Emerging Challenges and Lessons from the
Māori Economic Renaissance
Federation of Māori
Authorities (FOMA)
A speech delivered to the
annual in
conference Nelson
27 September 2019
By Adrian Orr, Governor
2 The Terrace, PO Box 2498, Wellington 6140, New Zealand
Telephone 64 4 472 2029 Online at www.rbnz.govt.nz
Ma tini ma mano ka rapa te whai.
Tihei mauri ora!
To our tīpuna, those past and present gathered here for
this paramount kaupapa.
Tēnā
koutou katoa
Thank you for inviting me to speak at your conference. It is a privilege to return to this fine
annual occasion.
I'd like to acknowledge Wakatū
whānau and Te Tau Ihu, and also the FOMA Board,
especially Traci Houpapa (chair) and FOMA members present.
I have been involved in many FOMA events over the years wearing a variety of hats. I have
always relished the experience and found it fun and challenging, and I am very proud of you
all for the progress made over recent decades.
Māori in business
As FOMA members you represent an important segment of in Aotearoa,
and Aotearoa business, full stop. Many of you have been at the forefront of the relatively
- -
recent Māori economic renaissance following your very long period of often forced
alienation from the business world.
Your businesses are based primarily on your whenua assets, and as a result most of you are
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heavily engaged in the fishing, forestry, and/or farming industries throughout the industries
or hapū
value-chains. You also operate under a variety of legal frameworks, from iwi Land
Trusts and Corporations, through to individual title.
Each governance framework has a unique history, as well as strengths and weaknesses for
attracting and retaining business capability, accepting and managing risk, and retaining
whenua ownership.
However, across these industries and ownership structures, you have been persistent and
innovative in returning your resources to sustainable and productive use.
There are growing and impressive statistics that are becoming more widely known and
assets are Māori owned, with a total value
celebrated. For example, 10% of primary sector
of $13 billion from New Zealand's
agriculture, forestry and fishing asset base1.
Māori
The economic asset base is also diversifying, with new investment areas including
-
geothermal, digital, services, education, tourism and housing2 moving with the New
Zealand economy and leading in some areas such as brand development. The Māori
economic asset base now adds-up to multi-billions of dollars, representing an important part
of the pūtea of Aotearoa.
However, measuring the contribution of Māori to the economic wellbeing of Aoteroa by asset
culture, and the challenges Māori and Pākehā
size alone is a dis-service. Māori have faced
together since the 1800s, continue to mold how we do business in New Zealand, and how
we are viewed by the rest of the world.3
In 2018, the New Zealand Ministry of Foreign Affairs and Trade recognised Māori as being
the past and ongoing
key to international trade.4 We also champion Māori economic
Te
contribution in our story The Journey of Pūtea Matua5, starting with the arrival of your
tīpuna in the 1400s, or thereabouts.
economic practices of your
The tīpuna are well known to have been, and continue to be,
long-term and inter-generational. Your investments aim to be values-based in the interests of
your mokopuna and their mokopuna. You strive to show more New Zealanders how
manaakitanga and kaitiakitanga are integral to running a business.
It's important to recognise the value Māori business brings to Aotearoa
not only but to also
encourage and protect that contribution. It is a vital resource that should not be overused.
This is similar to a desirable 'virtuous circle' of business
activity, one that self-supports
economic profit, environmental sustainability, social inclusion, and cultural diversity.6 The
alternative is the 'vicious circle' that sees any one of these outcomes only being achieved at
the cost of another. Often the difference between the vicious and virtuous circle is simply the
time horizon over which people are incentivised to operate.
Te
Pūtea Matua has a lot to learn from you, as do business owners globally. A real-life
example of business based on long-term values. This is, in part, why we have introduced a
Te Ao at Te
Māori strategy7 Pūtea Matua. Our role is to think and operate for the long-term,
and to be successful we need to be relevant and draw on the broadest insights. It is also in
part to support and guide our Climate Change strategy8, which we see as a key long-term
risk to financial stability globally.
for
Perhaps there is a place for a 'Kaitiaki Pledge' businesses more broadly, better ensuring
that we capture the 'virtuous circle' of long-term economic growth, using the insights from
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tangata whenua. What a powerful position for Aotearoa business internationally a unique
monopoly-selling strength to the heart of current and future consumers and investors.
Of course such a pledge would impose significant commitment, so as to be most recognised
business would need to 'walk the talk'
and valued internationally. All Māori of long-term
governance and leadership. An example of such a commitment relevant to this audience
could be better committing Māori economic entities to work together to provide access to
under-utilised resources on scale, so that relevant expertise can be sourced and
investments made with full 'kaitiaki confidence'. This concept is part of the kaupapa that
underpin FOMA, Poutama Trust9, and the more recently developed collective direct
investment vehicle Te Pūia Tāpapa Fund10.
Mahi tahi overcomes the fact that no one person or group has a monopoly access to
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resources, capability, and capital the three ingredients of an investment opportunity. Mahi
tahi will bring this together under the umbrella of shared values.
I have used the concepts of manaakitanga and kaitiakitanga to describe some of Māori
business value drivers. However, it is important to acknowledge that these concepts are
increasingly mainstream in international business, under a variety of headings but with
similar goals.
For investment, there is a growing cluster of managers of global capital concerned with
better managing long-term investment outcomes, rather than shorter-term financial reward
alone. For example, there are organisations such as: Focusing Capital on the Long-Term11;
the United Nations Principles of Responsible Investing12, CPD (formerly Carbon Disclosure
Projects)13; and Global Compact14; the One Planet Sovereign Wealth Funds15; the Global
Network for Greening the Financial System16; the Paris Accord on Climate Change17; and
locally Transparency International New Zealand18; the Climate Leaders Coalition19, The
Aotearoa Circle20, and more.
is great to be talking about
It Māori economic progress, celebrating success and
acknowledging that Māori entities are showing value-based leadership. As always, however,
there is more work to be done to make the New Zealand economy more resilient and
sustainable. The global investor activities mentioned already imply that standing still in
business is not an option - global consumer and investor expectations are changing.
Significant trust and investment is going to be needed to ensure the New Zealand economy
- and specifically -
Māori economic activity represented at FOMA moves sustainably into
higher value-add, productive, activities.
Internationally, consumer and investor preferences and expectations are changing rapidly,
especially so when it comes to issues such as climate change. For example, here in
Aotearoa there is recently proposed regulation attempting to transition the agricultural
industry towards more long-term thinking. This includes the action plan for water quality
developed by industry bodies and local and central government21, and agriculture being
brought under the emissions trading scheme22.
What ever your views are on the relative merits of these regulations, the fact is, preferences
are changing and businesses need to change to remain relevant. Such change takes
courage, action and investment. One thing is for sure, however, highly indebted businesses
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will have the least ability to invest ahead of these societal expectations and for innovation
more generally.
Going back a few years to the 1990s and 2000s, New Zealand's agriculture sector saw
wide-
spread conversions from sheep and beef farming to dairy. The number of sheep in New
Zealand more than halved, while the number of dairy cattle more than doubled23. This
transition was driven by increased global demand for dairy products, which led to higher milk
prices24. Meanwhile, wool and meat prices have been less attractive than they once were.
These farm conversions required significant investment. Banks helped to fund this
investment by lending heavily to the sector. Agriculture debt in New Zealand increased from
$5 billion in 1990 to $63 billion today. Two thirds of this debt is owed by dairy farms25.
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Looking more closely at dairy farming in Aotearoa, debt has grown much faster than output
debt per kilogram of milk solids produced has quadrupled in 15 years26. The rapid increase
debt has been fuelled by banks' aggressive
in agriculture and loose lending standards over
recent years.27
While bank lending allows businesses to quickly take advantage of new opportunities, high
debt comes with high risk. When times get tough, or when capital is needed to grow, highly
indebted businesses find it much harder to weather the storm and remain relevant. This is a
symptom of short-term thinking that is not sustainable.
Banks' incentives are not the same as the farmers. Banks' business is to
lend, and they are
incentivised to manage the risk of their overall portfolio for the long-term, rather than the risk
of any individual farm or business. This is why banks are critical and efficient in a modern
economy - but debt must be used with care. A bank has a more diversified portfolio, so it will
almost certainly survive a resonable sized dairy downturn, but many indebted farms might
not.
Te
What are we doing, as Pūtea Matua, about the challenge of competing horizons and
purposes when it comes to ensuring financial stability?
On top of keeping inflation low and stable so businesses can focus on the long-term, we also
look at other ways to maintain a healthy financial system.
It is known that banks will be better incentivised to think about the long-term performance of
the businesses they lend to, if they have more of their own equity at stake (i.e. more of their
own skin in the game). This is why we are proposing to significantly increase the minimum
capital requirements for banks operating in New Zealand28. An increase in bank capital
benefits all New Zealanders by creating a safer banking system and longer-term lending
consideration.
This topic should be of special interest to some of you who are managing collectively owned
assets.
Since it is difficult for a bank to foreclose on a collectively owned asset, lending to such
organisations is considered unsecured, and therefore more expensive. This makes it more
difficult for you to get access to bank lending.
In the short-term, less access to credit puts businesses with collectively owned assets at a
competitive disadvantage to their industry counterparts. They have less funding optionality.
These businesses also remain exposed to economic downturns which can be exacerbated
by excessive lending to other competitors in the same industry.
In the longer-term, businesses operating with collectively owned assets have lower leverage
ratios than their industry counterparts as a result. Lower leverage brings greater resilience to
economic shocks and longer-term sustainability. This means, in the longer-term, Māori
businesses with collectively owned assets can have a stabilising effect on the economy as a
whole.
I know for some of you, any progress to change this situation is too slow. In the meantime, I
would encourage you to take advantage of the opportunities that come with greater
resilience, and look for partnerships that value long-term outcomes.
In summary, the challenges ahead will still test your skills and adaptability: the global
economic environment is volatile as trade tensions persists; commodity price swings will
continue to test resilience; evolving consumer tastes and preferences are fast-moving and
we need to move with those demands. And climate change literally means the changing tide
will be closer to the door.
Being whenua-based, these challenges will be both a risk and opportunity to all of you, and
your ability to adapt and transform remains critical. A challenge I have confidence you will
stand up to along the way.
I want to acknowledge how you do business and the critical role FOMA has played to bring
you all together to have a collective voice on business practices in Aotearoa. There are
many examples of success within your membership that encapsulate innovation, increased
productivity, and better returns on capital, yet based on long-term sustainable beliefs.
That said, I want to thank all the many rangatira gathered here today for continuing to strive
whānau, hapū, iwi and Te Ao
for greater outcomes for our collective, Māori.
Meitaki ma'ata ata.
tēnā koutou, tātou katoa.
Tēnā koutou, tēnā
Māori
Word Reference
Aotearoa - New Zealand
Whenua - Land
Iwi - Tribe
- Sub-tribe
Hapū
Pūtea
- Wealth
Pākehā
- New Zealander of European descent
-
Mokopuna Grandchild(ren)
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Manaakitanga Respect for others
Kaitiakitanga - Guardianship
Te Pūtea Matua -
Reserve Bank of New Zealand
Te Ao Māori Māori world (view)
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Kaitiaki - Steward
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Tangata whenua Indigenous people
Mahi tahi - Working togather
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Rangatira Leaders (contemporary), Chiefs (traditional)
Meitaki ma'ata ata Cook Island Māori 'thank you very much'
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Tēnā koutou, tēnā koutou, tēnā tātou katoa - Greetings, greetings, greetings to us all