housing is undeniably less attractive as an investment at the moment than it has been for a while. Other clever ideas worth backing with personal savings are becom-ing more alluring. The trade-off between potential value creation and an invest-ment’s safety will never go away, but the trends will help decide which to go for.

The older the baby boomer, the more they can expect to get a price that’s fairly high, relative to average income, for his or her house.

For tail-enders like me, though, and the generations that follow, it’s less clear the good old family home is worth bidding to a higher value than it’s achieved already.

Pattrick Smellie is an editor and founder at Businessdesk, New Zealand’s independent business news service.

Out of reachAverage house prices have now blown

out to 5.4 times the average wage.

PATTRICK SMELLIE points out

that it’s a long way from the 2.5 rate

in 1960, the year of his birth.

“At the height of the credit boom, in June and September 2007, the average house cost 6.5 times the average income.”


IN CITE

What is listing?Listing involves signing a contract with a market operator, and dealing with the con-ditions of that contract. In New Zealand that contract is with NZX and the contract is the Listing Rules.

What do you get from listing?Access to NZX’s trading platform so that your shares may be quoted and traded. In terms of raising money you must still comply with the Securities Act, what a listing does is increase your appeal in the retail market, and among those wholesale investors who value liquidity.

The straightjacketOn top of quite substantial fees, the list-ing rules impose specific obligations on you over and above the obligations that you have under the Securities Act and Companies Act.

A non-exclusive list of the major items are these:

You will be required to have a quota of ➤➤

independent directors meaning non executive and non substantial share-holder directors. Plus if you do manage to find a good one and they stay too long, they may lose their independent status. Listing triggers an obligation to ➤➤

comply with the provisions of the Securities Markets Act (SMA), the major points of which are continuous disclosure, insider trading and market manipulation.You cannot issue more than 20 per ➤➤

cent of your current issued stock in any 12-month period without share-holder approval, which requires you to a call a meeting. You can issue up to 30 per cent of your stock to share-holders using the capped rights issue exemption for $15,000, without a pro-spectus. Unlisted companies cannot use this exemption and must issue a prospectus.All notices to shareholders and all ➤➤

meeting notices must be approved by NZX, including the form of all resolutions.You cannot pay your executives, with-➤➤

out shareholder approval, a sum that may exceed 1 per cent of your market capitalisation, including all contingent sums that may be derived. Another meeting, another report.The listing rules restrict those who ➤➤

have an interest in a resolution from voting on such resolutions. And all transactions with associates, widely defined, with a value above 10 per cent of the market capitalisation require shareholder approval.

In mature businesses with scale these restrictions are reasonably sensible, per-haps with the exception of the independ-ent director’s rule. Independence and good are not synonymous. Independence is a state of mind and a discipline in my view. Positional prescriptions don’t guarantee anything.

Liquidity: Is it all it is cracked up to be?First, NZX is not liquid in any international

sense of the word. Small companies can be listed and not effect a trade for months if not years. Even quite small holdings in companies can take a long time to sell and attempting to do so can significantly move the price around.

Assuming you do have reasonable liquidity, then the presumption is that the market will be working efficiently and will real time price your risk and return. Be careful what you wish for!

Markets are not efficient, they are a trade in emotion more than they are a trade in value. This can be mitigated if the com-pany is researched independently. New Zealand has very limited research capac-ity and a common complaint of all but the large NZX listings is the lack of research or broker support.

The past few months certainly vali-date the emotion proposition. Thus when things feel rosy stocks will over inflate, and when you deliver bad news they will over deflate. Sometimes these movements have nothing to do with your value proposition. The moral hazard to boards is the desire to suppress or sugar coat bad news.

Who buys listed shares? Who are you selling to and how are they different?There are three types of share investors, the traders, the portfolio investors, and the business owners or entrepreneurs. There are two major markets for raising capital, the public market or the private market. The private market is also called the whole-sale market; the public market, the retail market. Listing significantly improves access to the retail or public market.

The speculators are almost exclusively in the retail market, as they prize liquidity above all else. Portfolio investors are the most common investor category in listed markets, the entrepreneur investor is not so common as in the wholesale markets.

The point is this: listed markets are populated by less forgiving owners. Mum and Dad investors and retail focused insti-tutions will want short term performance and good news. If you disappoint they will punish you and, worse, if you need more money to survive they will not support you.

Keeping it privateEvery startup business or tech stock

asks themselves whether they should

list on the NZX or not, and if so

when they should do it. According

to BRUCE SHEPPARD most

businesses should stick to the private

market.


IN CITE

MY FULL NAME IS Ganesh Rajaram Nana Ahirao and I am a first generation New Zealander. My parents recently became great-grandparents, so the family here is up to generation number three. I can’t speak for us all but I’m certain that several generations into the future my family will still have a presence here in this part of the world.

For me, that was reinforced when, on the recent passing of my mother, decisions had to be made on where to sprinkle her remains. While it was entirely appropriate that we reunited her with her birthplace far away, it was also non-negotiable that she be close to family here, now, and into the future.

I relate this because it reflects my percep-tion that we, my family, are “here to stay”. It follows that I should take a long-term view, and give weight to the benefits of my decisions even if they don’t arise until long into the distant horizon. This suggests the answers to many of the decisions we now face will be very different – along with the questions themselves. If you do not view yourself as being “here to stay” then your perspective may well differ.

Take food and population. Apparently, the world’s human population has just topped seven billion. This immediately raises issues around the sustainability of the use of resources – land, water, nutri-ents, energy, and the like. And this is cen-tral to an economy, such as New Zealand’s, that is based on the “wise” use of land and water resources.

Here to stayAs the world’s population hits seven

billion, DR GANESH NANA says a

long-term view has to drive the

decisions that must be made around

the use of resources.

Sentiment in listed markets can turn on a pin.

Wholesale markets are populated by angels, venture capitalists, high net worth entrepreneurial investors and private equity funds. Retail investors are largely non existent in this market. Mostly this group are economically rational even if sometimes they advance their own inter-ests ahead of the company. The risk in this market is the vulture investor.

Continuous disclosureFirstly in small startups arguably each bit of business you win is price sensitive. If you are awarded a tender for a signifi-cant piece of work, but it takes a couple of months to have the contract signed, when do you announce? On winning the tender or on signing the contract? Commercially you would not want to announce at all, but arguably you are obliged to when you win the tender thus compromising your com-mercial negotiations around the contract.

Also the good, the bad and the ugly are known by the market continuously. This includes your employees, your suppliers, your customers, potential customers and your bankers.

If you are on a down cycle, full market disclosure will just help you on your way . . . down.

Growing or saving a company in a listed environmentForget the story, think about what you have to do to save or grow a small company. You have to attract good people, and probably pay them with equity in part, and you need to raise capital quickly to respond to devel-opment and market opportunities. In short you have to be fast and flexible.

If you have a market cap of $1 million or less, and many do, 1 per cent is $10,000. You won’t employ a part-time shelf stacker for that, let alone a CEO. If you need $500,000 of new capital to develop a sales chan-nel fast, before your competitors do, the costs of raising this capital will increase the cost to around $750,000 and it will be slow. Worse, down rounds mostly fail in public markets, and you end up having to do placements in the wholesale market anyway, with more compliance brakes to protect the retail investors who have already voted by closing their wallets.

Listed markets are highly inefficient for small capital raisings, and once in this market you are trapped. While on the board of a listed company, I led a process to delist it for all of these reasons.

The question: To list or not?You should not list, in my view, and instead should stick to the wholesale or private market if:

The amount you seek is less than ➤➤

$10 million.You have revenue of less than $5 ➤➤

million.You are losing more than $2 million ➤➤

per annum in the short term.You have high levels of customer ➤➤

or supplier concentration, that is, transparency will compromise your commercial activities.You have not got a strong retail story, ➤➤

that is, a brand they can see and feel in the market place or wide distribu-tion channels thus giving you name recognition.You think, on listing, your total ➤➤

market capitalisation will be less than $50 million.

If any of the above are true, you have a high probability of coming to grief in public markets, whereas in private markets you may well survive and prosper. Worse, the grief will be very public – the media also love to punish.

Bruce Sheppard is an accountant and founder of the New Zealand Shareholders’ Association.

“Listed markets are highly inefficient for small capital raisings, and once in this market you are trapped.”


IN CITE

THERE IS A CHANGE IN THE AIR in our attitude to ageing. It smells less of cabbage and disappointment than perhaps it once did, and a little more like a party.

Because any minute now, it is going to be very cool to be old. Or at least, if not cool, then certainly popular. This is the year the first of the baby boomers turns 65, and we begin to have more “old” people than any other kind.

I adore the idea that young people could become a minority interest group, mar-ginalised and side-lined. Let’s make that happen. “Young? How odd! Most people are in late middle-age. Do catch up.” And of course they will. In time.

I am a tail-end boomer, born in 1961 during the notable “boom” in the boom when New Zealand was enjoying record wool and meat export prices (so we felt safe and comfortable) but still enduring 6 o’clock closing and without television (so there wasn’t much to do in the evenings). Those factors combined, we popped out more babies per capita in 1961 than in any other year.

Which means, along with rather a lot of other people, I’ve just turned 50. Fifty is apparently the new 40, and 40 is quite cool because it is the new 30. I’m counting on the first wave boomers to make 65 the new 50 any minute now. Or at least, by the time I get there.

I’ve managed to deal with turning 50 by thinking of it in cricketing terms: nice steady half-century, well done, wave your bat to the crowd. And now that I’ve got my eye in and some steady runs on the board, I can take more risks, show a bit of flair and have a crack at really smacking it round the park.

With that in mind, I am writing this while on the road between Montreal and New York, half way through my six week North American holiday which takes in five cities I have never visited before, and is bookended by riding rollercoasters in LA. Two weeks ago, I got married in Las Vegas.

If I’d had a clear vision of what being “50” was when I was a young slip of a thing, I don’t think it would have been this. But I’m pretty sure if I could go back and ask my 20-year-old self what she thinks of me at 50, she would be delighted. Boom.

Michele A’Court is an acclaimed comedian and actor.

Boom boomMICHELE A’COURT is getting

excited about the prospect of youth

becoming a minority interest group.

“I adore the idea that young people could become a minority interest group, marginalised and side-lined. Let’s make that happen. ‘Young? How odd! Most people are in late middle-age. Do catch up.’”

Wise, to me, implies decisions that are cognisant of impacts both now and into the distant future.

As a nation blessed with relatively ample land and water resources, New Zealand has an obligation to use those resources wisely. In a future that will increasingly demand more and more food, our contribution – to the community of nations – is to ensure our food is produced efficiently. And, in doing so, that our efforts do not erode the land and water resources we hold so dear. To close the circle, wealth created from food production activities will need to be uti-lised in a manner that maintains, replen-ishes, and, indeed, improves the value of land and water resources. Economists call this investment, others refer to it as sustainability.

Challenges facing iwi and the broader Māori economy bring this starkly to the fore. During recent projects that I have con-tributed to, I heard consistently that “Māori are here to stay”. The need to lift yields on their land-holdings, not only to provide income today but also to build wealth for tomorrow’s generations, is broadly accepted. The option of “doing nothing” with the resources and taonga endowed by our tupuna is to ignore the obligations that came with such an inheritance.

Influencing these decisions is what attracted me to economics. If you are here to stay, then critical decisions about resource use (how, what, where and why) take on a different complexion. Rather than the archetypal coloniser whose primary goal is to wantonly pillage a land and its resources before departing, wise decisions mean thinking carefully about next year, next decade, next generation, next century.

This is probably the critical challenge facing New Zealand today. Whether it be challenges concerning the rebuilding of Christchurch, the use of land and water, or the distribution of income from Māori land holdings to iwi members, the answers (and questions) at hand are very different if we see ourselves as being “here to stay”.

So, perhaps now, in the development of our nation, is a good time to really ask that question. Are we here to stay?

Dr Ganesh Nana is chief economist at BERL.


IN CITE

IN NOVEMBER 1976 – when ABBA was top o’ the pops, Ford Zephyrs were the hoons’ choice and Muldoon was Prime Minister – a typical young Wellington couple packed their cords and headed to Australia.

They were in the first wave of a flood, soon joined by almost their entire group of friends.

Between that year and 1982, 100,000 Kiwis settled across the Tasman. By mid 2010, that number had soared to an esti-mated 566,815 – 14 per cent on top of our four million still at home.

In the mid 1970s Australia offered opportunity, more money, sunshine, better beer and an escape from the greyness of a hidebound outpost of England slowly awakening to a unique Pacific flavour.

Those economic factors and the weather still apply, although we have discovered wine and a vibrant Wellington has become Lonely Planet’s coolest little capital.

In the mid 1980s, the couple swam against the still strong tide and returned home with a newborn. But none of their compatriots did.

They are widely scattered, Aussies now. One is a multimillionaire property developer on the Gold Coast, another an Outback mechanic, one sells cars and

drinks too much, another is a Perth-based project manager on oil rigs.

For the Wellington couple, the dream did deliver.

He went from earning a measly 80 bucks a week learning his craft on a sub-urban newspaper chain, covering pot-holes and progressive association AGMs, to half as much again plus expenses on Australia’s biggest circulating newspa-per, the Melbourne Sun. That was thanks to an Invercargill-born chief of staff, Neddy Livingstone, who hired pretty much any Kiwi who walked in the door, however green.

She put 10c in a bulky red public phone in a café, rang a city hospital and was promptly hired as chief cardiology techni-cian in the then infant field of echo imaging. Melbourne was marvellous then.

Now the couple visits often and revels in friends and the parks and markets and trams, but the relentless traffic, the end-less urban sprawl, astronomical real estate prices and pressured jobs do not appeal.

One of those 1970s refugees recently made a wistful visit and took a lot of inter-est in local property prices. He complained of pre-dawn ramp rage among testy boaties queued up on an eight-lane launch ramp in Western Australia. The mood was not improved by the slim fishing prospects in over exploited waters.

He wants to return but is nervous about overcoming 30 years’ absence.

Maybe if we stopped beating ourselves up about our supposed poor economic performance and were happy to wear black but not let it darken our souls, more expats would be keen to return home.

If we were less inclined to gloominess, fewer might abandon ship in an oft elusive search for a better life.

Wellington was a dreary place until its weather beaten inhabitants decided to be positive about living there. There are shades of that in our wider attitudes to New Ziland, as our Prime Minister calls it.

God knows how Southland inhabitants put up with the sniggering from the rest of the country whenever Invercargill is men-tioned. Maybe they’re too busy getting on with producing a disproportionate amount of the country’s wealth.

Palmerston North cops it too. And Hamilton. We are the masters at putting ourselves down, possibly top of the OECD in that regard.

Wealth and productivity are not the only significant measures. This country, so practiced at peering into a half empty glass, has much to be thankful for and could use some other comparisons.

America is a vibrant and diverse country, the world’s richest and most powerful. It is also debt-ridden, mean and vengeful, and 44 million of its citizens live below the pov-erty line. That is why so many thousands live on the streets and panhandling is rife.

Australia’s wealth is built on its mining and a two-tier economy is emerging, with the retail and manufacturing sectors strug-gling. The “lucky country” has a huge vested interest in continuing stability in China, their major market.

Autocratic government and human rights repression are good for business.

Any upheaval in China and disruption of its extraordinary growth will have a profound impact on Australia.

In Europe the Euro is sinking, Greece and now Italy are joining the por-cine basket cases and Britain is on hard times.

Yes, of course we can and must do better; look beyond the boat, Beemer and beach house (although that looks pretty good to most of us) to nurture our innovators and build our prosperity, if only to keep the

boomers in style.But simple economic rankings do not do

justice to our quality of life. This is a fair, tolerant country where we still care for our fellow citizens – witness the remark-able outpouring of support for a shattered Christchurch. It is hard to get rich – at least by legal means – but you do not have to step over the homeless and beat off beggars in the streets and no one starves.

The fishing is still pretty good too.

Tim Pankhurst is chief executive of the Newspaper Publishers’ Association.

Looking on the bright sideWhile Kiwis “flock” to Australia

chasing higher wages and better

weather, TIM PANKHURST says

perhaps we should be concentrating

on why New Zealand is such a good

place to be.

“If we were less inclined to gloominess, fewer might abandon ship in an oft elusive search for a better life.”


FLY AWAY HOMEThey say that wherever you go in the world a Kiwi is already there. In fact, the Australian Bureau of Statistics estimates that there are 544,000 New Zealanders living in Australia alone. A quarter of our educated workforce lives and works overseas. So who are these fl ighty expatriates and what are their plans for the future? Using data from Kea’s new offshore Kiwi census, this infographic creates a profi le of the average expat and outlines their plans and attitude towards returning to New Zealand.

FACTORS AFFECTING EXPAT ATTITUDES TOWARDS INVESTING IN NEW ZEALANDTHE AVERAGE KIWI EXPAT

STATEMENTS REGARDING NZ’S STRENGTHS AND WEAKNESSES AS AN INVESTMENT DESTINATION AS RATED BY RESPONDENTS

ATTRACT DETRACT

Family/marital connection

Female 52.7%

86.2%

18.2%

Opportunities for family members

Male

NZ employer asked me to work overseasSpecifi c job offer from an overseas employer

Study

To retireOther

Doctorate

Bachelors degree

Masters degree

Other tertiary

Postgraduate

Secondary schoolNone of the above

General job/economic prospects overseas

Different lifestyle/culture/excitement overseas

16–20

36–40

56–60

26–30

46–50

66–70

21–25

41–45

61–65

31–35

51–55

71+Citizen by birth

Granted citizenship

Citizen by descent

Permanent resident Other

Former citizen

Former resident

Loss or zero income

NZ European

None

$1–$30,000

Maori

One

$100,001–$150,000

Tongan

Four

$30,001–$50,000

Samoan

Two

$150,001–$200,000

Niuean

Five or moreIndian

$50,001–$100,000

Cook Island Maori

Three

$200,001–$300,000More than $300,000

Chinese

Other

Will return to NZ permanently

There are huge investment and business opportunities in NZ

There is a strong talent pool in NZ

NZ businesses are supported by a very competitive infrastructure

NZ is a place where it is easy to raise capital

Business thinking in NZ is unhindered by size – there’s a can-do approach

Investment in NZ is helped by the tax regime

NZ is a very innovative market

Investment in NZ is hindered by a think-small culture

NZ business badly needs overseas expertise

NZ business culture is very advantageous for business success

NZ is a very good place to do business

The NZ business community is strongly plugged into the global economy

NZ business is well supported by the academic infrastructure

Investment in NZ is hindered by poor governance standards

Investment in NZ is risky due to currency movement

NZ businesses are too infl uenced by election or commodity cycles

SOURCES: Kea New Zealand. (2011a). Kea Investment Report. Auckland; Kea New Zealand. (2011b). Every Kiwi Counts 2011. Auckland.

For me, NZ is a blip on the investment horizon

PLANS TO RETURN

Likely to return permanentlyLikely but will also live somewhere else

I have not decidedLikely to remain overseas

Will remain overseasDon’t know

24.6%

Within a year

WHEN

1–5 years from nowIn more than 5 years

Don’t know

46.3%

30.9%

33.2%

51.5%

30.4%

89.7%

REASON FOR MOVING

CITIZENSHIP STATUS

AGE

GENDER

Less than one year1–2 years

10–19 years

3–4 years

20–29 years

5–9 years

More than 30 years

24.1%24.1%

TIME OVERSEAS

ETHNICITY

CHILDREN

INCOME

NoneAgriculture, forestry & fi shing

MiningManufacturing

Wholesale tradeRetail trade

Transport, postal & warehousing

Media & creativeFinancial & insurance services

Professional & technical servicesAdmin & support services

Property services

Healthcare & social assistanceArts & recreation services

Education & training

Other not-for-profi tOther

Accommodation & food services

ICT 11.0%

Public admin & safety

INDUSTRY

EDUCATION

No source of income for past yearPaid by employer

Government-paid social assistance

Self employment

Other

Interest, dividends, rent, invesments

77.7%

EMPLOYMENT

.17

.09

.08

-.10

-.09-.07

-.06

.08

.05

.03

.02

.06

.06

.05

-.02

.30

-.20

INFOGRAPHIC BY:





ATTRACT DETRACT


Female 52.7%

86.2%

18.2%


Male


Study

To retireOther

Doctorate

Bachelors degree

Masters degree

Other tertiary

Postgraduate




16–20

36–40

56–60

26–30

46–50

66–70

21–25

41–45

61–65

31–35

51–55

71+Citizen by birth

Granted citizenship

Citizen by descent


Former citizen

Former resident

Loss or zero income

NZ European

None

$1–$30,000

Maori

One

$100,001–$150,000

Tongan

Four

$30,001–$50,000

Samoan

Two

$150,001–$200,000

Niuean

Five or moreIndian

$50,001–$100,000

Cook Island Maori

Three

$200,001–$300,000More than $300,000

Chinese

Other




















PLANS TO RETURN




24.6%

Within a year

WHEN


Don’t know

46.3%

30.9%

33.2%

51.5%

30.4%

89.7%

REASON FOR MOVING

CITIZENSHIP STATUS

AGE

GENDER


10–19 years

3–4 years

20–29 years

5–9 years

More than 30 years

24.1%24.1%

TIME OVERSEAS

ETHNICITY

CHILDREN

INCOME


MiningManufacturing





Property services





ICT 11.0%


INDUSTRY

EDUCATION



Self employment

Other


77.7%

EMPLOYMENT

.17

.09

.08

-.10

-.09-.07

-.06

.08

.05

.03

.02

.06

.06

.05

-.02

.30

-.20

INFOGRAPHIC BY:




ATTRACT DETRACT


Female 52.7%

86.2%

18.2%


Male


Study

To retireOther

Doctorate

Bachelors degree

Masters degree

Other tertiary

Postgraduate




16–20

36–40

56–60

26–30

46–50

66–70

21–25

41–45

61–65

31–35

51–55

71+Citizen by birth

Granted citizenship

Citizen by descent


Former citizen

Former resident

Loss or zero income

NZ European

None

$1–$30,000

Maori

One

$100,001–$150,000

Tongan

Four

$30,001–$50,000

Samoan

Two

$150,001–$200,000

Niuean

Five or moreIndian

$50,001–$100,000

Cook Island Maori

Three

$200,001–$300,000More than $300,000

Chinese

Other




















PLANS TO RETURN




24.6%

Within a year

WHEN


Don’t know

46.3%

30.9%

33.2%

51.5%

30.4%

89.7%

REASON FOR MOVING

CITIZENSHIP STATUS

AGE

GENDER


10–19 years

3–4 years

20–29 years

5–9 years

More than 30 years

24.1%24.1%

TIME OVERSEAS

ETHNICITY

CHILDREN

INCOME


MiningManufacturing





Property services





ICT 11.0%


INDUSTRY

EDUCATION



Self employment

Other


77.7%

EMPLOYMENT

.17

.09

.08

-.10

-.09-.07

-.06

.08

.05

.03

.02

.06

.06

.05

-.02

.30

-.20

INFOGRAPHIC BY:

The emotive idea of family farms means farming children can waste their most productive

years waiting for nothing more than a lifetime right to be a tenant of their own inheritance.

IN FOCUS28 › Succession failure handing on the family farm

32 › Getting out gracefully Our ageing business population 34 › Phil Darke A UK farmer envies our opportunities

36 › Diana Crossan Financial literacy and retirement commissioner

28 IN-BUSINESS March/April 2012 Photo: Isaac de Reus

SucceSSion failurestoRy by tim fULtoN



EXIT IN FOCUS

“One day, my son, all this will be yours.”IT’S THE SIMPLEST and most time-worn of succession strategies, and also the most fraught. With agriculture contributing about 15 per cent of GDP, New Zealand’s ageing agricultural workforce is of real concern. And making a mess of farm suc-cession can turn beloved soil into little more than a place to die with your boots on, industry experts say.

Mandi McLeod, holder of a Masters Degree in Rural Systems management, refuses to accept that succession should be mostly about minimising tax and dividing goods among family members. Nor should the process be limited to gifting assets to the eldest child.

Drawing on her own experience in taking on a family farm, McLeod is calling for a paradigm shift in family farm succession.

In a brave admission, McLeod says taking on a family farm like she did can be

“fraught with innuendoes, emotion or con-flict with often very little thought given to preparing the next generation as leaders and successful entrepreneurs”.

Families, being complex beasts, consist of individuals with common lineage but sometimes with little more in common than the same bloodline. While these indi-viduals form the heart and soul of a family farm, this same collection of people tends to be forgotten about when the matriarch or patriarchs are deceased.

McLeod’s conclusions were shaped by taking up a Nuffield Farming Scholarship two years ago. The international organi-sation provides talented farmers and

agricultural businesspeople with the opportunity to study and travel, and her experiences have led her to ask farmers to think of such delicate asset transfers as a more holistic process of “family business continuance”.

People, their needs, wants, fears and expectations are the centre of every suc-cession and business continuance plan, yet they are often ignored or discounted in favour of the so-called technical aspects of the process, she says.

McLeod’s people-centred approach begins with the question of whether the founders of a farm are truly committed to passing the business on to another genera-tion, whether in the family or not.

What’s more, do the current owners really want to die on the farm, and what are the contents of the will? McLeod accepts these questions feel invasive and distaste-ful, but are necessary to maintain family goodwill.

In her experience, failing to ask those vital questions is just asking for a break-down in communication as family mem-bers try to second guess each other. Equally, the farm may be used as an emotional tool to hold the family back.

But all too often that farm doesn’t change hands while the elder generation is still drawing breath. If that’s considered a formula for succession a farm could well be considered “a personal old folks home with no staff”, McLeod suggests.

If that set-up sounds perfectly reason-able, McLeod can turn to a more graphic analogy from John Baker of Iowa State University, who likens a farmer owner leading their offspring to “two blind snip-ers in a room with a 12 gauge shotgun each

– they can do a lot of damage before they hit each other”.

Besides the act of communication itself, there’s the delicate matter of deciding who is actually best equipped to carry on the business. Make a wrong choice and you’re probably creating a hospital pass for the next generation, McLeod says.

“No one wants to set their family up for failure by supporting them into a venture that is not, cannot and will not be success-ful either due to their management capa-bilities of the scale and scope of the busi-ness,” she wrote in her Nuffield paper.

Specifically, a transition must take account of people’s visions, dreams and desires for the future “rather than the sin-gular tax-driven asset transfer process that

defines succession today”.Easier said than done, she accepts, but

New Zealand’s biggest farming sectors are changing rapidly and succession planning needs to take account of this.

New Zealand’s ageing agricultural work-force is of concern, not only in terms of food production, but also industry leadership.

Dairying has mechanisms such as sharemilking which make it a relatively self-replacing industry, McLeod notes, but for a young farmer the path back to the family property is becoming rockier.

Higher entry costs including land values, and the introduction of Fonterra’s Fair Value co-operative share has altered the perception of farming as an “easy” option for those who saw themselves as academ-ically-challenged, to that of a “business with increasing regulations and decreas-ing profit margins”.

The industry has responded to these rising costs by implementing equity part-nerships, allowing farmers to increase their holdings alongside other investors.

McLeod believes a partnership like this may also offer new opportunities for would-be owners to have a stake in a busi-ness and gain experience, advice and men-torship from other partners.

IN THE SHEEP AND BEEF industry you’ll typically find a more traditional approach to succession, with family members taking over the family farm, or the property sold and assets divided between the clan.

Farm consultant Phil Guscott spends a good deal of his time talking over succes-sion planning with these farmers, and he’s not shy about admitting to the difficulties.

Known widely in farming by the moniker “straight shooter”, Guscott says a family

trying to divide assets equally between those staying on the land and those want-ing another bit of the equity can soon come unstuck.

“If you want the farm to stay in the family then . . . equal might be fair but fair isn’t equal in farming,” he tells farmers.

A major factor to consider in any hand-over is calculating what is economic for the retiring generation, who will need a house and a lasting source of income.

He estimates the capital needed to retire on is $2.6 to $3 million – a house being $500,000 to $1 million, leaving a further $2million of capital earning 5 per cent in interest annually, which would provide $100,000 a year for living costs.


To achieve this sort of transition you should start planning . . . about now.

To be blunt, when you start farming and have a family you only have 25 to 30 years before it is your turn to pass on the busi-ness. Guscott maintains that, contrary to a vision of late-life arrangements on a death-bed, succession is best done in our 50s and 60s, not 70s and 80s.

“I would say that farming is a young man’s occupation and needs to transfer when he/she is young so that he/she can drive the farm business forward so that it maxim-ises its potential and their opportunity.”

This doesn’t happen when the owner is old, he says.

When the succession plan is imple-mented the family member gets their

“inheritance” at that point but it is actu-ally only the opportunity to go farming. Essentially, you will only be a tenant of it ( your inheritance) for your lifetime, if you pass it on to your children.

But irrespective of when the big moment of transfer comes, Guscott is adamant that responsibility for running the place should rest completely with the new owner.

This part of his message can surely be taken as a caution to a non-farming family who might be resentful towards one of

their own being given control of something they had considered a birthright.

Often, non-farmers fail to understand the risk in farming or the difficulty the farming child has being able to do their own succession plan without having to sell the farm.

The capital gain that has traditionally come with it makes everyone think the farmer is “rich” and they don’t understand that if he/she wants to pass it on the next generation then all that equity is no use to him/her.

“Everyone points out that they could always sell it and then they would be rich, which is true, but in my experience most farmers want it to continue in the family if one member wants to and is capable. The farmer’s roots go deeper than his feet, par-ticularly when it has been in the family for a number of generations.”

Guscott believes it’s only fair that all the family get certainty about what they will get (by way of inheritance) early in their lives so they can make good life decisions knowing what may come to them when their parents are dead.

He suggests this is especially important for the young farmer, because if he/she doesn’t get the opportunity early enough then they run the risk of never knowing where they are going. Sadly, some may waste the best years of their lives when they can move a mountain. IN

“If you want the farm to stay in the family then . . . equal might be fair but fair isn’t equal in farming.”

Top and left: Sheep and beef farmers typically find a more traditional approach to succession.

Above: Phil Guscott and Mandi McLeod both say hard questions need to be asked – and answered – when dealing with succession planning.

Phot

o: Is

aac

de R

eus


EXIT IN FOCUS

LIFTING THE SUPERANNUATION age wasn’t an election winner last year but the fact it was even suggested is a sign of the times. Like it or not, New Zealand’s popu-lation is ageing, and it could affect every-thing from taxes to business succession.

The impact of the baby boomers (those born between 1946 and 1964) reaching superannuation age will be as diverse as the group they represent. We do know it’s going to be big. By 2031, the number of New Zealanders aged 65 and over will top

1 million, almost double what it is now. In 2006, there were five New Zealanders aged between 15 and 64 to every pensioner (65 plus). By 2030, that ratio will be three to one.

Demand for aged care and the cost of paying out pensions are relatively easy to predict. The impact an ageing population will have on labour markets is less clear.

As leader of the National Institute of Demographic and Economic Analysis (NIDEA) at Waikato University, Natalie

GETTING OuT GRACEFuLLY

New Zealand’s ageing population poses important

questions for business owners – and the country.

How do we make sure the experience, contacts

and successful businesses are not lost as the baby

boomers move into retirement? It’s no longer a

simple matter of holding on until you’re ready to sell.

stoRy by NiNA foWLeR

iLLUstRAtioN by RebeCCA

WALthALL


EXIT IN FOCUS

Jackson says we have to think about it regionally.

She says that last year 42 per cent of territorial authorities already had more people at labour market exit age (55-64) than entry age (15-24). “How do you take an excess labour supply of young people from Auckland down to Gore each day? You can’t.”

We’re not alone in facing these kinds of issues. Most OECD countries are ageing. New Zealanders are among the most fer-tile in the OECD, which is helpful. We lose a relatively high proportion of our popula-tion to migration, particularly to Australia, which is not.

Jackson argues more investment in today’s young is needed to increase path-ways into work and help keep young workers at home. “We’re going to need absolutely every kid working in the labour market in the next five, 10, 15 years.”

We also need to make the most of older workers. Many of those currently nearing super age have no plans to retire and have a wealth of skills and experience to offer.

A 2011 Ministry of Social Development report, The Business of Ageing, points out that New Zealand already has one of the OECD’s highest labour participation rates for those aged 65–69. Lifting the labour participation of older people from 16 per cent in 2010 to over 26 per cent by 2030 could offset a projected shortfall in fund-ing New Zealand Superannuation over that period.

“Not all baby boomers may want to remain in paid work,” the report reads, “but flexibility and changing attitudes will be key to harnessing the potential of those who do.”

For baby boomer business owners who are ready to retire and need to successfully exit their businesses to do so, the current economic slump is not good news.

“The recession’s almost put up a dam to

stop these people retiring,” Auckland busi-ness broker David Newport says. Business advisers are telling clients they’ll get better prices if they wait and “sell on the other side”, despite the availability of willing buyers. But, he asks, once that dam is removed, “what happens if everyone tries to hit the market at the same time”? Prices will drop and would-be retirees may find themselves worse off.

There’s another potential problem on the buyers’ side of the equation. “A lot of Generation X and obviously Generation Y generally live up to their means,” Newport says, which means they might not be able to raise enough funds to buy the baby boomers’ businesses.

For now, this isn’t an issue. Older boom-ers can sell to their slightly younger peers (those in their late 40s or early 50s) or to peers who’ve found retirement too boring for their liking.

Eventually, though, the boomers might need to find alternative exit strategies. “I don’t think people are going to be able to sell 100 per cent of their businesses,” Newport says. “People are going to have to leave money in. They’re going to have to have vendor loans. They’re going to have to have different ways of exiting.”

On the plus side, if the boomers leave money in their businesses, they’re more likely to stay involved and pass their expe-rience and contacts on to the next genera-tion.

There are other upsides to New Zealand’s ageing population. There’ll be a growing

“silver market” of consumers, which will fuel growth in certain sectors. Retired baby boomers could prove an invaluable addi-tion to the volunteer sector, including as business mentors.

What’s certain is that the ageing of the boomers won’t be business as usual. Expect to hear a lot more about it in another three years. IN

Natalie Jackson: “We’re going to need absolutely every kid working in the labour market”

David Newport: “People are going to have to have different ways of exiting.”

“People are going to have to leave money in. They’re going to have to have vendor loans. They’re going to have to have different ways of exiting.”

Photos: supplied


FOR VISITING ENGLISH dairy farmer, Phil Darke, the New Zealanders’ quest for farm ownership is like a shimmer-ing object to be admired from afar.

Working the family farm and a tract of rented land with his father and with the help of his 18-year-old son, Darke envies New Zealand’s decades-old sharemilking system and the flexibility of modern equity partnerships. But he says there’s just too much competitive-ness back home for it to ever take root in England.

Darke has been lead manager for his family business for the past 10 years, during which time he and his 73-year-old father have tripled the size of their holding to just over 1000 acres.

The business is “expanding all the time” and Darke is intent on securing a career for his son, who is studying at the local agricultural college.

But opportunities to buy land or go farming aren’t as free-flowing as in New Zealand. They’ve rented land to expand their farm production and it’s likely the youngest farmer in the family will have to work his way into business on the home block to get ahead.

“My wife and I were only talking about this the other day,” Darke says.

“There would never be the opportunity for him in the UK that he would get here; going out and buying 100-150 cows and starting off [in sharemilking]. There’s

so much jealousy in the UK. People will not work together – and that will prob-ably be the key to it.”

Moreover, farms rarely come on the market in England, making it harder for a young farmer to get a start.

While English farmers do have access to council-owned “starter farms” of 50 to 100 acres, these lease-hold options are drying up as cash-strapped councils either sell the farms or rent them for up to £250 an acre (NZ$472).

That up-front fee just isn’t viable for a youngster to start milking, Darke says.

In contrast, his two trips to New Zealand this year as a Nuffield Scholar have introduced him to North Canterbury dairy farmers Andrew and Ann-Marie Benton, who have used equity partnerships to establish them-selves in the Culverden district.

The Bentons started out as share-milkers before buying their first farm. Andrew’s parents then sold a small farm and went into partnership with their son and daughter-in-law; as did Ann-Marie’s parents after selling a shop.

The young Bentons had started out in the partnership with a 39 per cent share, now they’ve got 65 per cent of it. You just wouldn’t hear this sort of story in the UK, Darke says.

“There wouldn’t be an opportunity to do that. I think it’s fantastic, what they’ve done.” IN

A SHARE OF GOOD FORTuNEAn English farmer compares his New Zealand experiences

to the competitiveness at home.

stoRy by tim fULtoNPhotoGRAPh by tessA bURRoWs


Phil Darke sees family-run Kiwi dairy farms as an enviable institution.

EXIT IN FOCUS


FINANCIAL LITERACY and Retirement Commissioner Diana Crossan has lived in the same house, on a narrow street above Wellington’s Botanic Gardens, for 32 years. And as it turns out, home ownership is one of the next items on her agenda.

Buying a house, that corner-stone of the Kiwi dream (and many Kiwis’ retirement plans), is about as far out of reach as it should be, she says. If housing affordability figures get worse, the commis-sion will look into it as part of its next three-yearly review of New Zealand’s retirement income.

Giving good advice doesn’t mean the government will listen. On John Key’s refusal to lift the superannua-tion age (a recommendation of the 2010 review), Crossan, aged 62, says she’s happy just to have kicked off the conversation.

“I mean, I’ll be disappointed if I’m lying at the beach in 10 years time and somebody says ‘we’ve got to raise the age, why didn’t we do it in 2010?’,” she says, “but the fact that’s it now on the agenda, that it’s now being discussed, is the most important thing for me.”

The ability to work through bureaucratic systems to get things done is common ground in an unu-sual career path.

Crossan studied geography then spent 13 years as a probation officer, working in a system that carried with it some bizarre sexism – as she told NZ Management journalist Vicki Jayne a few years back, court protocol at the time meant she had to be addressed as “Mr Probation Officer”.

Many things have changed since then. Others haven’t. “We still have so few women on boards,” Crossan says. At a recent event for business

magnate Sir Richard Branson in Auckland, she noticed about 20 people at the top table and just one woman. “I thought, ‘we just don’t get it, really, do we?’”

After leaving probation work, she helped draft equal employment opportunity rights into the 1988 State Services Act. She remembers it as a proud success but a hard one. The Public Service Association had called a general strike to protest the new legislation, and Crossan

and her colleagues were torn on whether or not to join.

“I actually went past the protes-tors and into the building to help draft the legislation,” she says. “We made a call, as a small group of people, that it was better to get the words in the act so that people in the future could use it.”

In 1997 she switched to the pri-vate sector as a manager for AMP. “I went from one bureaucracy to another. They just have slightly dif-ferent rules.”

In her first month there, she phoned up “the boss” and asked for a meeting about her job. “I said ‘have I got it right?’,” she recalls. “He said ‘no, no, this is this, that’s that’ and I said ‘well you should go down to the fourth floor and tell them’.”

It wasn’t the done thing then,

probably still isn’t today, but it paid off. She went on to spend another four years with AMP, including a year in London managing a merger affecting 4.1 million customers.

Now settled in Wellington, she splits her time between the com-mission and several governance roles, including as chair for two non-profit organisations, Refugees in Business and the Orangi Kaupapa Trust.

Upcoming work, as well as more financial literacy tools for the “really, really old”, includes research into the implications that stages through a woman’s life can have for her retirement income. KiwiSaver’s “great”, Crossan says, but taking time off work to have children, plus the gender pay gap, means women are likely to end up with consider-ably less income than men in their retirement.

On home ownership, Crossan says there are two options: find a way to make buying a home more affordable for more people, or change the way we approach renting.

She has friends in Paris who’ve had the same rental apartment for 50 years. “There’s no suggestion that they’ll ever be kicked out. They can pass it on to their daughter,” she says. “We just haven’t got that thinking; we haven’t got the finan-cial structure for that. So we either have to go one way or the other and we have to have that debate, that discussion. What do we want?”

Crossan has another year to get that conversation, and others, up and running before her current contract finishes up. After that, one thing is certain. “Like most people, I don’t intend to retire,” she says. “At this stage, I’ve got lots of things to do.” IN

stoRy by NiNA foWLeR

PhotoGRAPh bysAbRiNA hyDe

THEN AND NOWDiana Crossan says she won’t be retiring when her current

contract runs out – she has lots of things she wants to do.

“I’ll be disappointed if I’m lying at the beach in 10 years time and somebody says ‘we’ve got to raise the age, why didn’t we do it in 2010?’”

36 IN-BUSINESS March/April 2012

EXIT IN FOCUS


Diana Crossan says we need to look at

our options when it comes to housing

affordability.

www.in-business.co.nz 37


IN GENIUS39 › Rise of the resthome robots 44 › These are interesting times Listing on the NZX 48 › From the lab of . . . Fressure Foods 50 › Everything has its uses Waste processing 52 › Vicki Hyde looks through a glass darkly

Plus, it wAsn’t just one scientist, but three of them – Sir Ray Avery, Sir Peter Gluckman and Sir Paul Callaghan. Journalists, by the way, came 37th out of 38 – just before real estate agents but after tow truck drivers.

No one was really surprised because scientists deal with facts and can be trusted, while journalists clearly can’t.

But underneath the veneer of trust there’s a wider issue: the impact of science for business is borderless, but few really under-stand both sides. If New Zealand’s top 100 science and tech com-panies performed as well as our top 10 do, our GDP would equal Australia’s at $400 billion. But science and business don’t trust

each other, and no one trusts journalists to tell them about it.In this, the second installment of our science, technology,

research and development, and commercialisation section, we explore the benefits of cross-border collaboration for both research and commercial gains in a story about the development of resthome robots (opposite page). We look at the pros and cons of listing on the NZX, and Vicki Hyde, one of New Zealand’s fore-most science voices, laments our continuing reluctance to invest in science research.

— KAtie Foley

Where science and business convergeIn 2011, for the first time ever, a sportsperson didn’t top the list of people most trusted

by the New Zealand public. It wasn’t even a war hero. It was a scientist.

Fressure Foods uses this ultra high pressure processing technology to produce ready-to-eat guacamole. See page 48.

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IN GeNIus Is produced IN partNershIp wIth opus INterNatIoNal coNsultaNts

The project manager doesn’t seem all that convinced he should be showing us the robot research hub. “I’m not sure how tidy it is,”

he says. “And I don’t know if you’ll be able to take photos.”

It turns out to be quite untidy, and also unlike anything at any resthome any-where in the world, and therefore ideal for photos.

The robot research hub is a three-bed-room show home behind a residential block at Selwyn Village in Auckland’s Pt Chevalier and the base for a study into how robots can help care for the elderly. It’s a collaboration between the University of Auckland and four Korean organisations, including Korea’s largest government-funded research institute ETRI. This morn-ing, there are around 10 people working in the house and only slightly fewer robots.

There are research nurses, research assistants, technicians, PhD students, project managers and content develop-ers here, working with robots made by three separate Korean companies. At the moment, the robots are effectively clever computers that do things like taking your blood pressure and vital signs, making Skype calls and showing you funny cat photos or video clips of Susan Boyle.

But, if all goes according to plan, in a few years they might just put some New Zealand researchers and companies at the forefront of the enormous elder care indus-try – and they might also save your life.

In the show home’s tiny kitchen, two of the researchers are trying to make morning tea. One of the robots – known as a Guide – is right in the middle of the kitchen. It’s bigger than either one of them and is clearly in the way, but they seem not to even notice it.

RiSe oF the ReSthoMe RobotS In an unassuming Auckland resthome, the world’s largest trial of robot nurses has just

been launched. The profession is set to get a high tech boost in the coming years thanks

in part to this Kiwi/Korean collaboration between technology entrepreneurs, researchers

and universities.

WordS By grEg BrUcE | PhoTogrAPhS By ISAAc dE rEUS



Down the hallway, in one of the bed-rooms, three Korean researchers are work-ing with three partially assembled robots. Across the hall, the toilet and bathroom are piled floor to ceiling with empty boxes, packaging and other robot detritus. More detritus is scattered on the floor through-out the house.

The project manager, Ben Robins, speaks briefly with three Korean engineers, then turns back to us. “Yeah, sorry, no photos,” he says.

It’s a shame, because it’s an incredible scene: a small retirement village apart-ment packed with ambitious academics, engineers and robots.

It’s been called “the age quake” and ”the silver tsunami”: the rush of baby boomers into their retirement years. In New Zealand today, one in eight

people is over 65. In 2025, it will be one in five. The numbers are similar around the developed world – in the case of the United States, they’re almost identical.

As we age, we often lose the ability to do the simple tasks that living alone requires: taking medication, turning off ovens, lock-ing doors, closing windows. We solve the problem by putting our elderly into care, which is expensive and dislocating and difficult.

Elder care costs are already starting to spiral. By the middle of this century, an estimated 67 per cent of healthcare costs will come from the over 65s. Many devel-oped countries are pursuing a strategy of “ageing in place” to allow the elderly to remain independent and reduce the burden, although at this stage, nobody is

quite sure how this is going to work. The market, though, is huge. Already, in the United States, $100 billion is being spent annually on ”care in place”.

For organisations able to find ways of making the concept work, there is a mas-sive opportunity.

As unlikely as it may seem, New Zealand has emerged as a centre of this effort and at the centre of that centre is Associate Professor Bruce MacDonald, a robotics expert from the University of Auckland.

When he first travelled to Korea to dis-cuss robotics as part of a New Zealand trade delegation several years ago, it set in train a series of events that led directly to that robot-filled show home at Selwyn Village.

“I wasn’t keen to go,” he says. “I thought I would be talking for an hour, then spending

“Researchers might have good ideas but getting them into the marketplace is hard work. I just think we need to do it together.”

At the moment the health robots are effectively clever computers that do things like taking your blood pressure and vital signs.


the rest of the time listening to things I wasn’t interested in. I got dragged in, and I said ‘we’re working with robots and is any-body interested?’”

It turns out they were. Korea’s govern-ment funded research institute ETRI had been developing personal robots and were interested in developing a market. They were impressed with New Zealand’s expertise in delivery of health services and with the way the University’s research arm, UniServices, had been able to develop global products and get them implemented overseas.

An agreement was signed and the project was given an initial $5.4m funding from the New Zealand and Korean governments.

With the money secured, MacDonald began building a team, including special-ists in robotics, engineering, psychology, gerontology and – crucially – outside com-panies who were interested in developing products and services around the robot.

He admits he’s biased, but thinks that the project is now the most advanced of its

kind in the world. And the reason for that, he says, is collaboration.

The project is ultimately about creat-ing a better quality of life for the elderly, but MacDonald says that’s a goal that can only be achieved by creating a system that is commercially successful and pervasive. It’s not just about science. It’s about sci-ence collaborating with business to create a product that is both effective and market-able.

“From a scientific view, it’s about gaug-ing efficacy,” he says. “From a business view, it’s ‘does it provide value?’”

A woman shuffles into the Selwyn Village reception area on a walking frame. It’s a week or two after the robots have been

brought in for their latest trial. She notices the robot in the corner and smiles: “Oh look! It’s Charlie!” she says, using the nick-name researchers gave the robots that were brought here for their first research trials two years ago.

This robot, however, is actually not Charlie. It’s a new robot, made by a differ-ent Korean company. It’s nearly twice as big as Charlie, and where he was essentially a screen on a stick, this robot (researchers call it ”Guide”, although the factory paint job says ”Mr Aro”) looks like a slightly eccen-tric young woman, with its wide-set eyes, blushing cheeks and stylised Mohawk.

The woman stands in front of the robot for maybe a minute, staring, as if she’s just met an old friend. She calls it Charlie again and although she never stops smiling, she shows no desire to approach it.

Familiarity, though, leads to acceptance, and this is part of the reason why both Mr Aro and Charlie (known to researchers as Cafero) have been set up in public loca-tions around the village for this new trial and why other robots called iRobiQ are being set up in residents’ private apart-ments. When the study is fully underway, five different types of robot, 30 in total, will be in use at Selwyn, making it the biggest research trial of its type in the world.


IN GENIUS

The researchers want residents using them as much as possible so they can gather data with which to improve the robot but – just as importantly – so they can pass that data to their commercial partners to create applications and devices that will make the robot as useful as possible.

CEO of UniServices, Peter Lee has a favourite catchphrase: “Research is not just good for business. Research is good busi-

ness.” Research is certainly big business.

UniServices has 700 staff and $125 million in revenue last year and it’s set for $150m this year, according to Lee.

It exists to commercialise research car-ried out at the University of Auckland by bringing together business and academia, and it has been a critical link in the robot project from the beginning.

“We said, ‘this is an opportunity for NZ Inc.’,” Lee says. “We’ll get a cluster of com-panies developing apps and devices around the framework of the robot and between the two of us [New Zealand and Korea], we’ll take the solution into the United States.”

So UniServices set up a website, Kumanu (Māori for care), to attract business involve-ment, and business development manager David Cotter then set about finding busi-nesses who could both benefit the project and benefit from the project.

One of the companies he signed up is

Lifetime Health Diary, a Kiwi company which produces software to bring together all of a person’s health information into one integrated page that can then be electroni-cally shared among doctor, pharmacist, nurse, caregiver and whoever else needs to see it. It’s envisioned that the robot will guide the patient through the process of recording vital signs, then automati-cally transmit the updated Lifetime Health Diary document to the relevant people,

exponentially improving the quality of their care.

Another Kiwi company, Pulsecor, is working with the project to test its high tech blood pressure monitoring equip-ment. The Pulsecor equipment is in use on many of the public robots in Selwyn Village and measures arterial stiffness as an addi-tional way of determining cardiovascular health. Researchers are getting almost as many blood pressure readings from staff as from residents, but they’re not unhappy about that. It’s all data.

What the companies get from the project is the benefit of research feedback, allow-ing them to develop and improve the prod-uct for the elder care market. What the uni-versity gets is a smarter robot, with more applications and functions and therefore more research possibilities and more chance of success.

But, as much as the mutual benefits are obvious from the outside, academia and business are not always happy bedfellows. Even UniServices, whose role it is to bring the two together, acknowledges that their different goals – research outputs versus profits – can make for awkward interac-tions. But Bruce MacDonald has made it a personal mission to ensure that is not a problem with the robot project. He recog-nises the crucial role business investment has to play in the project’s success.

“We [researchers] might have good ideas,” he says, “but getting them into the marketplace is hard work. Sometimes people stand back and blame either busi-ness or the university for not crossing that gap. I just think we need to do it together. Not every innovation is going to make a product. It needs a partnership. We all need to try to make it happen.”

In one of Selwyn Village’s many com-munal lounges, there’s a modest chapel. Three or four rows of chairs face a table featuring a small, framed

picture of Jesus. To the right of the table, amongst a tangle of wires and laptops, three Koreans are talking and tapping on their keyboards. In the roof, an electronic ZigBee network is being installed, which will allow robots to navigate their own way around the building.

Soon after the network is complete, when a resident falls a specially designed bracelet will send a signal to a robot – designed and built by Koreans, developed and tested by New Zealanders, using software and hard-ware from New Zealand companies, with input from psychologists, gerontologists, engineers, programmers, research assist-ants – which will then use the network to find its way to the injured person anywhere in this building, and will check to see if that person is okay. If they’re not, it will call for emergency help.

When the robot is commercialised and it saves its first life, as it surely will, chances are nobody will mention UniServices or Lifetime Health Diary or Pulsecor, or any of the countless researchers and academ-ics that worked together to create it. Teams aren’t that sexy and “collaboration” doesn’t read well in a headline. But they won’t care. If successful, their work won’t just save lives; it will change the way we think about ageing. It’s not a stretch to say their work will change the way we live. That will be reward enough. IN

“Research is not just good for business. Research is good business.”

these robots are part of a ground-breaking study combining robotics and the retirement industry.



Science and technology companies often have trouble condensing what they do into a 10 to 15

minute presentation for brokers.IN-BUSINESS March/April 201244


IN GENIUS

Science and technology firms want-ing to list on the stock exchange have been some of the biggest vic-tims of the economic downturn as

investors turn to traditional safe havens for their money. The appetite for longer-term, higher-risk investments – as technology companies are often perceived to be – has disappeared, as people turn to the tried-and-true.

But that may be about to change, with pundits saying the government’s moves to sell off a stake in several state-owned assets may rejuvenate the market, although industry experts say there are a lot of hur-dles to get over for tech companies wanting to go public – not least a change of mind-set for both the firm’s owners and those investing.

There have been only two listings of science and technology companies on the New Zealand stock exchange in the past four years. Rod Drury’s Xero listed in 2007 and Chris Mardon from Energy Mad, a company that produces eco-light bulbs, announced it had reached its minimum IPO target of $5 million in October 2011.

Drury says listing Xero was a no-brainer. “In terms of being a businessperson, that was the ultimate experience, taking the company public and building value for the shareholders.” But he admits the process

was challenging and required a thick skin.New Zealand’s habit of knocking down

tall poppies is a big hurdle for technol-ogy and science companies to overcome. Bronwyn Dilley, managing director of Intelligentsia, an investor relations firm, and former CEO of NZBIO, says business-people, especially those in technology businesses, are hesitant to say what they do well. Drury agrees. “It’s against our culture to stand up and do things and put yourself out there. You get arrows thrown at you.”

That means technology companies tend to seek out other methods of raising capital before opting for the stock exchange. John Fernandes, of the NZX Strategy Team, says science and technology firms have tradi-tionally opted for private equity investment or trade sales.

Mardon says it is tough to get fund-ing through traditional routes at present. “Unless you are low-risk or high guaran-teed return early on, the traditional sources [of funding] such as banking, or private equity, are much harder to get these days.”

“Some have chosen to list offshore,” Fernandes says, “for example Endace and DataSquirt, as the vendors believed valua-tions received overseas would be higher… Trade sales indicate to us that Kiwi busi-ness owners don’t always value their intel-lectual property as highly as they should.”

theSe ARe inteReStinG tiMeScapital raising for companies involved in research, development and the

commercialisation of science and new technologies comes down to the

art of being in the right place at the right time after jumping backwards

through the right hoops and bending the ears of the right people.

words By susaN edmuNds

IllustratIoN By reBecca walthall


IN GENIUS

Traditionally, technology firms would grow to a certain size and then be bought by a bigger firm that was attracted to its product or service.

Venture capitalist Mark Stuart, of Movac, says a lot of international businesses choose to buy smaller technology and sci-ence companies rather than undertake their own research and development. “By the time the companies have enough capital to list, they are bought by overseas investors. Trade sales can happen a lot earlier. When companies get traction in the market, big international companies swoop in and buy them. There’s a trend for overseas compa-nies to outsource their R&D by waiting to see which companies succeed. They might pay more but there is no risk whatsoever.”

There is a perception among business owners that listing on the stock exchange means a loss of control. That is especially a problem for technology and science firms, which often centre on an entrepreneur who has spent years developing a product.

Fernandes says those companies some-times fear the prospect of having share-holders to answer to. There is also concern the regular disclosure that is required of publicly-listed companies will mean com-petitors will find out what a firm is up to.

But David Darling, CEO of Pacific Edge Biotechnology, says he has experienced no loss of control since the company was listed in 2002, although being listed meant

the firm was operating to a tight set of com-mercial and fiscal guidelines. “It stands you in good stead when you come to need to raise money.”

He says the fact it operates under more rigorous conditions made investors more confident about the business.

Stuart says listing on the stock exchange allows companies to get the benefit of added liquidity without the loss of control that comes with a full trade sale. “You stay in it for the ride as well as getting capital.”

For smaller companies, there is the very real prospect that an NZX listing attempt will get nowhere. Mardon says he knew listing would be hard. “We knew it would be expensive and there was no guarantee it would succeed. We knew we could end up with all bills and no cash raised.”

Energy Mad knew the current market was not ideal for a new listing and that it would be a battle as a small company. The firm also had to contend with the fact that it was the first listing since the new Financial Markets Authority (FMA) regu-lations came into force. “Brokers were saying unless you’d done all the research, they weren’t prepared to take a risk on the FMA rules.”

But he says Energy Mad made the com-mitment to list because it was the most efficient way to raise capital for its growth plans. Being listed would also make it easier to raise cash again in future.

Many technology firms may still be biding their time. Darling says one problem is picking the right moment to

list. Many do not list until there is a sig-nificant development for the firm, because investors can become disenfranchised if they do not see a prompt return. “They are not prepared to list because they don’t have a proposition that’s big enough.”

He says at the moment few companies have the traction to warrant a public listing and few companies can get a listing away at an early stage. “The [investor] appetite for that is lost at the moment. Investors require proximity of revenue.”

New Zealand investors are more focused on getting a dividend every year than they are on the stock price, which is problematic for technology firms that are likely to rein-vest profits, Stuart says. Mardon agrees. “Kiwi investors tend to like safe invest-ments that return big dividends, there’s a risk aversion for small companies.”

Darling says only 14 biotech companies listed on the stock exchange in the US in 2011. Twenty listed the year before. “That’s a lot less than used to list in that biotech space. Biotech is seen as long-term with significant risk. In a downturn, there’s no appetite for that.”

John Moore, head of equity capital mar-kets at Craigs Investment Partners, agrees it is hard to get investors to take a risk, but he expects the government’s mixed-ownership model of state-owned assets

Mark Stuart: “You stay in it for the ride as well as getting capital.”

Rod Drury: “in terms of being a businessperson [listing] was the ultimate experience, taking the company public and building value for the shareholders.”


IN GENIUS

to stimulate the market. “The recycling of capital will mean room in the appetite for startups, especially young companies.”

An often forgotten but signifi-cant problem for technology firms listing is that the average investor does not have a work-

ing knowledge of what the company does – unless it is a household name such as Trade Me. Darling says it is important for technology firms to sell themselves prop-

erly. “For technology companies like ours, people can relate to the company. It’s about the idea and how it captures attention.”

Moore says the challenge is to explain to would-be investors how the company can expect to become profitable. “It can be hard [for technology companies] to explain how they make money.” Inventors in particular may struggle with condensing what they do into a 10 or 15-minute presentation for stock brokers.

But Darling says for firms such as his, which produces medical technology,

investors sometimes have reasons that are more altruistic than financial. He says one investor told him she invests as an alterna-tive to giving money to the Cancer Society.

There is a suggestion that New Zealand firms could better capitalise on their prox-imity to the ASX because of the lack of liquid capital in this country but Drury says there is no benefit to his firm in listing across the ditch. “Being listed on the NZX doesn’t hurt your options later on. We’re getting lots of Australian investors on the

register.”But Stuart expects

to see more companies getting involved in the ASX as time goes by. “It’s not that big a leap culturally.” Companies with a specialised product will benefit from a bigger market where there are more

investors. “The only reason to put the NZX at the top of the wishlist is if you are sell-ing something in New Zealand or there’s a particular New Zealand bias to it.”

Dilley says there is a lack of listings in general in New Zealand. Australia has sys-temic factors in the economy that contrib-ute to more companies going public, such as compulsory super that churns money through the market. That institutionalised investing is something New Zealand could see more of under the mixed-ownership model of state-owned assets. IN

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John Moore: “it can be hard [for technology companies] to explain how they make money.”

Chris Mardon: “Kiwi investors tend to like safe investments that return big dividends.”

Phot

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“There’s a trend for overseas companies to outsource their R&D by waiting to see which companies succeed. They might pay more but there is no risk whatsoever.”


FRoM the LAb oF . . .Roberto Peregrina Fressure Foods



I designed the recipe starting with a common recipe for guacamole that you’ll find anywhere in Mexico. When you make guacamole, you do it with spicy chilli but it’s harder for Kiwis to eat chilli – you find people who love chilli and then others who find even the mildest is too spicy for them. Our guacamole is just avocado, onions, coriander, garlic and salt – it’s all fresh. We don’t use tomato as it creates a lot of water.

The processing technology is ultra high pressure, extreme pressure which doesn’t exist naturally, like taking the product to 52km to the bottom of the ocean, except the deepest part of the ocean is about 11km. The pressure disrupts the membrane and you have a product free of pathogens. The technology doesn’t cause any emissions and we recycle the water that goes into the process. It’s clean and environmentally friendly.

This technology started in the early 1900s but the initial industrial machines came much later. The avocado processing technology started in the late 1990s in the United States where people wanted to have a fresh, light guacamole, but it started small scale. What we use is a Spanish machine. It can be used for any product with more than 3 per cent moisture. It’s ideal for

soups, purées, juices, smoothies, salsas – everything that’s in a liquid or gel texture. It’s widely used to preserve meat as well.

Avocado is a labour intensive fruit. The shape is irregular and comes in differ-ent sizes. We cut the avocado by hand and remove the stone. All the chunks you see in our product are made by hand. We put more chunks than pulp which is made by pulp equipment.

We’re always exploring new things, we have a product development team and we have a tasting or development session every week. We come up with ideas, we try different things . . . like chocolate and avo-cado. It tastes good but you have to find a way of putting it together without a funny colour. Avocado and wasabi was too spicy. A lot has not worked – funny juices that curdle – they might taste fine but don’t look nice. We’re exploring different options at the moment like salsas and more spreads, but we want to get the products that we’ve already got right to get into the market, for people to know about them.

When you live in the main avocado plantation area, avocados are everywhere, everyone has a tree. My grandfather had an orchard so I used to go and help him with it when I was young, which is probably my

earliest memory. We planted an avocado tree at my Mum’s house when I was three and it’s still growing avocados.

Avocado in Mexico is eaten in so many ways, but normally people just slice it with lime and sea salt. In Mexico they eat 9kg per capita per year. Avocado goes best with cheese and honey on toast. Slice avo-cado with haloumi, gouda or goats cheese with honey on top. It tastes really good, you have the buttery taste from the avocado and the salt from the cheese with the bread and honey.

I really love my job. Coming in early, the first thing I do is go to the ripening rooms and check the avocados. Probably one of the things I enjoy the most is seeing the avocados ripening – it’s like making wine. Avocados come from all over, from Kaitaia to the Bay of Plenty. All fruit are picked at different times of the day in different con-ditions. Getting the perfect ripeness is a challenge. IN

Fressure Foods is a publicly listed company owned mainly by avocado growers and was set up to combat an oversupply of the fruit in the New Zealand market. It now has more than 45 staff and is selling in Japan, Australia, Tahiti, Hong Kong and Singapore.

Producing commercially viable fresh guacamole is about much more than mashing

avocado and packaging it. No one knows this more than roberto Peregrina, the plant

manager at guacamole manufacturer Fressure Foods. he grew up in the Avocado capital

of the world, Uruapan, Mexico and arrived here in 2009 to help set up the Pukekohe

based operation. Ultra high pressure processing technology (cold pasteurisation) is used

to give the mostly handmade guacamole a longer shelf life – without changing its colour,

flavour, nutrients or texture.

as told to carolyN Brooke | photoGraphs By GleNN mcmahoN


It’s not usually a subject you bring up in polite company; you need to tread very care-fully if you want to introduce

it to the dinner table conversation. But emerging technology is show-ing that by letting our waste (the bodily kind) languish in sewage treatment plants we are overlook-ing a valuable resource.

Yes you heard me right. The search for alternative, environmen-tally friendly energy sources has led us to our own toilet bowls.

Processing our waste in the right way can produce biogas, which can then be used to for heating, cooking and electricity. It’s already being used in far-flung countries around the world, including Rwanda, India, Canada and the United Kingdom.

We’re not the first to come up with this. Not by a long shot. Experts believe the Assyrians were using biogas to heat bath water as far back as the 10th century BC, as were the Persians in the 16th cen-tury. In the 13th century AD Marco Polo noted the Chinese were using covered sewage tanks to generate power, and the 17th century author Daniel Defoe referred to biogas technology. In 1859 an anaerobic digestion plant was built to process sewage at a Bombay leper colony and in Victorian Britain human waste was used to power gas street lamps.

In the modern world, biogas is commonly produced by anaerobic digestion as part of the treatment process in municipal wastewa-ter and sewage treatment plants. Technology can take that a step further so that biogas can be used on-site for electricity or exported to other areas.

Biogas from anaerobic digestion

can be used to produce heat for the digestion process itself, or for heat and electricity in other parts of the plant. It can be upgraded to “natu-ral gas” quality and fed into a local utility network. It can also be used directly as a fuel in a number of dif-ferent types of plants.

Biogas is typically composed of 60 per cent methane and 40 per cent CO2, similar to natural gas, which is composed of 99 per cent methane. While methane is a greenhouse gas, combustion turns it into CO2, reducing its envi-ronmental impact by more than 20 times. It’s con-sidered carbon neutral because carbon emitted by its combus-tion comes from carbon that is then fixed by plants, ie it’s part of the natural carbon cycle.

For countries such as India, the process can also provide an answer to two issues – the lack of sewage infrastructure in many villages and lowering their contribution to climate change. Private digesters, which the government there has recently agreed to subsidise, effec-tively provide the residents with a hygienic sewerage system while also using that waste to supply elec-tricity and gas. All of which creates energy-neutral communities.

On a larger scale, most of the biogas currently produced powers small communities or specific institutions which, collectively, helps ease electricity demand on the national grid and lowers green-house emissions. For instance half

the prisons in Rwanda operate biogas facilities that use the elec-tricity produced to cook the pris-oners’ meals and light the build-ings. In the UK the Didcot sewage works in Oxfordshire went online in October 2010 supplying up to 200 homes with biogas made from human waste.

In New Zealand, several councils generate biogas through sewage and wastewater treatment plants, as well as landfill. There is potential

for its use in transport, and the coun-try’s first biogas-powered rubbish truck hit the road in November 2010 (although at this stage the biogas comes from Redvale Energy Park landfill site, rather than directly from sewage).

Biogas from human waste is by no means the silver bullet when it comes to finding a replacement for fossil fuels. We humans naturally produce a finite amount of waste – although that does increase as the population rises – and our stom-achs are so efficient that human waste doesn’t produce as much biogas per cubic tonne as animal waste does. However, the more communities and high-energy users that can become self-sus-taining, the less demand there is on the national grid. IN

everything has its usesThe search for alternative and environmentally friendly energy sources has turned up

some surprising possibilities. human waste may not be as inspiring as water and wind,

but it can be an effective step in creating energy neutral communities.

“Biogas from human waste is by no means the silver bullet but the more communities and high-energy users that can become self-sustaining, the less demand there is on the national grid.”

STory By ELLIE VAN BAArEN

50 IN-BUSINESS March/April 2012

IN GENIUS


IN GENIUS

INdIathe government has agreed to

subsidise private digesters, to get human waste off the streets and

power local communities.

rwaNdahalf the country’s prisons power their cooking and lighting via biogas made from the prisoners’ waste.

uNIted kINGdomthe didcot sewage works in oxfordshire supplies up to 200 homes with biogas made from human waste as part of a pilot programme.

New ZealaNdseveral councils use wastewater and sewage treatment plants, or landfill to create biogas, plus the country’s first biogas-fuelled rubbish truck hit the road in 2010.

chINamore than 30 million households in china have biogas digesters, biogas accounts for about 1.2 per cent of china’s total energy use.

ARounD the WoRLD

CANADA

SAAniCh PeninSuLA theRMAL eneRGY ReCoveRY PLAnt

CoMMissioned in early 2001, this plant was built by Opus DaytonKnight Consultants Ltd, the Canadian arm of New Zealand success story Opus International Consultants. Its thermal energy recovery system extracts energy from the effluent of a wastewater treatment plant and, in its first phase, uses it to heat a leisure centre swimming pool.

Based in British Columbia, the Saanich Peninsula Thermal Energy Recovery Plant was a North American first and is a great example of the potential for facilities to benefit from a single closed energy system – feeding in surplus heat or drawing it out depending on requirements.

The closed loop system is efficient and doesn’t need additional energy to operate unlike in more open systems where pumps are required. It is also low-temperature so the piping doesn’t require insulation against energy loss.

Already, the Panorama Recreation Centre has reported cost

savings of almost NZ$93,500 and an estimated reduction in greenhouse gas emissions of 560 tonnes.

The whole loop was designed with future expansion in mind. Phase two for the project will see the introduction of an ice rink, and future phases could provide for a local primary school, Centre for Plant Health, the treatment plant itself and nearby residents.

Panorama Recreation Commission’s vice-chair, Marilyn Loveless, is excited about the project’s wider objectives of advocating efficient energy use within communities.

“I believe the value of our facility, the pool in particular, is increased significantly by thermal energy recovery it receives from Saanich Peninsula Wastewater Treatment Plant. We work to make our society healthy, inclusive and sustainable and this project has done much to further these goals.”

Waste not: the Saanich Peninsula thermal energy Recovery Plant is a great example of the potential for facilities to benefit from a single closed energy system.


Phot

o: o

pus

inte

rnat

iona

l Con

sulta

nts


IN GENIUS

in 18 yeArs As head of the NZ Skeptics I encountered a lot of people who thought they could see the future – psychics, astrologers, clairvoyants, econ-omists . . .

I even tried a bit of crystal-ball gazing myself. In 1994, addressing a set of Waikato University science graduates, I confidently predicted that they would have great prospects in the coming decade or two.

I pointed out that the 1980s had seen commerce graduates balloon by 131 per cent, while numbers of science and tech-nology students had slumped significantly. At the same time we were hearing increasing calls for a technologically savvy workforce and smart scientific input into our corporate man-agement and boards.

Combine that, I said, with a significant demographic drop in young ’uns set to coincide with peak retirement years for the ageing New Zealand scien-tist population, and those 1994 S&T graduates were bound to be in short supply and strong demand. Surely this would mean that they would attain all the consequent goodies of high salaries, attractive work-ing conditions, a committed research environment, maybe even some social status.

Cue hollow laughter – my predictive powers were every bit as good as those of the tack-iest self-proclaimed medium.

Despite the demographic data being valid, there’s been little sign of any of those hoped-for benefits panning out. What’s worse is that during the

intervening period I’ve heard many a retiring scientist say that they’re telling their grand-children to keep away from a research career. The delight in discovery is still there, but aca-demic debt, contestable fund-ing, commercial pressures and an ever-uncertain employment future have taken much of the joy out of the laboratory.

My powers weren’t a com-plete wash-out though. In amongst my panegyrics on the alleged coming rise in fortunes, I did sound a cautious note as to whether that fortune would be made in New Zealand or elsewhere. After all, the kinds of market and social changes I was considering were going to happen elsewhere and sci-ence has traditionally offered international connections and

opportunities. Perhaps the best advice I gave those graduates in 1994 was to take up a foreign language.

After all, alongside our exports of meat and dairy products, timber and wine, we’ve been great at exporting our skilled, educated gradu-ates. We’ve told ourselves year after year that they would come home bringing their expanded knowledge and networks with them. On occasion, that’s hap-pened, but it’s not because the science workplace has attracted them back, but largely the lucky circumstance of lifestyle fac-tors New Zealand has to offer.

we Are A Country noto-rious for its paucity of public or private sector support for research and development,

through a glass darklythe public and private sectors continue to drip feed their support for research and development, says

ViCKi Hyde. it’s an approach that doesn’t seem to be changing any time soon.


IN GENIUS

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The Sharpest Pencil in the Drawer

sitting at about half the OECD average. It’s all too easy to deem R&D a luxury rather than a necessity. Thus we had farm-ers last year vote to cut the levy that supported wool research, with a consequent loss of scientific skills, knowledge and potential future develop-ment. Government cutbacks have been just as debilitating, whether dropping post-doc-toral scholarships which once helped support our brightest talent or requiring our Crown Research Institutes to trim, trim and trim again to make commercial gains.

Science is particularly vul-nerable to the loss of expertise. It can take years to develop the knowledge, experience and collaborative networks that underpin discovery, and in this country that can all be swept away with the loss of even one or two strategic people. Each time the cuts come round, it seems to be the physicists and taxonomists, the molecular biologists and the invertebrate experts that go, not the man-agement layers.

Sadly, the public research experiment of the Crown Research Institutes appears to have boosted the job prospects for business management, administrative staff and fund-ing proposal consultants, rather than boosting our capabilities in research. Even worse, the contestable funding approach has created significant rifts between the CRIs and the uni-versities, the joint Centres for Research Excellence notwith-standing.

Last year, the 2025 Taskforce recommended that there should be no further increases in the amount of public funding allocated to research and devel-opment. Instead we should be encouraging firms to innovate. Now we have a new Ministry of Science and Innovation. And once more a call to shift focus – and funding – from blue skies research to the applied stuff

that is predicted to provide commercial outcomes.

As a long-term observer of such things, it has felt a bit like “Groundhog Day” at times. Every couple of years there’s been another white paper or policy analysis regarding the importance of scientific literacy in the population; the need to boost R&D and commercialise scientific innovation; the value of having scientific expertise at board level.

And there’s the seemingly ever-changing parade of insti-tutional amalgamations, logo redevelopment and rebranding, and enthusiastic press releases about how this time the new ministry/institute/policy ini-tiative will bring a focus on innovation and commerciali-sation to boost New Zealand’s economy with our new-found knowledge.

But there’s a vicious circle at work. If you want the applied innovation, you need the brains and experience to identify those lucrative opportunities or, as often happens, to recog-nise when some oddball result in an apparently unrelated blue skies research programme has the potential to become a major industry. To get those brains, you need the universi-ties, research institutions and CRIs alike to attract the best staff they can and keep them. And those senior researchers need to be in place to be able to mentor, inspire and enthuse the up-and-coming generation that will power the research, development and, yes, com-mercialisation of the future.

Will the graduates of 2014 have better prospects than those of 1994? You’ll forgive me if I don´t make any rash predic-tions.

Vicki Hyde is a long-time science commentator, having been editor and publisher of the New Zealand Science Monthly and managing editor of SciTechDaily Review.


IN ASIA55 › A matter of facts Growth in Asia 56 › Other people’s money The rise of RMB 60 › Inspiring Indonesia Opportunities for New Zealand business 63 › A road less travelled Katie Foley visits Lombok 64 › Tim Green takes another look 66 › Root revival New Zealand-grown ginseng 68 › From the desk of . . . David Catty 70 › Chris Lipscombe Embracing the moon’s reflection

Looking eastIt’s said that actions speak louder

than words. As I write this from

my new home in Shanghai where

I’m studying Mandarin, I’m struck

by just how much meaning

this saying has across cultural

boundaries.

FroM the little Mandarin I know already, I know that each character is broken down into smaller components or “radicals”, each with its own intricate meaning.

Recently I came across a gem – the character for the Chinese verb “to listen” is made up of the radicals for “ear”, “eyes”, “undivided attention” and “heart”, which really says a lot about the way the Chinese approach business, be that for better or worse.

This edition our Asia section takes a close look at Indonesia, the last country to ratify the ASEAN Australia and New Zealand Free Trade Agreement, which came into force there in January this year.

We’ve also included several China-related stories, including that of Maraeroa C selling Waikato ginseng for tidy mar-gins, and recently-retired head of the New Zealand China Trade Association David Catty reminiscing about his business deal-ings in China.

For now, the Chinese New Year decora-tions are still up here. It’s the year of the dragon, a year said to bring good fortune, high risks and high returns.

— KAtie FoleyKatie

Fol

ey

IN ASIA IS produced IN pArtNerShIp wIth hSBc


Growth is signalled by a number of different factors – from the journeys people make, to the assets they buy, the investments they make and the infrastructure they build. Rather than rely purely on figures and statistics, we’ve put together a visual snapshot to paint a picture of what’s happening in Asia now and where it’s heading over the next 30-odd years.

19

16.8

401

27

270

37

800

3013.7

25 2426 232122 20 19 18 17 16

15 14 13 12 10 9118 7 6 35 241

The number of currently emerging economies expected to be among the top 30 economies in 2050.

million cars bought by the Chinese between January and November 2011.

million dollars in Korean bonds bought by foreign investors for the week ending 20 Jaunuary 2012.

The number of economic league table rankings with Philippines is expected to rise by 2050.

million domestic flights taken in China between January and November 2011.

million estimated trips to be made during the Chinese New Year period across China, by transport mode.

The percentage the Japanese working population looks set to contract by 2050.

million domestic flights taken in the United States between January and November 2011.

thousand kilometres of new rail track that China aims to lay between now and 2015.

billion US dollars of Korean foreign direct investment in 2011, compared to US$13.1billion in 2010.

A MATTER OF FACTS

3544

235104

Source: HSBC Global Research


IN ASIAIN ASIA


IN ASIA

The Chinese are credited with the invention of paper money, which they named “Feiqian” or “Flying Money” because it was light and

could be caught by the wind. China’s modern day legal tender, the

“Renminbi” (RMB) has been making head-lines for the past three years. China’s his-torical currency restrictions, set in place to avoid “capital flight” – or rapid devaluation if investors were all to pull their money at the same time – are waning, creating opportunities for businesses both big and small.

With the meteoric rise of China as an economic power, the world’s largest exporter, second largest and fastest grow-ing economy and all the other oft-quoted statistics, the RMB is being hailed as the next alternative in trade, investment and reserve currency, akin to the Greenback.

But before that can happen, serious changes need to occur with their restricted currency to make it more attractive and “convertible” from one currency to another. The upside is that change is already hap-pening – fast.

Large multinationals the likes of

OTHER PEOPLE’S MONEY

It’s perhaps the most primary concept in business: other people’s money.

Mostly you’d prefer it if it were yours. But with international business, turning

their money into your money, your money into my money, and my money

back into their money, can be a little more complicated than just earning it.

Because when it’s other people’s money, it’s other people’s rules.

IN ASIA

wordS BY KAtIe FoLeY

ILLuStrAtIoN BY reBeccA wALthALL


IN ASIA

McDonalds, Unilever, IKEA, Nokia, Volkswagen and Caterpillar have raised millions since relaxed regulations have allowed them to issue so called “dim sum” bonds to raise RMB for their Chinese expansion and investments, allowing them to reduce their reliance on the volatile US dollar.

Closer to home, Fonterra raised ¥ 300 million (NZ$56 million) in June 2011, the first Australasian corporate to raise RMB via the capital market.

Head of Trade and Supply Chain at HSBC Gary Cross says this move by Fonterra is key to showing the Chinese their commit-ment to the market.

“The Chinese particularly respond well to that because they’re showing that they’re there for the duration, they’re not there to come and go,” he says.

Most New Zealand companies so far have a “wait and see” mentality about the potential RMB offers their company, despite the rate at which progress is hap-pening.

“A lot of people are just seeing it as some-thing that is going on, and we’ll worry about it at a later point,” he says.

The key poten-tial benefits for New Zealand companies of using RMB are both hard measures around pricing advantage and access to

a wider, more diverse buyer base, as well as a softer side – showing commitment to China by dealing in their currency.

Early experience has shown that export-ers who put up two prices – an RMB price and a US dollar price – in order to test the waters for pricing advantage may find they avoid the currency fluctuation premium that’s factored into invoices to allow for movement between RMB and USD.

“A lot of companies are heavily, heavily reliant on the success of China, so if they can eke some advantage out of that, it helps to offset some of the risk by being so reliant on one market,” he says.

This is particularly pertinent for smaller companies, where small gains made in pricing have more of an impact because of their scale.

“In a lot of respects, the advantages that are to be had probably have more of an impact on the small guy. They’re the ones that can really leverage it for all it’s worth.”

And when it comes to buyers, not all Chinese companies have access to foreign exchange – they may trade only domesti-

cally in RMB. Being in a position to deal in RMB could potentially give New Zealand companies access to a wider and more diverse array of buyers.

It’s a sentiment shared by Asian Sales Manager Adrian Gray of lumber exporter LumberLink, who is currently “keeping an eye on it [RMB] and we will see how it unfolds.”

They started investigating the poten-tial to use RMB to settle their cross border trade with China several years ago.

Currently the business they do with China is split approximately 40 per cent with companies that manufacture for domestic Chinese consumption and 60 per cent with companies that use LumberLink’s product for re-export, while allowing for the many companies that do both.

With the intense squeeze on margins for re-exporting companies, it’s likely more Chinese manufacturers will turn inwards to their own burgeoning middle class.

“I think as the world unfolds we will hopefully see more internal because the re-export to economies like the US is pretty tough,” Gray says. “We know the Chinese margins for the manufacturers that are exporting is appalling, they’re under huge

“The retail sector in the US just pounds those guys down on pricing, so they’re running pretty skinny and we are seeing more of those people are going towards more domestic.”

HSBC Head of Trade and Supply Chain Gary Cross: Kiwi businesses can show their commitment to the Chinese market by trading in Renminbi.


IN ASIA

pressure all the time. The retail sector in the US just pounds those guys down on pricing, so they’re running pretty skinny and we are seeing more of those people are going towards more domestic.”

But for LumberLink, every initiative they take on must be customer driven, and they aren’t seeing Chinese importers knocking on their doors asking for prices in RMB – yet.

The 2011 HSBC RMB Cross-Border Trade Settlement Survey showed that nearly eight in ten businesses in Mainland China that had not

yet started to use RMB to settle cross-bor-der trade were planning to use or adopt it conditionally in their future transactions.

And HSBC in-house estimates predict that more than US$2 trillion or 50 per cent of China’s total trade flows with emerging markets will be settled in RMB by 2013 to 2015.

All indications are that this is a fast moving space. The Chinese Government’s initial toe in the water came in April 2009 when they started a pilot scheme allowing specific exporters and import-ers in Shanghai, Guangzhou, Shenzhen, Dongguan and Zhuhai to use RMB to

buy and sell their wares. In June 2010 the scheme was expanded to cover 20 prov-inces.

July 2010 saw the foundation of the offshore RMB market in Hong Kong that allows the likes of Fonterra to raise mil-lions of dollars worth of RMB for their Chinese expansion. In January 2011 it was announced that all mainland enterprises were now allowed to make overseas invest-ment in RMB.

Cross says with New Zealand’s vested interest in China’s economic success, investigating RMB and its potential uses needs to happen sooner rather than later. He predicts 2016 will be the year the RMB becomes fully convertible with no restric-tions and 2020 as the year the RMB will become a reserve currency alongside the Greenback and Euro.

“We’re a nation built on trade, and we’re reliant on the success of China to be a suc-cessful nation,” he says.

“The fact is that our exporters are not competing against other New Zealand exporters, they’re competing on a global stage, so any advantage, anything that ena-bles them to be more competitive on the global market, is going to be advantageous for them.” IN

45 33

78

66

40 30

per cent have definite plans to adopt RMB for future cross-border trade.

per cent would trade in RMB depending on the pricing and services offered by banks.

per cent of businesses in mainland China which have not yet started to use RMB to settle cross-border trade are planning to adopt it for future transactions.

per cent of businesses planning to settle in RMB have trading partners in Hong Kong

per cent have trading partners in other Asia-Pacific countries

per cent have trading partners in the US and Europe

Terms and conditions apply to the products and services mentioned. Fees and charges may also apply. HSBC’s Quarterly Disclosure Statement is available on request, free of charge from any HSBC offi ce. Issued by The Hongkong and Shanghai Banking Corporation Limited, incorporated in the Hong Kong SAR with limited liability, acting through its New Zealand branch.

After 145 years, we’ve learned a thing or two about doing business in ChinaWe’ve been doing business in China since 1865, and today HSBC has the largest network of corporate customers among foreign banks in this region. With over 5,000 local staff working in over 100 offi ces across 30 cities and territories, we have the local knowledge and expertise you need to do business in this emerging market.

From opening RMB accounts for you in New Zealand to facilitating trade transactions, no bank knows China better than HSBC. To fi nd out more, email [email protected] or visit hsbc.co.nz/corporatebanking.

HSB 1147 In Business China Map logo update.indd 1 9/11/11 10:17 AM


IN ASIA

INSPIRING INdONESIAIndonesia ratified the ASEAN-Australia-New Zealand FTA on January 10 this year.

The world’s most populous Muslim nation is already New Zealand’s seventh biggest

trading partner and there is a multitude of potential opportunities for New Zealand

businesses. It is also a challenging environment to succeed in.

StorY BY KAtherINe edMoNd

Katie Foley


IN ASIA

Indonesia is not yet on the radar for many Kiwi exporters but it should be, says NZTE’s Trade Commissioner for the country, Fiona Acheson. “It’s not easy, but nor is

it harder than China or India. I wouldn’t introduce a new exporter to Indonesia but established exporters have so much to gain from this market.”

Acheson concedes that when you ask New Zealanders about Indonesia, most mention Bali, volcanic eruptions, tsunamis and rocky financial institutions, which is “not an up to date description” of the world’s fourth most populous country.

But faulty perceptions go both ways. “New Zealand is also under the radar here. Indonesians tend to come up with traditional icons such as cows and sheep, a natural envi-ronment and maybe kiwifruit, but not much more.”

Things are changing though, on both sides. Indonesia is our seventh biggest trading partner and busi-nesses like Fonterra and Education New Zealand, which have both made Indonesia a priority market, recognise the potential.

After an exodus of New Zealand companies following the crash in 1997, Acheson says a rebuild

is taking place and the ASEAN-Australia-New Zealand free trade agreement (AANZFTA), which Indonesia has almost completed ratification procedures for, will accelerate the trend.

With a GDP growth rate of over 6 per cent, Indonesia is on track to rank among the world’s top economies by 2050. Jakarta is the commercial heart, accounting for around 60 per cent of economic

activity, but with 10 Indonesian cities having more than 1 million people, it’s not the only place to focus.

And one of the best things about doing business, in or out of Jakarta, Acheson says, is the people. “They’re charming, friendly and cultured. Once you have built a relationship you can trust it. It becomes a friendship, not just a business engagement.”

Hi tech hurdlesColin Swainson from airport bag-gage handling systems firm BCS Group, has worked all over the world and also rates Indonesians highly as business partners.

He’s on the ground, helping BCS win a slice of the massive avia-tion redevelopment taking place to meet spiralling demand (Jakarta’s Soekarno-Hatta airport handled 44 million passengers last year, double the number it was built to accom-modate) and relieve congestion on a choked roading network.

Swainson says although the rewards are attractive, Indonesia is challenging for high tech com-panies.

“You get a head start if you are selling food and beverages because that’s what New Zealand’s known for. In a business like ours, you have to be super fit to succeed and it’s not something a small company could do. Margins are tight and establishment costs are high.”

He says language can be a bar-rier, especially when you’re talking technology, and so can navigating administrative and regulatory sys-tems. “The best approach is to have good agents or local partners who manage interaction with govern-ment departments.”

Another Kiwi enterprise eyeing rapid growth in Indonesia’s avia-tion sector is the Air New Zealand Aviation Institute, which has part-nered with five Kiwi flight training organisations to develop career training for new pilots.

The institute has already deliv-ered specialist training in different types of aircraft to Indonesia’s Lion Air but is eyeing much bigger con-tracts for full pilot training.

New Zealand’s strength, says

General Manager Jignasha Patel, is in providing top quality pro-grammes in an environment with plenty of air space and diverse ter-rain to build up experience.

“The challenge is that Indonesia is a very price-driven market. We have to work at getting organisa-tions to understand that there is a price/quality trade off. We’re up front about that. We say we’re going to be a bit more expensive but here are the benefits – you get a first class pilot who won’t need so much additional training down the track.”

What New Zealand must do, she says, is take a NZ Inc, approach.

“There is a raft of aviation train-ing operations in New Zealand [in addition to the five the Institute works with]. It takes just one to cut corners or for one student to go back with a negative comment and the whole industry is compro-mised.”

She says banding together also helps New Zealand compete with much bigger players such as Australia where a number of states offer incentives to win contracts with airlines.

“The opportunities are huge in Indonesia but it’s the same for everyone. We have to collaborate to get significant value out of it.”

Development goalsInfrastructure development, grow-ing demand for up-skilling of pro-fessionals and decentralisation of decision-making are other trends New Zealand businesses can capi-talise on.

Indonesia has big goals for its geothermal resources aiming to become the world’s largest pro-ducer in the next few years.

Crown research institute GNS Science has helped Indonesia assess its geothermal energy resource in the past but the big push is recent says Rob Johnston, General Manager for Business Development.

He says many contracts are being managed at a local govern-ment level and it is smaller agricul-tural towns and fishing villages that stand to gain the most.

“Some of these places use diesel

“The people are charming, friendly and cultured. Once you have built a relationship you can trust it. It becomes a friendship, not just a business engagement.”


IN ASIA

generators to supply electricity and they only run for a few hours each day. If they can get a small geothermal power station going they’ll be able to have refrigeration and get into productive industries which would be very good for the Indonesia economy.”

New Zealand expertise is sought after but, Johnston says, if the business involves significant time in Indonesia, suppli-ers may need to consider establishing an Indonesian registered company.

He says it can be risky for New Zealand organisations to sign contracts subject to Indonesian law, which is very different from ours, and some form of international arbitration is preferable.

Forming partnerships can be a safer way to go. GNS Science has a Memorandum of Understanding with Gadjah Mada University (UGM) in Yogyakarta through which New Zealand Aid is funding disas-ter risk management training. That may be extended to training government offi-cials in approving consents for geothermal projects.

Michele Daly, Social Science Team Leader for GNS Science, manages up-skilling of officials in the technical aspects of preparing for disasters such as identify-ing hazards and creating hazard maps.

“Through that relationship with UGM we are also connected to a network of other universities and, together with UGM, we train local university staff to train the local officials and build capacity that way.”

While “things can get lost in translation” and communication links are poor in more remote areas, she says local government issues and challenges are not dissimilar to those faced by smaller councils in New Zealand.

Agents and distributorsWhile having a local partner is often a pre-requisite for success, some Kiwi companies are doing very nicely using agents or dis-tributors. Manuka Health has grown sales of its natural health products in Indonesia by 20 per cent a year since 2006 using Jakarta based distributor Citra Bening Berseri (PT Citra). CEO Kerry Paul says the relationship began when he met one of PT Citra’s owners, who was completing an MBA at the University of Auckland, at a business function.

Paul says getting the company’s prod-ucts registered for sale took time, as did shifting product from New Zealand to Indonesia (via Singapore) in the early days. “But they’ve really improved their import-ing systems and it’s now quite straightfor-ward.”

For Manuka Health, Indonesian percep-tions of New Zealand’s pristine environ-ment are a winner.

“Our whole brand is built around New Zealand as a source of safe, clean and healthy products. The market hasn’t been an overnight sensation but if you take a long-term view the potential for growth is significant.” IN

NZTE is the government’s economic development agency. Its job is to lift the country’s economic performance by helping more New Zealand businesses to grow and compete in international markets. For more information about NZTE’s programmes and services see www.nzte.govt.nz

There are moves under way to make it easier to do business with Indonesia, NZTE Trade Commissioner Fiona Acheson says.

Direct flightsOne is encouraging Indonesian airline Garuda to resume direct flights between the two countries. Inviting senior Indonesian business executives, including Garuda’s CEO, to New Zealand to watch the final of the Rugby World Cup was part of the strategy.

“It’s a game changer when it happens,” Acheson says. “Our experience shows an air link boosts tourism, trade and education exchanges.”

Halal certificationGetting New Zealand halal certifiers back on the list

of those approved by the Indonesian halal authority is another target. Since local agencies fell off that list a couple of years ago, some Kiwi companies have been flying certifiers here from Indonesia, an expensive and time consuming process, Acheson says.

“MFAT [Ministry of Foreign Affairs and Trade] and MAF [Ministry of Agriculture and Forestry] have been working hard to secure an easier and more predictable solution for New Zealand exporters,” she says.

“We are one of the world’s most experienced halal exporters and, with Indonesia having the world’s largest Muslim population, there is growing potential for a wider range of New Zealand’s food and beverage products.”

In-market assistanceThere’s also plenty of help available in-market. NZTE has three business development managers in Indonesia and an Indonesian representative on its Southeast Asia Beachhead. In addition, Tim Green, NZTE’s General Manager International, says Indonesia has a resident, experienced group of expatriate New Zealanders who are keen to assist new exporters.

AANZFTA benefitsNZTE is also looking at whether it needs to increase resources to help businesses get the most out of Indonesia and it may run joint seminars with Australia, as happened earlier in Malaysia, to promote the benefits of the AANZFTA.

GAMe chAnGers

NZTE’s Fiona Acheson says New Zealand exporters have much to gain from the as yet untapped Indonesian market.

TOP TIPS FOR DOING BUSINESS IN INDONESIA

1 Get a good local partner.

2 Visit often – remote control won’t work.

3 do due diligence before you commit.

4 Sales cycles are long – think in two to three-year timeframes.

5 Pick the brains of Kiwis already established in the market.


IN ASIA

iF you’ve ever been in a completely empty airport, you’ll know just how eerie it is. It’s because they’re supposed to be bustling, full of comings and goings. When they’re not it’s stark.

We were at Lombok International Airport (Bandara Internasional Lombok), just a couple of months before it was completed. The builders and associated hangers-on were bemused we were so interested; their dogs roamed the site.

In 2008 Lombok was described by the New York Times as “perpetually arriving, yet has never quite arrived”. But when it does arrive, undoubtedly this is where it will turn up.

On the drive to Mataram, Lombok’s capital, our guide spends 15 minutes talk-ing lovingly of the new road we’re driving on and the development it offers the local community. This same route was described in the Jakarta Post as “like sailing over black silk”: “One of the finest stretches of road imaginable . . . twisting through harbours and bays, around breathless hairpin bends to the inlets below.” Obviously to them it’s more than just a road.

The infrastructure being developed here is fundamental to giving the community the view that they’ve arrived, and that soon tourists will too.

Tourism is in theory ideal for develop-ing countries. It’s consumed at the point of production thus benefitting surround-ing communities, it balances communities poor in material wealth but rich in culture, it creates a versatile labour market where flexible or seasonal work can be paired with farming or fishing, and it encourages the development of multiple-use infra-structure: roads, health-care facilities and so on.

By 2021, the World Economic Forum predicts the travel and tourism industry will account for 69 million more jobs than it did in 2011– almost 80 per cent of which will be in Asia, Latin America, the Middle East and Africa. Tourism is one of the larg-est employers in most countries, notable for its opportunities for young people and women.

But the industry is extremely vulnerable

to the thousand natural shocks the world is heir to: terrorism, financial crises, natural disasters, riots and pandemics.

This is what makes Lombok’s “perpetu-ally arriving” moniker so fitting – progress has stalled here previously due to the Asian Financial Crisis in 1997 and the Bali bomb-ings of 2002 and 2005.

Officials refer variously to Lombok as “the new Bali”, “Bali 30 years ago”, and “Bali’s sister island”, and they are actively seeking foreign investment to make it so, while avoiding the now-obvious construc-tion errors made during Bali’s emergence.

Only 40km separate Bali and Lombok, and the islands are of a similar size and density. Lombok is hailed as an oppor-tunity to overcome Bali’s mistakes – its clogged streets where tourist buses puff up roads that are too narrow and too con-gested, its patchy footpaths and its rivers clogged with plastic.

Lombok’s strategies focus on grow-ing the number of visitors from Asia, on eco tourism, and the hosting of meetings, conferences and exhibitions. For Lombok and the neighbouring surfer’s paradise of Sumbawa, the target is for one million visi-tors annually by 2012.

Katie Foley travelled to Indonesia with support from the Indonesian Ministry of Foreign Affairs and Ministry of Culture and Tourism.

A ROAd LESS TRAVELLEdThe infrastructure development necessary to bring the loud shirts

and big cameras of tourism to developing countries in theory allows

economies to eventually move up the value chain. KAtie Foley looks

at the tourism industry’s development on the Indonesian island of

Lombok, tipped as “the next Bali”.

comprehensive and currentinformation on the

14% of NZ businessaccounting for

80% of NZ economic output

start your FREE TRIAL at www.kompass.co.nz

find sales leads

research companies

produce targeted listsKa

tie F

oley


IN ASIA

i wAs lAst in JAKArtA in 1998 – not long after major riots and right in the middle of the Asian finan-cial crisis. The banks were in desperate trouble, busi-nesses were failing. Poverty, terrorism, corruption, political wrongs and rubbish were a visible part of every day life.

This was the perception I still had of Indonesia until my recent trip, where I spent six intensive days in Indonesia and Singapore talking to a number of successful Kiwi businesses about the challenges and opportunities of operating in South East Asia.

I’ve learnt many things, but I am particularly struck by two:

South East Asia offers a strong value proposition ➤➤

to New Zealand businesses – much untapped.

Our common view of Indonesia is 10 years old and ➤➤

out of date.What’s happened in those 10 years is a sustained

and very successful reform effort. It’s the third fast-est growing economy in the G20 and, according to the Economist will see 6–7 per cent growth for the next three to five years.

Indonesia’s international credit rating is now just one step below investment grade thanks to a sustained debt reduction effort. Private consumption is robust and growing, and the country’s very young population is getting wealthier. The nation is now a democracy and the political outlook is more stable.

The luxury brand malls are testament to the exist-ence of affluent consumer segments. There is a rapidly

Take another lookIndonesia is the third fastest growing economy in the G20. NZTE’s tiM Green says the business

opportunities are sizeable but New Zealanders’ views are “10 years old and out of date”.

Photo: Katie Foley


IN ASIA

growing and urbanising middle class keen for protein and consumer goods. There is substantial investment planned to upgrade infrastructure. In these respects the growth story is very similar to other large develop-ing markets including China.

There are opportunities for New Zealand companies to participate in engineering and construction, as well as the growth of the aviation and airport sector and the investment to be seen in geothermal power generation over the next several years. This is a sector in which New Zealand enjoys a big reputation in Indonesia (in fact I was told that “New Zealand is considered the Mecca for geothermal expertise”).

But, Indonesia is certainly not a market that can be viewed through rose-tinted glasses. Transparency and corruption are still factors, there are many regula-tory barriers and much of the existing infrastructure is either outdated or over-stretched.

The Indonesian Government is looking for foreign companies doing business there to contribute to the country’s economic development particularly through investment, but also knowledge transfer and capabil-ity building. And while I saw many modern and well-appointed new buildings and well-dressed shoppers, the wealth certainly isn’t shared by everyone.

It was described as a tough, different, difficult and complex place to do business – but one in which many businesses are succeeding and happy with the profits they’re making.

The slow IT infrastructure, for example, hasn’t pre-vented Indonesia gaining the second largest commu-nity of Facebook users in the world. ANZ Bank has a highly visible presence. Holcim Cement told me they’ve only invested in two countries over the last year – India and Indonesia.

The messages were clear from everyone I spoke to – to succeed you have to have a market presence, find-ing the right local partner is essential, and tenacity is a critical ingredient for success. However, a) if you can put those success factors in place, the profits will follow and b) there are a number of trusted advisers available to help navigate your way through the difficulties.

Overall South East Asia’s a region that’s geographi-cally close to New Zealand (relative to all other mar-kets bar Australia) and offers many of the high-growth characteristics we associate with China and India. It’s a region where New Zealand has several free trade agreements making it more cost-effective to access these markets including bilateral free trade agree-ments with Singapore, Malaysia and Thailand and a multilateral Australia ASEAN New Zealand Free Trade Agreement (AANZFTA).

So while tough, the region represents a significant opportunity for New Zealand, relatively close by. I was inspired – as usual – by the Kiwi businesses succeed-ing in the region, and at the same time I left wondering whether more could take advantage of what it offers.

Tim Green is NZTE’s General Manager, International, and leads their work in international markets.


IN ASIA

GinsenG hAs hAd a central place in Asian medicinal therapies for millennia, and right now it’s quietly flourishing in the King Country. Though it seems incongruous, these small plants nestled among several hectares of pines could well herald an innovative new export industry.

Maraeroa C Incorporation (MCI) aims to produce wild-simulated ginseng for the Chinese pharma-ceutical market, growing the prized root as a complementary crop

under the Pureora forest canopy. They have also developed their own tourism facility and hope to attract travellers interested in culturally enriched wilderness adventures.

MCI Chief Executive Glen Katu is getting used to wearing differ-ent hats when required. As we first speak, he muses on how New Zealand might increase its share of the 50 million Chinese people travelling internationally for their holidays – apparently only 130,000 or so currently make it here – but

switches effortlessly into describ-ing what makes a good ginseng root.

He is passionate about the gin-seng project and makes a good advertisement for the plant’s ener-gising properties as he enthusiasti-cally shows off examples of the first trials. Long fine roots indicate nat-ural growth and higher potency, he says, while farmed ginseng tends to have thicker roots due to the ferti-liser chemicals. Those with “good form” might resemble people.

ROOT REVIVAL All the way from Te Kuiti to China, cultural tourism

and an innovative ginseng crop are forging

connections for New Zealand’s Maraeroa C.

wordS BY dAwN tuFFerY

photoS BY AAroN SAMI


IN ASIA

So far, the ginseng crop looks promising. Mapping by Crown research institute Scion indicates the Pureora forest soil and climate is “spot on”. The name “Maraeroa” (meaning much hospitality) was initially chosen to reflect the hos-pitable nature of the area and its ability to provide sustenance, Katu says. And the project, still in trial stages, has significant potential to do just that for the incorporation’s thousand-plus shareholders. The MCI block makes up 5500 ha of land and is part of a wider cluster of land trusts.

despite its unassuming appear-ance, wild ginseng commands big prices in the Chinese export market – between NZ$1000 and NZ$4000 a kilogram for quality product if it’s naturally grown, or “wild-simu-lated”, like the MCI trials. However, it takes between six and 12 years to mature, is labour-intensive to grow and requires a complex synergy of growing factors.

The Ministry of Science and Innovation initially funded two projects to confirm the market feasibility of New Zealand wild-grown ginseng and how it could be managed, sold and promoted.

In 2006 MCI commenced the trials at Pureora, as part of a three-year Plant and Food Research programme, and followed this up with a planting at their own cost. Currently there are more than five hectares in the ground. This will mature in stages, with the first trial batch due in 2013.

Once the root is harvested and dried, processing is minimal. Dried ginseng in its natural form is where the value is, says Katu. “To retain the premium pricing, we have to show it’s wild.” Once the ginseng is clean and dry, most will simply be packed into a box and exported. Through KiwiSeng Ltd, MCI may also have the opportunity to access the lucrative giftbox market, where a single attractively packaged gin-seng root can be sold for up to NZ$200.

Early tests on MCI’s ginseng came up nil for chemicals and high for active ingredient. Thanks to the idyllic growing conditions, it also ticks another box – a natural inter-national marketing pitch. “Pureora”

will be the brand name, due to the area’s significant associations with healing. “Wild-simulated is natu-ral and that’s what the Chinese are going after in a big way,” Katu says. “They don’t want stuff with chemi-cals in it to make medicines.”

Accessing the Chinese market is easy enough, he says, but the trick is extracting the best price. MCI has been consulting lawyers about the logistics of setting up a company in China. While opening a business can be as straightforward as paying NZ$50 for an online store, a repu-table agent offers the advantage of connections.

FindinG out GinsenG is included in New Zealand’s Free Trade Agreement (FTA) with China was a bonus, Katu says. “The immediate benefit for New Zealand from the FTA is that the import tar-iffs will reduce over time so there is a competitive benefit from pricing of our products compared to coun-tries who don’t have that agree-ment.”

Katu believes that embracing food and health tourism here could offer a new dimension, with other New Zealand products such as manuka honey, gingko and ginseng also having significant appeal for overseas visitors.

Attracting more visitors is a dual passion for Katu, and tourism forms the other prong of MCI’s sustain-able development plan. They have established Pa Harakeke – an eco-cultural tourism facility offering activities such as guided tours and cycle trips in the Pureora region. Katu is also chairman of the New Zealand Māori Tourism Council, a role which complements both MCI projects, and on his many trips to China he’s been struck by the simi-larities between Māori and Chinese cultures. “We seem to share a simi-lar custom for things like hospital-ity, and have a strong empathy with each other.”

In September 2011, Katu trav-elled to the China (Guangdong) International Tourism Industry Expo in Guangzhou as part of a delegation to promote Maori cul-ture and products. Their contri-bution was well received, he says, particularly the performance by the Patea Maori Club. “The music

broke down any barriers and it was tremendous to see that interaction straight away.”

He hopes this could be a spring-board for more Chinese people to visit New Zealand. “The idea we took to Guangzhou was that New Zealand has an authentic indig-enous people with arts, medicine, history, and stories – all those things that go to make a compelling visitor experience. After seeing the reaction, we think there’s a bright future for Maori tourism and our economy overall.”

whAt coMes next for MCI? A dramatic increase in scale could be on the cards for the ginseng, pend-ing success in the trials. “If we are able to attract an investor, we could be planting 200 hectares as early as 2013.” More research projects also beckon – it’s been suggested that the ginseng leaf could also contain beneficial compounds – and har-vesting seeds for future planting is also an option.

Katu says he is hopeful the ginseng will take off, but “pretty mindful we’re only five years in”. “All our early predictions – pricing yield, disease – we’ve been able to manage really well, but there’s still uncertainly. Until we do it for nine years we’ll never know.”

The aim for Pa Harakeke is to publicise the facility and expand the scope of operations. Katu will also be kept busy with opportuni-ties through his Maori Tourism Council role. In late 2011, he delivered a keynote speech at the International Austronesian Conference in Taiwan, focusing on how Māori tourism operators can operate within environmental pro-tocols that align with Māori con-servation philosophy.

Alongside the conference, Katu seized the chance for market research on the Taiwanese ginseng industry, investigation into local tourism trends and a hard-earned nap on the plane. IN

“Wild-simulated is natural and that’s what the Chinese are going after in a big way. They don’t want stuff with chemicals in it to make medicines.”

Maraeroa C chief executive Glen Katu says ginseng roots that resemble people are considered good form.

nz$4000per kilo for “wild-simulated” ginseng root of the highest quality.


David Catty knows the power of

trade and has the stories to prove

it. He was in China in the 1970s,

dealing with Government Trading

Corporations, and is the outgoing

executive director of the New

Zealand China Trade Association.

AS toLd to GreG BrucephotoGrAph BY ISAAc de reuS

On my first trip to China in 1986 we had a long three-day negotiation about the price of pulp. They very skilfully held off actually agreeing. They sort of agreed tentatively, subject to what the boss said. By that stage Madam Li, who was the boss, was not in the negotiating team. We had the final ban-quet before we left and the banquet took place – as it did every time I went there – in a restaurant called The Sick Duck. It was a Beijing duck restaurant next to the hospi-tal.

If you speak to anybody about doing busi-ness in China, the common characteristic is that you have to be able to hold your liquor. You were tested on that. The toasts were in Maotai, the Chinese local spirit, a sort of rice wine, which was very strong and godawful. It tasted like bad medicine. We got to the point where we had a couple of toasts, then Madam Li, who was presiding, said to me: “If you can just drop another $5 off your price, we’ve got a deal.” By that stage, everyone was being friends. I subse-quently found out they weren’t drinking the Maotai. They were actually drinking water, with a colour like schnapps. Fortunately, in those days I was younger and able to toast without too much bad effect. We were able to do a deal somewhere in between.

We got a lot of things wrong in the early days. One meeting in China still embarrasses me to this day. Unlike with the people I had been dealing with previously, which were a series of relationships building up, this was a cold call in effect.

He asked me: “What are you here for?”“I want to sell you some linerboard.”“But you used to sell us linerboard,

then you pulled out of the market” which I remembered and knew, but I had to say: “Oh we’re serious this time.”

I wasn’t prepared for the meeting and he quite rightly really tore me to strips – in a

polite way, because the Chinese are very polite. Face is an important thing. He basi-cally said: “No, I’m not going to buy your linerboard because I don’t think you’re serious about it.”

He was quite right. And I couldn’t say with a straight face: “If we start a relation-ship with you to buy linerboard, we will stay in the market,” because I knew our company regarded it as a spot sale and that’s not how you deal with the Chinese.

Vic Percival was really the New Zealand pioneer in China trade. We were with him at the 100th Canton Fair in 2006 [one of the world’s biggest trade fairs] when he was honoured as one of the 30 surviv-ing foreigners from the first Canton fair in 1957. The Chinese Premier, Wen Jiabao, was there and the governor of Guangzhou, and all these dignitaries were on the stage. And there’s Vic. He, as it turned out, was the only foreigner to speak, which was a huge honour. The guests who were being honoured were told not to make contact with the dignitaries. They would go and get their medals, shake hands and that would be it.

So Vic made his speech. Vic being Vic didn’t stick to the script, which rather upset the interpreters. At the time, Air New Zealand was launching its direct service into Shanghai, so he departed from the approved script to give a big plug to Air New Zealand. We were just gobsmacked. And not only were there 5000 there at the ceremony, with the Premier and everything, but it was beamed live all over China, so hundreds of millions of viewers were watching Vic make his speech. And although they had been told not to make contact, Premier Wen went up to Vic and just embraced him: “Vic, my old friend.”

If you have good trade you avoid wars. People talk to each other. It creates the forum where you’re communicating with other cultures, other people. As Vic Percival proved, you can go up to China, which was basically our enemy – the US was telling the New Zealand government “don’t go near the place” – but Vic went up there and created relationships, which have lasted to this day.

Some of the places I went, New Zealand wasn’t on the friendliest terms with, but you felt you could build up a relationship. It was a business relationship essentially, but it had personal elements to it that tran-scended trade. IN


IN ASIA


IN ASIA

From the desk of . . .DAviD CAtty



IN ASIA

the roAd FroM nAnJinG to Ma’anshan is dreadful. In China, motorways connect all the major cities, but the roads into the hinter-land are still little more than coun-try highways, poorly maintained and clogged with traffic. At any hour of the day or night the road is a tangle of trucks and cars dodging potholes and competing for space with motorbikes piled high with produce.

This is the road five of us travelled when we headed to Ma’anshan, a small but heavily industrialised city of 1.4 million people in the rural province of Anhui. Ma’anshan is home to Ma Gang Steel, the sev-enth largest steel-making enter-prise in China, as well as the largest ice-cream factory in Asia, run by Chinese dairy company Mengniu.

The story of our trip down this road is an illustration of how diffi-cult it is for Westerners and Chinese alike to navigate the shift between the mixed public and private sector development model that emerged in the 1980s and the newer, west-ernised private sector model now prevalent in larger cities such as Shanghai and Shenzhen.

This shift – generational as much as cultural, social or economic – is best seen in the fast developing third and fourth tier cities of central China. Cities such as Ma’anshan.

I had come to this part of China less interested in industry, and more in the potential demand for urban planning and design serv-ices. New Zealand’s reputation for environmentally sensitive urban design, boosted within China by the publicity surrounding New Zealand’s pavilion at the Shanghai 2010 World Expo, was my entry ticket.

We quickly discovered that Ma’anshan city officials were hell-bent on reinventing their city as a commuter satellite of Nanjing. Nanjing South, 40 km away, is an important stop on the new high-speed Beijing-Shanghai railway. The fastest trains (travelling at 300 km per hour) connect Nanjing to Shanghai in an hour, and to Beijing in under four hours.

Ma’anshan officials had been

doing their arithmetic. You could now work or run your business in Shanghai or Beijing from rural Anhui.

In our first public meeting with local dignatories and media, the Mayor of Ma’anshan emphasised his administration’s focus on envi-ronmental protection and urban environment. Plans for several new city districts had been approved and earthworks had started.

In later meetings with offi-cials, we learnt that an Australian design firm had already been paid a ¥40 million (NZ$8 million) con-cept design fee for Xiushan New District. Would a New Zealand firm or consortium be interested in designing an eco-friendly residen-tial area of approximately 1000 mu (2km2) as part of this project?

So far, so good. But this orderly account masks the reality of doing business outside of the main centres. Despite their business-like exterior, dealing with

the local bureaucracy was every bit opaque as it might have been in Beijing 20 years ago.

To begin with, there’s baijiu – the infamous white liquor served at every Chinese banquet. Our first banquet in Ma’anshan, hosted by the mayor and party secretary, started with sips, then glasses, then jugs of the stuff. With everyone lining up to ”gan bei” the distin-guished guest (me), our whole team had to swing into action, picking off groups and toasting them before they could inflict themselves on me one by one.

And that was lunch. Media conference and meetings

in the afternoon, then the same routine was repeated for dinner. Our host in the evening was the leader of the Xiushan New District project – and a prodigious drinker. Obviously the fact that I hadn’t fallen over at lunch had proven my

worth, and by the end of dinner we were fast friends.

That’s when the opportunity started to unravel. It wasn’t an offer, but an offer to tender. We couldn’t pin down a timetable for the bid. A committee was going to have to make the final decision on who would deliver the project. We would have to follow up later from Shanghai. Despite the fact that two of our party were Chinese nation-als and everyone except me spoke fluent Mandarin Chinese, we were missing the mark. I don’t think it was just us. We were talking past each other.

Our government minders were unfailingly polite. As we left, one produced a piece of calligraphy for me, displaying the characters ”qi kai de sheng” (unfurl the flag), a symbol of victory on the battlefield. Nothing could be further from the truth.

We had been given conducted tours of the steelworks, the ice-cream factory, a meat processing plant and a dairy farm (a collabora-tive venture between Mengnui and Denmark). We had been toasted at banquets, lauded in the local press, treated like long-lost friends. Yet we were no closer to qualifying the opportunity than we were before we arrived.

I continue to believe that third and fourth tier cities offer sig-nificant chances for New Zealand companies to buy and sell prod-ucts, build business partnerships and secure investment. There are fewer Westerners competing for attention, and more local Chinese willing to engage. There are rising incomes, and rising expectations to match. But be warned – all parties are on a steep learning curve.

I’m told there is a memorial to the famous Chinese poet Li Bai just west of Ma’anshan. Li Bai is said to have drowned at Ma’anshan after attempting to embrace a reflection of the moon.

I know just how he feels.

Chris Lipscombe is an economic development manager and international business adviser.

Embracing the moon’s reflection

As Beijing and

Shanghai become

more globally

competitive,

smaller cities

away from the

prosperous

coastal areas are

gaining attention.

But never mind

the competition,

chris

lipscoMbe

writes, watch

out for the white

liquor.

“The fact that I hadn’t fallen over at lunch had proven my worth.”

If you’re interested in China, but not sure where to start, take a look at

how Hong Kong can help. Thousands of foreign companies –

large and small – have grown their China business successfully from Hong Kong.

As a Government agency, with private sector expertise, InvestHK assists

overseas businesses to set up and expand in Hong Kong.

Our services are free, confidential and tailored to your needs.

Visit our website or contact us today

www.investhk.gov.hk

Sydney office: Cameron Boardman, Head of Australia & New ZealandTel: (61) 2 9286 2358 Email: [email protected]

Head office: 25/F, Fairmont House, 8 Cotton Tree Drive, Central, Hong KongTel: (852) 3107 1000 Email: [email protected]

C

M

Y

CM

MY

CY

CMY

K

Asia Today Int'l_Feb12.ai 1 12年2月14日下午6:00

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HSB1228 InBusiness FP v2.indd 1 23/02/12 3:36 PM

IN-Business March/April 2012

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