Q&A: Steven Joyce on Lochinver, Silver Fern Farms

The proposed sale of Lochinver Station near Taupo to a Chinese investor was part of a contentious debate over foreign investment at the last election a year ago today, and it’s taken until this week for the Government to make its final call on the deal. It’s been vetoed, the first big deal to be blocked since 2008. TVNZ’S Corin Dann caught up with Economic Development Minister Steven Joyce before he flew out on a trade mission to China. Corin Dann asked if Steven Joyce had some explaining to do to the Chinese.

STEVEN JOYCE: But, actually, we have a pretty good relationship, and all sorts of issues have popped up over the years. This isn’t a big one. This is just a transaction that won’t be going through.

CORIN DANN: But it is one in which the process took 14 months. And I’ve certainly spoken with Gary Romano, for example, involved with Shanghai Pengxin. Very frustrated about the time this has taken. Doesn’t that send a pretty damaging message to investors that, you know, they come in to buy something, it takes 14 months, the Overseas Investment Office approves it, and then a government changes the rules and pulls the rug out?

STEVEN JOYCE: Oh, a couple of things. Firstly, in terms of the time, we are aware that some of the applications have taken a little bit too long. I’m not necessarily saying this one, because I’ll come back to that in a minute. So we are doing some work on speeding it up – more resources for the office and so on, which is being talked about. In this particular transaction, it was quite complex, I understand, because the ownership of the purchaser and the ways— which companies were involved is actually quite a complex arrangement, and there was quite a lot of requests for information going back to the purchaser as well. So I can understand Gary’s frustration, but it’s also a two-way street. And as I understand it, there was some extra information required that took a bit of time to turn up. More broadly, I think we would like to get the process through quickly and get more to yes and no on a more rapid basis for all transactions, but we can’t do it for all of them because some of them are more complex, but we are looking, as I said, at ways we can do that.

CORIN DANN: Would you, given your position, your unique position of sort of, I guess, waving the flag for New Zealand, trying to attract investment, did you want this deal to go through?

STEVEN JOYCE: No, I just want the deals to be assessed against the rules and that it’s a straightforward process that people understand. I actually think overall it is. And, look, these guys that didn’t get this one through, they will be disappointed, there’s no doubt about that, but, actually, a lot do get through, and if you’re going to have an investment test around sensitive land, then you aren’t going to get them all through.

CORIN DANN: But, I mean, coming back to— you’ve talked about trying to build up a pipeline of foreign investment, yet Mark Franklin, the CEO of Stevenson Group, said it quite well in his statement, this creates uncertainty – economic ramifications for New Zealand. I mean, how are you going to attract that investment when you’ve got that message? Rightly or wrongly, that’s how it will be perceived.

STEVEN JOYCE: I think, again, that’s Mark’s view, and I understand his view because he’s a bit sore because the transaction didn’t go through, but, actually, more broadly, there’s a lot of transactions that do go through, and land isn’t the only story. In fact, it’s not even the bigger part of the story in terms of growing exports and growing investment in the export sector. It’s much more about production, marketing and those sorts of things. We saw another transaction proposed last week which will be up to the shareholders of Silver Fern Farms, but it could well be quite a big, significant lift for that industry. We also have a lot of investment in other industries, so the food industry – a Philippine company has just picked up Griffin’s, Goodman Fielder Watties has just been picked up by another Philippines company – and we’ve got a lot of investment coming into the smaller end too.

CORIN DANN: You see, that’s interesting, though, because a lot of people will hear that, and they’re hearing household brands – New Zealand household brands – falling into offshore hands, I mean, losing our means of production.

STEVEN JOYCE: You can’t make the argument both ways, Corin.

CORIN DANN:  Well, I’m the devil’s advocate here.

STEVEN JOYCE: But in terms of Griffin’s, I think it’s a fantastic opportunity, so this company, a Filipino company, is just thrilled. I was actually in the Philippines shortly after they’d made the purchase. They bought it from a private equity group, and they are just thrilled to have the opportunity to be involved with what they see as an iconic New Zealand brand, and that’s going to be expanded and exported into South-east Asia, which means more investment and more jobs for Kiwis. So on the whole, international investment is good for growing our exports, frankly, growing jobs and incomes in New Zealand, and we see plenty of examples of that – king salmon, the wine industry.


STEVEN JOYCE: You know, New Zealand has been built on foreign investment into our food industry and other industries.

CORIN DANN: Okay, but we have to be choosy, though. We have to be choosy, though, so let’s talk about Silver Fern Farms.


CORIN DANN: Do you like this deal? Do you think it is good for New Zealand?

STEVEN JOYCE: Well, I’ve got to be a little bit careful because I don’t know the details of the deal, and I truly believe this is a decision for the shareholders of Silver Fern Farms predominantly because they’ll have it all laid out before them, they’ll have the meetings on it, and they’ll get to make decisions. And what they will be assessing is whether, for example, the additional capital that comes into the company and the distribution channels that this Chinese company bring to the table will create more value for the farmers, both in terms of dividends and in terms of the payments they get for their stock. And they’ll be the best placed to assess that, and any politician, whether it’s Winston Peters or I, shouldn’t be putting ourselves from the sidelines into that.

CORIN DANN: But in terms of your pipeline message of trying to stack up a pipeline of foreign direct investment into New Zealand, is this the type of thing – joint ventures – that you want to see more of?

STEVEN JOYCE: Absolutely. We will see a range of these. We have a programme where we’re seeking to attract investment, not just international investment but domestic investment as well into our productive companies and the food industry and ICT and high-tech manufacturing. That will continue to go on, and the more investment these companies attract, then the more ability they have to get out there and compete and win on the world stage.

CORIN DANN: Isn’t there some risks, though? I mean, some will argue that the Silver Ferns case is a case of a distressed company that had too much debt and is now effectively giving away decades – decades – of intellectual property and meat-processing capability to the Chinese, which presumably they feel that they’re getting a good deal?

STEVEN JOYCE: But that is a matter for the shareholders of that company.

CORIN DANN: But isn’t that a matter for the country as well?

STEVEN JOYCE: Well, no, not necessarily. I mean, we have, for example, ANZCO. ANZCO has been a very successful meat-processor company, I grant you, but it’s been majority owned by Japanese interests forever, more or less for 20 years, and yet lots of farmers supply that and they’re very happy with the relationship that they have with ANZCO because it delivers the sort of returns that they’re looking for from their part of the meat industry. So the best people to assess that is the industry itself because they know of the dynamics of the industry. Many of them will know, for example, that there’s been challenges in the meat-processing industry for some time. This is one possible solution. We should let that industry get on. It could actually be a great thing for the industry, but that’s for them to assess.

CORIN DANN: Putting your election strategist hat on as well, is there a point where you in government, you sit with John Key and Bill English and you say, ‘It’s getting a bit too much here. New Zealand voters are uncomfortable’? You must think about those issues.

STEVEN JOYCE:  Well, this is a little bit of a turnaround on the start of the interview where you were being critical about this particular transaction that we talked about earlier not going ahead. But, look, the thing is this – New Zealanders ultimately want to see jobs and incomes for them and their families and their kids in New Zealand. And there’ll be lots of growth in the world over the next 20 or 30 years, and the only question is where it is. It’s sort of like a geographic play. We can have more investment in this country or some of that investment could instead be in Australia or in Singapore or in Jakarta or wherever. So if we welcome that investment, if we attract it, we bring it here, that means more jobs, higher incomes, capital invested in our companies. And I think as long as New Zealanders see that and understand that and can see that it works for New Zealand, they’ll be in favour of it because ultimately what they’re really looking for is for the chance for their kids to be successful and grow up and bring up their own families in this country. And we’re seeing that with the shift in migration back to New Zealand that people see that future.

CORIN DANN:  Well, that’s an interesting point, that migration, because we’ve had growth figures out this week – 0.4%. The economy’s growing – I’ll give you that.

STEVEN JOYCE: Yeah. Not as fast as we’d like, but, yeah.

CORIN DANN: But some would argue, though, it’s not as fast when you start to think about population growth, and, of course, migration is a factor.


CORIN DANN: Now, Bill English this week acknowledged that that migration, that strong migration is keeping wages down a bit. Are you concerned about that, given unemployment is forecast to go over 6%?

STEVEN JOYCE: Well, unemployment is already close to 6%, so I don’t think— it’s 5.9, so statistically it could easily tick up just over the six, which I think is what the Reserve Bank is suggesting. Look, I think the key thing with migration is to be attracting the sort of migrants which help New Zealand companies grow. So you hear the Opposition saying, ‘Oh, we should crack down on migration,’ but, actually, you talk to the ICT companies, one of our fastest growing industries, and they are very keen to keep attracting software developers. We grow our own in this country as well, but the rate at which this industry is growing, adding 3000 high-paying jobs a year, it needs to bring in people from offshore.

CORIN DANN: But is that—?

STEVEN JOYCE: The South Island is another example, where North Islanders for whatever reason don’t want to shift south and yet there’s been a big differential of jobs in the South Island. And you can’t say to the South Islanders, ‘Look, you guys can’t grow, because North Islanders won’t shift down there, but we can’t allow you bring any migrants in either.


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