Agribusiness: Government agencies stellar job keeps agri exports flowing (NZ Herald)

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There is a massive opportunity in front of us to capture premiums. Without doubt, our brand story is at an all-time high at the moment because of what we’ve done with Covid.

NZTE chief executive Peter Chrisp says the impact of New Zealand’s Covid-19 lockdown had immediate consequences for its customers — New Zealand exporters.

“I’ve always worked hard. I’ve never worked this hard,” Chrisp said at an interview at NZTE’s Wellington head office.

Even prior to the coronavirus pandemic hitting New Zealand’s shores, the agency was heavily involved providing support to its customers exporting to the China market.

“China is such a big market for New Zealand with many of our customers,” said Chrisp. “They needed to know what was going on and were desperate for insights. We had 65 people in China – we had to get them working from home. They were keen to contribute and lean in to support customers.

“So that was the beginning of it, and then it just unfolded, into Italy and South Korea.”

When New Zealand entered the alert level four lockdown phase, one of the immediate issues Chrisp’s team needed to face was how to support airfreight. With passenger traffic severely limited, there wasn’t a functioning airfreight market, which many of our high-value exports — including seafood and honey — depend on.

NZTE co-ordinated around 200 charter flights to key export markets, including Shanghai, Los Angeles, Tokyo, Singapore and Australia: “We got good backing from the ministers and the Ministry of Transport. We underwrote the capacity of the plane — the last 20 per cent of the plane.”

He said if a chartered plane wasn’t full it wouldn’t leave. The underwrite didn’t have to be used very often, but it was an important mechanism to provide certainty to exporters that their goods would make it to market.

In the medium term, a new initiative with funding allocated from the May budget will focus on supply chains, building firm capability in freight and logistics and helping to build capability within export firms.

Another of the initial challenges for exporters was ensuring sufficient cashflow for business continuity. NZTE formed partnerships with Deloitte, PwC and KPMG to provide a business continuity service for around 500 of its customers.

“From that, they got a bit of a plan about how to respond immediately, how to get their cash under control and what to do with their working capital and inventory,” Chrisp explained.

He said that while many exporters might be dealing with the current environment, they are starting to ask questions about the sales funnel and how to fill it long-term.

“I’ve been talking to some specialist manufacturers who would normally sell mostly through attending conferences, relationships with procurement mangers, and foot traffic. They are now wondering how they reach their customers.”

Many are turning to digital – which Chrisp said is one of the biggest things NZTE is engaged with at the moment. This will include scaling up e-commerce capability to provide digital commerce content, tools and advice to more exporters.

Keeping track of its current suite of clients, NZTE has developed a heat map that runs a ruler over companies and considers which companies that are thriving, surviving, or struggling.

Chrisp said this gave the agency a good feeling for where the hotspots were, and at the start of the crisis it was the export-dependant specialist manufacturing firms that he was most concerned about.

He said that though a lot of the customers of specialised manufacturing firms were considered essential overseas, they weren’t here — which had made things difficult.

The heat map is now showing around 32 per cent of companies thriving, 60 per cent surviving and about 8 per cent struggling.

“The thriving companies are across categories like food, manuka honey, nutraceuticals. But even in tech you’ve got companies involved with education software or gaming software that are doing well,” though Chrisp noted, you’ve also got people struggling in those categories as well. The Ministry of Foreign Affairs and Trade (MFAT) has developed a trade recovery strategy to address that. MFAT says the next phase of New Zealand’s response is recalibrating New Zealand’s trade policy for a new international environment.

The strategy, launched by trade and export growth minister David Parker, has three pillars: retooling support for exporters, reinvigorating international trade architecture, and refreshing key trade relationships.

NZTE will play a key role in this — in particular, Chrisp said it will be the custodian of the retooling pillar.

“The Government knew it couldn’t just rebuild New Zealand with a domestic fiscal spend. You need an international export recovery leg — and I think you need an investment recovery leg as well.”

Some of the $216 million funding boost it received through the Budget will be used to significantly increase the number of exporters that receive intensive support from NZTE. The agency says that collectively these exporters directly employ over 200,000 people. About 75 per cent of these firms are expected to be SMEs with 50 or fewer employees.

“We will have more customer managers that can deal with more New Zealand companies and services — and more boots on the ground in premium international markets,” Chrisp said.

Business development managers in key offshore markets will be particularly important for exporters while international travel remains restricted. It is envisaged that this team will be able to carry out additional functions for companies in-market – including meeting customers, vetting new employees, and selecting distributors.

Another portion of the funding has been allocated to expand the International Growth Fund, which helps reconnect companies with international markets and supply chain partners, as well as explore new opportunities.

Chrisp said he is keen to uphold the sense of the opportunity in front of New Zealand — particularly in the food and beverage sector.

“We’ve had food and beverage manufacturers in New Zealand that responded very well during Covid.

“The opportunity to be the most keeps agri exports flowing sustainable food producer on the planet is quite a niche — quite an exciting niche.”

One area that Covid-19 might help New Zealand is by spurring the acceleration of the shift from volume to value. Chrisp said food and beverage is at the sharp end of that.

“There is a massive opportunity in front of us to capture premiums. Without doubt, our brand story is at an all-time high at the moment because of what we’ve done with Covid. There is an opportunity to double-down on that brand story and those sustainability settings.”

“The health competitor advantage — growing food and beverage out of this healthy country and the intersection of innovation with our food and beverage story and our agritech sector, there’s some really great things that we can accelerate and advance around this.”

But, said Chrisp, a key challenge for New Zealand will be keeping the New Zealand brand alive in international markets over the next 12 months without international travel.

NZTE is working on strengthening New Zealand’s brand in priority markets by maintaining, promoting and broadening New Zealand’s brand appeal, particularly while the tourism sector is recovering.

Chrisp said it will re-emphasise New Zealand’s reputation for safety, trust, resilience, ingenuity, sustainability and high-value goods and services using the highly successful New Zealand Story strategy.

“When you think about who is probably likely to carry the New Zealand brand story, it is probably food and beverage and tech, because there are such good stories wrapped around those products and services.

“If our food comes out of a Covid-free country, it’s good for human health and it’s got a story wrapped around it about the quality of the country — that’s a particularly good story that will resonate in premium markets.”

Chrisp said it comes back to the underpinning values of kaitiaki — our role as guardians of people, place and planet and protecting what is precious over generations. We think that Covid has demonstrated that story.

“Our high integrity, high transparency, our very low corruption and our ingenuity — they are underpinning values that we think will resonate well on the international stage.”

Agribusiness: Covid impact felt in January in agribusiness (NZ Herald)

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Ministry of Primary Industries chief executive Ray Smith says the impact of the Covid-19 crisis started early for MPI “as an agency”.

Smith says in late January, MPI started to observe the impact. Their biosecurity workforce — around 300 people at air passenger terminals — saw about 20,000 people passing through daily.

“The very first issue for us became the safety of our staff with the number of people coming to New Zealand,” he recalls. “At that point in time the concern was China. We acted early to make sure our staff had protective equipment. We were one of the first companies to give our staff PPE (personal protective equipment) and Perspex screens at the airport.

“While we had a few people that had Covid, none of them picked it up through the course of undertaking their work.”

By early February, MPI was countering emerging issues in the forestry sector with too many logs sitting on wharves in China. Similarly for rock lobster where 98 per cent of NZ’s crayfish is exported to China.

“Those were huge issues. But it was when we headed into lockdown that things really started to intensify.”

Following the lockdown announcement, MPI pulled together a conference call with people right across the primary sector. Smith says it was on that call that MPI set a standard for how it would operate through the crisis.

“People were incredibly grateful to be given the opportunity to continue to operate as essential services — there was a great fear at the time that many more things would be closed down.

“We were very clear about the gravity of the situation we were facing. But we had the potential to manage this well and show what could be done.”

Over the course of the following few weeks, MPI officials visited about 4000 premises. Smith says the agency set some high standards, and it was very challenging for some reasons — those in big processing areas like meat plants, dairy companies, horticultural pack houses — where there were large volumes of people working together. Enforcing those rules had a big impact on their productivity and he says MPI was aware of that. “But they adopted protocols, enforced them, and were actually grateful to have someone come out and verify from MPI they were adhering to good practice. We wouldn’t let each other down. It was a real test of positive relationships and working together to achieve a good outcome for New Zealanders.”

Says Smith: “It wasn’t easy in all areas. We did have some people in a couple of meat plants that had Covid, and in the dairy factory — but because of the protocols they never spread the disease, and it didn’t result in any closures. That level of cooperation, and the way we rallied together to get it right for New Zealand shone through and is something we can all be very proud of.”

The Herald put a number of questions to Smith:

Herald: How did you manage early on with your people in market?

Over February and March, we were bringing our people from China and Japan and other countries home. Our deputy director general for China relations — Tim Knox — went the other way. We felt that market was so important that we had our most senior person there throughout. He is still over there, and we have more MPI staff over in the next few weeks. We’ll back to our full complement by August. That has been an important priority for us — to have our people back in market.

Herald: Was there anything that really surprised you as you got further into the crisis?

The level of interdependence. We are managing a biological system, and it works on a season and pattern. You can’t turn off things for four weeks and just go back to normal.

Animals have to be able to reared, farmed, go into works and sold — or else you end up with a backlog somewhere. All of these things are heavily interdependent.

And there is a challenge for us around some of our systems when these crises hit. It was made worse for us because there was a drought as well as Covid. At one point there were worries about feed coming out of Malaysia — but all of these issues resolved themselves. My colleagues across government were critically important to making sure there was good flow at the border.

The forestry industry was largely closed. But we didn’t close it all down. The plant in Kawerau that produces chlorine, which is needed for our drinking water remained open. We have to have packaging materials so that our produce could be shipped offshore; paper produced for newsprint. We made an early call that we needed to allow people that work in nurseries to go and look after the plants. We couldn’t just close everything down — if those people stayed home, we would have lost more than one season of product.

Herald: What about the NZ brand story and implications for how the sector dealt with Covid-19?

The great thing going forward for New Zealand is how it has dealt with Covid has reinforced the confidence for NZ that you can trust the products that come out of it.

The e-certification of products into China emerged through this period as well, and became very important since documents were not able to flow as easily. There is a real opportunity to change things, because people have become more used to doing things digitally. I suspect in some ways our productivity was enhanced!

Herald: Are there any lessons for the future from dealing with the Covid-19 crisis?

We couldn’t have achieved what we did without having relationships, trust and a sense that we are all in this together. What I was really worried about was that New Zealand was making a huge sacrifice by keeping most people at home. When we were sending people to work — particularly in meat plants and packhouses with large numbers of people — we could not become a vector of disease through poor practice. But we proved we could do it.

Herald: What are the big challenges you are facing now?

We have a great primary sector, but one of the big challenges we will have is attracting more New Zealanders to come into the workforce as part of the recovery effort. We will have a campaign over the next few weeks to encourage Kiwis to come and work right across the primary sector.

Also maintaining our presence in market, and the inevitable levels of protectionism that might creep in as people see jobs disappear in other economies. And in getting that message out that New Zealand is here, we have great products, and you can trust us.

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World War II acted as a catalyst for town planning.

One of the solutions to the overcrowded, polluted and bombed areas of Britain was to get people out and into new town developments.

The “new towns” were conceived by the post-war Labour government, and built between the 1940s and 1960s with the New Towns Act of 1946 giving the Government the power to designate areas of land for new town development.

Now home to 2.7 million people, they are situated 30 to 70 kilometres from big cities and close to motorways and railway lines. Most are the very definition of a concrete jungle — monolithic brutalist architecture with myriad concrete underpasses and walkways.

The first new town developments — such as Harlow and Stevenage — only allowed for social housing, which limited the diversity of residents. Milton Keynes was in the third and last wave of new town developments and included semi-detached housing that was offered for private sale.

It is the largest of the new towns, and is considered one of the most successful — it had the fastest-growing economy outside London between 1997 and 2011.

The new towns were guided by several fundamental planning principles, including economic self-containment with a drive to attract industry and employment, and the creation of socially mixed communities.

One of the important lessons from the developments is the links to bigger cities that foster growth.

Key to Milton Keynes’ success is its links to central London — the trip takes under an hour with an average of 224 trains making the journey on a weekday.

But some 70 years on, the legacy of new towns is mixed.

Though they had been economically successful and are recognised to have made a significant improvement in the housing shortage, some are now experiencing major problems.

The new town master plans resulted in low-density housing with large amounts of open space and residential areas segregated from jobs, shopping and businesses services.

Low-density infrastructure is expensive to maintain, and has created a car dependency which is now not considered sustainable.

Since infrastructure within the new towns was constructed at the same time, it is now ageing at the same rate.

Similarly, the rapidly built housing developments are approaching the end of their design lives and give the towns a tired look.

Some local authorities do not have the capacity to resolve the problems and have had difficulty agreeing on the detail.

Today’s housing shortage makes new developments in Auckland an attractive option.

Taking lessons — good and bad — from last century’s new towns will ensure we create residential areas that Aucklanders will want to live in now, and in the future.

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Technology is playing a key role in changing the whole energy sector and enabling sustainability, says Vector chief.

Meeting the needs of current generations without compromising the ability of future generations to meet their needs, is about striking the right balance between the environment, society and the economy.

New Zealand’s largest distributor of electricity and gas, Vector, says it is leading the transformation to create a new energy future.

“Meeting the needs of current generations without compromising the ability of future generations to meet their needs, is about striking the right balance between the environment, society and the economy,” it says.

Vector chief executive Simon Mackenzie says that technology is playing a key role in changing the whole energy sector and enabling sustainability.

“Primarily this is through the decarbonisation of the energy space, but also very much through changing the whole consumer interaction in an industry that has been very low on the consumer interface,” he says.

He explains that the old model was always about generation being built and transmitted into cities or regions, with consumers turning on the light with no choice.

“When you think about that from an economic perspective, that was all very much a market-orientated supply side, but with an elastic demand side,” he says.

“What we see now is a massive change to technology, primarily through digital platforms, and also new solutions — whether they are solar, battery, microgrids or digital environments where people can shift energy.”

He says these are all emerging and putting shape into the demand side of the energy sector.

New Zealand’s energy production is different to many other countries in that it uses mainly renewable energy sources including hydropower, geothermal and wind energy. But it is the large fossil fuel generators that are investing massive amounts into emissions-free production to decarbonise their energy production systems.

This is changing the cost curves of these technologies, and is encouraging a shift to a decentralised model. For example, as residents put solar panels on their private property, they are beginning to ask: “I’ve got solar, I’ve got a battery and I’ve got an electric vehicle — how should I use my energy to the best effect?”

And it is here, Mackenzie says, where digital platforms come in — such as Vector’s investment in Internet of Energy (IoE) company mPrest.

He says mPrest’s technology is the most comprehensive monitoring, analytical and control system available anywhere in the world.

“You can think of it as a system of systems. The software sits over customer, market, distributed energy resources and network systems managing performance in real-time.

“Through self-learning, it is able to assess and predict multiple factors including loads, market dynamics, storage, customer demand and capacity. This greatly enhances the resilience, security and efficiency of customer solutions and our network.”

Mackenzie says if you can understand customers’ behaviour and shift them to flatten consumption by 20-30 per cent, then “that’s a massive change in the energy system”.

“Some of these modern electric vehicles (EVs) are turning up in the driveway with in-car battery capacities that are equivalent to seven houses’ worth of demand,” he says.

“This means to charge them quickly, you can have five to seven times the consumption of a house being needed. How do you manage that from an overall efficiency? If you can digitally control when the EV is charged, it is much better than creating new peaks that have to be managed — the costs are significant”.

As an example, EV chargers can help to facilitate energy flow both to and from an EV, allowing it to act as a rechargeable energy source. When connected at home or work, charge from the EV can be used as a power boost for the building, as a cheaper power source when electricity prices are at their peak — and will eventually be able to power homes during power outages.

“Many homes could be powered by their EVs at peak time. Similarly, EVs will be releasing energy back to the grid to support grid demand while taking advantage of a higher peak energy buyback rate,” says Mackenzie. However, he warns that one of the big challenges from a New Zealand perspective in the movement toward sustainability is a risk of complacency.

“We are getting asked questions about our sustainability position and our carbon reporting and we won’t get capital to New Zealand if we are not completely over what the trends are globally and financially.”

He says that just because we are small, at the bottom of the world, and perceived as clean and green, we must not think we are immune from these trends.

“We still have to raise capital from offshore and we need to be able to address questions about our sustainability position and carbon reporting.”

When Vector issued capital bonds, Mackenzie was asked a lot about what Vector is doing in decarbonisation.

“On the capital bond roadshow in New Zealand, some of the brokers were asking the question.

Offshore agencies are also asking about it … it is becoming much more prevalent.”

He says if we are complacent, we will be economically cast adrift.

“We won’t get capital if we aren’t completely over what the trends are globally and financially. But if we act, we can lead the way and create growth opportunities.”

Mackenzie sees this as an opportunity for Vector, because the company can adapt quickly and deploy new technologies.

He has seen rapid advances and focus in this space from global technology players that are developing new digital solutions for the energy sector.

“Vector has great international partnerships, so we see this as a way in which we can demonstrate how a market or a business can respond to these challenges and continue to learn,” he says.

This is an opportunity because Vector’s partners are keen to work with New Zealand to test out new innovation — “almost like a Petri dish”, which Mackenzie says will also provide export and other growth opportunities.

He adds that those who don’t show absolute concrete initiatives and actions will be left in an ever-increasingly difficult situation as social, regulatory and political pressure is applied.

We already hear of flight-shaming, which is encouraging people to shun air travel for the sake of the planet. Mackenzie has no doubt there will be energy shaming at some stage as well.

“Directors and business leaders need to be thinking of their carbon risk and appreciate that carbon is the new tobacco. Pressure will mount on them — including potential legal claims — if they can’t show action.”

This view is shared by the governor of the Bank of England Mark Carney, who earlier this month said companies and industries that are not moving towards zero-carbon emissions will be punished by investors and go bankrupt.

He said it was possible the global transition needed to tackle the climate crisis could result in an abrupt financial collapse, and the longer action to reverse emissions was delayed, the more the risk of a collapse would grow.

But he noted that great fortunes could be made by those working to end greenhouse gas emissions.

Carney told the Guardian that disclosure by companies of the risks posed by climate change to their business was key to a smooth transition to a zero-carbon world as it enabled investors to back winners.

“There will be industries, sectors and firms that do very well during this process because they will be part of the solution,” he said. “But there will also be ones that lag behind and will be punished.”

Sustainable Finance: No such thing as waste (NZ Herald)

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Infrastructure: Can Auckland be a major hub?

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NZ could be a connector of China and Latin America, but it’s not without its challenges, writes Tim McCready

Developments in air travel are making longer non-stop flights possible and commercially viable. Currently, the longest distance flight is Singapore Airline’s 15,300km between Newark New Jersey and Singapore — not quite reaching the distance to fly direct to South America from China.

The Herald’s aviation editor, Grant Bradley, says new aircraft technology could allow load restricted non-stop flights from Southeast Asia to South America — but those departing from China must still stop along the way.

“By stopping over in New Zealand (or Australia), airlines do get the opportunity to tap into more passenger and freight markets,” he says.

“But in saying that, Auckland Airport’s aim of being something of a mini-hub for Southeast Asia — South America flights could be some way off too; the demand isn’t there yet.

“And worryingly for Auckland, Latam airlines will overfly the city with some of its flights from Sydney to Santiago from the end of the year, instead of calling here.”

The Building the Southern Link conference, held in Auckland earlier this year, sought to leverage the opportunity, suggesting that New Zealand’s place in the world as a major and natural connection between China and South America is an idea whose time has come. It brought together more than 200 international experts and key stakeholders, to discuss the opportunity, and develop recommendations to move forward.

“New Zealand is either first cab off the rank, or the last,” former trade minister Tim Groser told attendees.

He says that for a small country, you must have the wherewithal to not wait for good company, but to get ahead of the queue and move swiftly. This is a central lesson if you survey the history of New Zealand’s relationship with China in particular. China attributes “five firsts” to New Zealand:

  1. In 1997, New Zealand became the first country to agree to China’s accession to the WTO by concluding the bilateral negotiations component of that process.
  2. New Zealand was the first country to recognise China as a market economy in 2004.
  3. New Zealand was the first developed country to commence free trade agreement negotiations with China. In November 2004, New Zealand and China launched free trade agreement negotiations.
  4. In April 2008, New Zealand became the first country to successfully conclude free trade agreement negotiations with China.
  5. In November 2016, New Zealand and China jointly announced the launch of negotiations to upgrade its bilateral free trade agreement, a first for a developed country with China.

Groser says New Zealand has been an outlier in that respect. “Traditionally foreign ministries look for good company — political safety,” he says. “The tendency is to join queues, not to form them. If we’ve had some success, it’s because we’ve taken well calculated risks — because if we don’t, we end up at the back of the queue.”

Trade and Export Growth Minister David Parker says New Zealand’s geographic location — which was once considered a disadvantage — was now a development opportunity. He says the idea of the Southern Link is one that the Government is behind — it fits with their objective of diversifying our economic linkages further.

“What do we need this southern hub to do?

“At the simplest level, the hub should facilitate seamless and convenient exchange of goods and travel for people between the eastern and western sides of the Pacific Ocean,” he said.

“In this sense, New Zealand offers a clear alternative to crowded northern hemisphere airports.”

At the conference, Chinese Ambassador to New Zealand Wu Xi said: “The key features of the Belt and Road Initiative are connectivity, openness and inclusiveness. In many ways, it is like a modern version of the ancient Silk Road.”

She said it has created new energy and momentum for global economic growth, and a framework for ideas like the Southern Link to take shape.

Groser agreed — saying the Belt and Road Initiative, first described in 2013 by Chinese President Xi Jinping (and at that time known as One Belt One Road), is a “mother of a plan — you don’t get bigger vision than BRI”.

New Zealand is a small, sophisticated country — and well organised. The conclusion of working groups at the conference agreed that the potential exists to make the Southern Link a reality, but there are issues that will need to be addressed.

These include political complications, transit visas, air services, customs and biosecurity regulations, trade facilitation and border policies.

Many of these are a lot more complex than they might appear. Stephen Jacobi, executive director of the New Zealand China Council, told the conference that the Southern Link must be a partnership between government and business.

He says we need to convince government that the changes to public policy and regulation are worth making, “because the prize — in terms of increased trade, travel and tourism — is high”.

Groser wrapped up the conference by throwing down a challenge:

“A plan not backed by a vision is a nightmare. But a vision without a plan is hallucination,” he said.

“We have a big idea. I think it’s on the move — and I think we should seize the time.”