Would You Like Some Sav With Your Rocket?

August 22, 2014
Iain MacLeod

With exports up in value by 25% in the past six years and one of the lowest unemployment rates in the developed world at 5.6% I cannot always convey how impressed I am with the people of this country who by and large don’t sit around and whinge, they just create, develop (usually on the smell of an oily rag) and then take their ideas to the world. But equally how much better it could be……

I suspect you might be quite surprised at the range of businesses and exports that are New Zealand grown.

We all know we have a large sheep herd (which is by the way falling rapidly) and we milk lots of cows (herds growing rapidly) but how many of you have heard of Xero, the cloud based accounting software company on track to turn a local service into a global operation, of Weta Workshop working among other things on the special effects for Avatar 2, 3 and 4 or Alpha Aviation, the Hamilton based light aircraft manufacturer? Or Fonterra and their range of value added infant formula? What about Super Yachts? Metal widgets costing $10,000 a pop for Rolls Royce aircraft engines manufactured in Hamilton? What about the Martin Aircraft Company that has designed, refined and is now manufacturing the world’s first personal flying Jet-Pack?

If I told you that a group of New Zealanders had just, on a shoe string budget, designed, built, launched a rocket and are now close to launching a bigger model to put small satellites into low orbit for about $6m and a fraction of the price of anyone else currently in the market, would you believe me?

Well it is about to happen. The company is called Rocket Lab. Who’d have thought?

But it isn’t all jet packs, video games, rockets, hobbits, Avatars and Ugg boots.

We still export an awful lot of food – after all we produce nine times more than we need to consume.

Along with New Zealand companies the Chinese and Australians in particular have been investing big time in local manufacturing plants to process our abundant food resources for export.

If I asked you which of the following four New Zealand exports was the most valuable in terms of dollars which would you choose:

· Butter

· Kiwifruit

· Wine

· Fish

Kiwifruit? Butter? The answer is in fact wine.

Although we are still a relatively small producer by the standards of France or California this export is set to break into our top 5 foreign exchange earners by value within the next 5 – 6 years.

While we are playing guessing games you might be surprised to learn that the current four biggest foreign exchange earners for this country are dairy products, tourism, meat along with oil and gas….. (bet you’d never have guessed that last one).

Within five years it is expected that ICT will be in the top half dozen as well.

It is insightful that at this year’s University of Auckland Business School Entrepreneur’s Competition Technology tops the list of business ‘types’. Of the 11 chosen finalists 5 are cloud based. This is a strong indicator of where many New Zealanders are seeing their future.

Already software exports are measured in the hundreds of millions of dollars each year and are rapidly closing in on wine with its $1.3 billion (US$1.1 billion) of sales.

Game Developers of which we have many cannot train or find enough staff to expand their businesses quickly enough. Some amazing and popular global games, particularly for mobile devices are being created, developed and run from New Zealand.

It isn’t on the farms, forests or fishing grounds but in Information Technology that we see our futures.

What holds us back particularly in the area of ICT is a chronic shortage of skills.

Our Universities only provide industry with half the graduates required to fill this rapidly expanding sector of the economy. This is in part because of the way Universities were historically funded – Government funded based on a ‘bums on seats’ model rather than a ‘what do we need to produce most and should therefore subsidise more’ model. Our schools seem to produce too many non-science type graduates which is a real shame and loss of potential. Interesting to note that the current Government, if re-elected next month, has this firmly in their sights for change.

There is also not a lot in the way of incentives to invest with tax write offs for Research and Develop and as a result our rate of investment in these areas is only about half the OCD average. Government has in recent years made some changes but this is one area that in my view they could do better.

Creating an idea is cheap. Commercialising it is usually very expensive. Especially here where getting quick economies of scale can be very difficult owing to our small local population and relative geographic isolation.

If we cannot have the advantage of a local population of say 10 million people other conditions need to be created to foster investment in our great ideas.

Many companies come up with ground breaking products and get the idea up and running within New Zealand to a limited extent. They often struggle when it comes to taking it global and end up selling out.

I don’t imagine you knew that Glaxo-Smith-Kline was a New Zealand business to begin with and has gone on to become one of the biggest Pharmaceutical companies in the world – with no New Zealand ownership any longer. To think what could have been……

This is starting to change with more and more companies taking in foreign equity partners but who retain majority or at least very large chunks of their businesses ‘New Zealand owned’ but who recognise the need for capital and expertise is needed and valuable to springboard internationally but who keeping these businesses, in particular the intellectual property aspects, local.

I often refer to New Zealand as the little country that could. A highly educated work force awaits any Entrepreneur who wishes to base themselves here or was born here. As a country that is apparently the easiest in the world to establish and do business in (the red tape here is pretty thin) we have a very exciting high value added future. Our relatively low tax rates for companies (28%) is another attraction.

I recently read an article by a local journalist suggesting all children should be taught computer coding from their first day in school. Imagine the challenge of that. Imagine the outcome in 15 years if we did!

It’ll take greater political will in regards to issues like tax write offs for R and D but it is clear that all political leaders in this country with few exceptions agree on the path to greater prosperity and social cohesion.

It will all take more than business people and politicians having a chat over a glass of that Sauvignon Blanc – we need some concrete initiatives in education and tax reform for starters to produce even more of the skills sets and businesses we need.

We’ve clearly shown that New Zealanders have made a pretty good fist of it as things stand but we can do better.

Leave a Reply

There are currently no comments. Why don't you kick things off?