Will New Zealand pickers step up in Central? (Photo: Getty Images; additional design by Tina Tiller)
Will New Zealand pickers step up in Central? (Photo: Getty Images; additional design by Tina Tiller)

BusinessNovember 17, 2021

Will New Zealand workers save Central Otago’s summer harvest?

Will New Zealand pickers step up in Central? (Photo: Getty Images; additional design by Tina Tiller)
Will New Zealand pickers step up in Central? (Photo: Getty Images; additional design by Tina Tiller)

As the fruit harvest season nears, orchardists are again raising the alarm of an impending worker shortage. So will enough of us head to the country this summer to pick Central Otago’s crop?

Every year I said it would be my last. Every year I came crawling back.

From the age of 14, I spent a decade of summers picking stone fruit under the searing Central Otago sun. I was fortunate to have been born into the iPod generation, but all of the audiobooks on Napster couldn’t stave off the boredom of fruit picking. Working 7am to 4pm seven days a week atop a shuddering Hydralada would put me into fatigue-induced stupor that enveloped every summer of my youth. The only reprieve was the sound of rain on the corrugated iron roof that signalled a long awaited day off.

But for a teenager working at a time when youth rates meant the minimum wage was a little over $7 an hour, the pay was unbeatable. On a good day I could make over $30 an hour and working for six weeks during university holidays would be enough to keep me in Hollandias year-round. Working alongside backpackers from around the world also brought me invaluable contact with a life beyond the mountains of Clyde and provided an education in itself.

And my fate was nothing compared to what the out-of-town students and backpackers had to endure. While I left work to a home-cooked meal and my own bed, they would be staying four to a room in a cinderblock bunkhouse, with no escape from the shell-shock inducing booms of the bird scaring guns.


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Looking back I still idealise those summers as a Central Otago rite of passage and remain grateful for the work (thanks Bill and Cathy). I would chose working beneath a cherry tree over being hunched over a checkout counter any day. But it is a hard sell to the average New Zealander.

So when Covid-19 sent the backpackers packing I wasn’t alone in wondering who would pick the country’s fruit.

This time last year, orchardists began warning of an impending “nightmare harvest”, where fruit would be left to rot on the trees due to a lack of workers. Mike Hosking declared New Zealanders were simply too lazy to pick. However, when I called local orchardists here in Clyde last year, all of them were turning prospective pickers away. They already had enough workers signed up for the harvest – although there was concern about whether they would turn up.

In the end a lack of workers wasn’t the problem. On New Year’s Day, as the season was in full swing, it started raining and didn’t stop for days. The cherry crop was ruined. Droves of workers who came out to pick were sent away.

Panmure Orchards manager Jeremy Hiscock says it was unreal. The orchard was able to get enough pickers for the harvest, but the rain cracked the cherries and the neighbouring Fraser River burst its banks.

“The whole orchard got flooded,” Hiscock says. “I had two feet water in my cherry block.”

Now the pressure is now on to bring in a bumper harvest to make up for last year and headlines warning of an impending worker shortage have started again. So will New Zealanders up sticks en masse for a summer working in the trees once more?

Hiscock says he is “cautiously optimistic” the answer is yes.

In the absence of foreign backpackers, New Zealand workers are being lured to the stonefruit orchards of Central Otago (Photo of the Cromwell fruit sign: Wikimedia Commons)

I started my orcharding career at Panmure Orchards when I was 14, driving an ageing two-stroke motorbike up and down the rows to scare the birds. I soon graduated to the packing shed where I was responsible for loading cherries onto a conveyor belt for eight hours a day. For weeks I would see cherries scrolling past whenever I closed my eyes.

The orchard needs about 120 staff through the season and Hiscock says it already has enough pickers signed up for the harvest and for the fruit thinning already underway. But he is still concerned about whether everyone on the books will show up.

“We are on the roller coaster now. In October it was looking disastrous, but then the inquiries started flowing in. The influx of Kiwis trying orchard work has been awesome.”

Hiscock says the orchard has also been an unexpected beneficiary of Auckland’s Covid-19 lockdown, with a number of workers coming from the city because orchard staff are classed as essential workers.

“That’s enabled us to complete our base tasks for the season, but everybody has had to cut their cloth to suit the pool of labour. People have had to remove low-performing blocks of fruit so they can concentrate labour on their best blocks.”


Related:

Can you really make $400 a day picking cherries?


Across the fence at Strode Road Orchard, owner Lochie McNally also has enough pickers signed up for the coming season.

“We finished recruiting about three weeks ago and have had a lot students and a few backpackers and locals sign up, which is good. We’re definitely happy where we are sitting at the moment.”

Formerly Forests Orchard, this is where I spent my summers picking and thinning fruit. McNally says the orchard has upgraded the accommodation from the cinderblock bunkhouse and has hired cabins to attract workers. He has also discounted the price of accommodation.

At nearby Clyde Orchards, there’s also no worker shortage yet. Manager Kris Robb says it needs 150 pickers for the harvest and has 160 signed up, but he is still nervous.

“On paper it’s looking pretty good, but a lot of orchards have a lot of backpackers on their lists and given there are so few backpackers left in the country there is a risk of duplication. We had 60 people signed up to start thinning this morning but only 45 have shown up.”

About a third of the prospective pickers are overseas backpackers who have extended their visas to stay in the country. The rest are high school and university students.

He says a lot of work has gone into attracting staff and making picking fruit in Central Otago more desirable to New Zealand workers.

“We’ve had to change our mentality. We were predominantly set up for backpackers in self-contained vans and that demographic has changed so we have had to get more cabins and huts and we are constantly improving our facilities. We’ve also secured a house in Alexandra to accommodate staff. It’s not the Hilton, but it’s good affordable accommodation.

“We are also finding the reason people come here is about lifestyle, so we’ve been looking at having activities and events for staff.”

The orchard fields sports teams in local competitions and has developed deals with tourism operators in the area to encourage workers to explore Central Otago. Industry body Summerfruit NZ has also developed a “crew card” which gives orchard workers discounts at local shops.

Because of these efforts, Robb says a large portion of workers have signed up to come back for a second season.

Apricots are one of Central Otago’s leading crops (Photo: Getty Images)

Government and the local council have also developed schemes to encourage NZ pickers. The government’s Seasonal Work Scheme gives workers money for transport and clothing and other work-related costs. Workers are also eligible for a $200 a week accommodation payment and a $1000 bonus if they stay for six weeks or more. MSD said they’d paid out “almost $1 million” to 550 workers under the scheme and 7,557 people had gone off the benefit into seasonal work over the past year. Central Otago District Council has a marketing campaign showcasing the region as a good place to work and travel.

Despite having enough pickers signed up for summer, there was a pervading anxiety among the orchard owners that workers wouldn’t show up and a golden harvest could go unpicked. But with Covid-19 likely to depress the backpacker market for years to come, those worries may be a reality for some time as finding workers becomes an annual struggle for the industry.

Summerfruit NZ chief executive Kate Hellstrom says there will never be enough workers living in Central Otago for the harvest. The district’s population is just 21,000 and has one of the lowest unemployment rates in the country, but about 6000 workers are needed for the harvest. There are also more orchards being planted, so the need will only grow and attracting workers from outside of the region will be an ongoing focus.

“We don’t expect to suddenly return to 2019 employment conditions and we are thinking really carefully as an industry about what that might mean and how we adapt to the future,” Hellstrom says. “A lot of work has gone into appropriate accommodation and being flexible for different groups – students, retirees and working parents. There’s also work going into how technology might help in the future, having growing systems where people can pick more easily. So the work is underway as to how we can adapt long term to a changing workforce.”

But if New Zealanders are already signing up to pick in sufficient numbers, is talk of a worker shortage overblown?

“I think the concerns are genuine,” Hellstrom says. “I don’t think you’d find one employer who has full confidence they are going to have all the staff they need right through the harvest. They’ve been putting a lot of work into promoting the region and to get pickers to return, and growers are saying they’re going to be OK while they’ve got students, but for the later fruit there’s a real concern.”

Beyond a potential worker shortage is the looming prospect of a Covid outbreak. The region has largely been Covid-free throughout the pandemic, but an outbreak could put people off coming to work and hamper the harvest.

All of the orchards I spoke to required staff in the packing sheds to be fully vaccinated and some required all staff to be double-jabbed. But there’s only so much that can be done to prepare.

“We’re dealing with a perishable that needs to be packed and dispatched quickly,” Robb says. “To have a 14-day shutdown in the middle of a cherry season would be catastrophic.”

Like so much of the horticulture industry, the fate of the harvest is in the hands of the gods.

But if needed, I think even I would come crawling back to help with one more season in the trees.

Keep going!
Simplicity Living’s proposed Hinaki Street development in Glen Innes, Auckland (Photo: Simplicity Living/Supplied)
Simplicity Living’s proposed Hinaki Street development in Glen Innes, Auckland (Photo: Simplicity Living/Supplied)

BusinessNovember 16, 2021

The ambitious plan to build 10,000 high quality, affordable rentals

Simplicity Living’s proposed Hinaki Street development in Glen Innes, Auckland (Photo: Simplicity Living/Supplied)
Simplicity Living’s proposed Hinaki Street development in Glen Innes, Auckland (Photo: Simplicity Living/Supplied)

With Simplicity Living, Sam Stubbs and Shane Brealey want to upend the rental property market in New Zealand. Bernard Hickey spoke to them about why the local property development sector is so dire, and how they plan to change things.

This is an edited version of a post first published on Bernard Hickey’s Substack newsletter, The Kākā.

I’ve spent a long time covering the residential property development market in New Zealand, particularly for the type of medium-density dwellings that are desperately needed close to the centre of large cities. It is a sector that has bred its own culture of zero-sum-game cynicism, inflating costs and stunting any attempt at scale and affordability.

It created the finance company crises of 2007-11 that cost savers and taxpayers close to $5b and created the biggest hole in new home creation in New Zealand’s history, along with an exodus of skilled tradespeople to Australia, many of whom have never returned. It was a painful reporting exercise that shaped my view of whether we could ever build houses affordably in the right places for people on regular incomes.

Up until now, residential property development has been designed to take advantage of (or at least live within) a pronounced boom-bust cycle. It is profoundly broken.


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Now KiwiSaver fund Simplicity and apartment and townhouse developer NZ Living have teamed up to create Simplicity Living and a unique plan for Aotearoa: to build 10,000 homes worth $5b over 10 years with the sole aim of holding them and renting them out at affordable levels. In the process, they hope to expose the waste and hidden costs that currently make building flats painfully expensive.

This is not the way it’s done in local property development – a sector dominated by booms, busts, litigation, short-term thinking, and the overall aim of making tax-free capital gains on land price escalation, rather than building homes people will rent for years and years, possibly even decades.

Our current hodge-podge stack of developers, sub-contractors, buy-and-flick owners, agents and increasingly disenfranchised and desperate renters believe it can’t be done another way. They’re told and tell each other that chronic shortages of land, building materials and skilled tradies – and the focus on homes as investments – mean it is impossible to build houses more affordably. These are the underlying assumptions that have been behind all sorts of government, Reserve Bank, council and investor actions for decades. There is no alternative, we’re told.


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But is that true?

On the latest episode of my Spinoff podcast When the Facts Change I speak to Simplicity CEO Sam Stubbs and NZ Living co-founder Shane Brealey, who have both spent years soaking in the industry’s norms and practices. Over the last decade they’ve disconnected themselves from those usual modes of operation to do things differently. Now they have a plan to become one of New Zealand’s biggest home builders and owners, which is able to ride through the ups and downs of the markets to build and operate affordable and liveable homes.

Effectively, they want to dismantle the “stack” that currently dominates house building and find a way to solve the massive challenge our cities face: building tens of thousands of new medium-density apartments and townhouses that cost way less to rent that the current crop, relative to incomes, and doing it in a way that reduces climate emissions and creates stable, safe and nourishing communities.

They’re breaking the usual rules to do it

Simplicity is a not-for-profit KiwiSaver fund manager that has focused on keeping its systems and practices low-cost since it launched five years ago. It now has 75,000 members and $4b in funds under management, with members paying an average of $400 a year in fees, far lower than most for-profit funds. Simplicity is now one of the default KiwiSaver providers. (Disclosure: I’m a Simplicity KiwiSaver member)

NZ Living was set up by Shane and Anna Brearley as a residential property developer using “Kaizen” techniques to strip out waste and cost. A Kāinga Ora developer, NZ Living is on track to build 720 homes over the three years to the end of 2022.

NZ Living don’t run tenders for projects. They don’t try to play suppliers and partners off against each other or try to circumvent local building materials suppliers. Instead, they focus on refining out cost and waste in both materials and processes. They pride themselves on not having groups of subbies standing around high-viz waiting for directions, materials and systems to get through the traffic jam at the gate.

They’ve gone out of their way to avoid a culture that has left dozens of business collapses in its wake – just google Ebert, Mainzeal, Soho Square, Layne Kells, Mark Hotchin, Hanover Finance, Strategic Finance, Orange-H Group, Stanley Group, Bridgecorp and Tower Cranes for examples. That property development culture is the reason second-tier lenders charge double-digit interest rates on short-term interest-only loans that can explode in everyone’s faces if there’s a change of market sentiment, consenting delays or problems for apartment buyers getting funding from banks. It’s the reason contractors layer on cost at every opportunity to make up for the inevitable payment delays, litigation and collapses.

NZ Living’s Shane Brealey, left, and Simplicity’s Sam Stubbs, right (Photos: supplied)

The music will always stop

That property development culture is also the reason few want to build systems and train apprentices, knowing the bust is just around the corner and no one wants to be left holding the parcel of explosive debt, contracting bills and litigation fees when the bust inevitably arrives.

And it’s the reason no one in the sector takes a strategic or long-run approach to planning developments over decades. The culture is fantastic for:

  • Construction industry lawyers and litigators;
  • Mezzanine financiers hoping to lend high, repossess low and sell high;
  • Buy-and-flick merchants using the natural leverage of apartment deposits and never-ending price increases to make property trading gains;
  • Insolvency practitioners and agents able to set their own fees in the restructuring and sale of assets;
  • Cowboy-boot wearing Ferrari-driving property developers with an excellent line in phoenixing their companies and timing their entries and exits to both take advantage of and then avoid the booms and busts.

The losers?

  • The finance company investors left holding worthless paper when they go bust, as many of them will.
  • Renters who pay over 50% of their disposable income to live in insecure, poorly maintained and unhealthy homes, and their kids who bounce from school to school and then into the Emergency Department with skin, chest and brain infections;
  • Employers in the likes of Auckland and Wellington who are mystified as to why they can’t attract staff to work in their offices or keep their existing staff from moving for cheaper rents and the chance of buying a home in Sydney, Melbourne, Brisbane or the UK.

“The construction industry is kind of like the finance industry – it’s a filo pastry of fees,” Simplicity’s Sam Stubbs says in the podcast.

NZ Living’s Shane Brealey began in the construction industry 35 years ago as an engineer fresh from Canterbury University. He was lucky enough to study Kaizen techniques, often known as the Toyota Way, when working at LendLease, which builds massive amounts of apartments in Australia.

“I’ve been in that pyramid contracting spiral, lowest-price tender game,” Brealey says. “That invariably means tendering at certain points, and the rest cascades into just a jungle of waste and confusion and waiting and overpricing and under delivery and poor outcomes.”

He initially set up his own construction firm 15 years ago, but decided to created an integrated supply chain of sorts that included the design, financing and ownership of apartments and townhouses.

Brealey and Stubbs have done the calculations and believe their top-to-tail system of funding, designing, building and owning cuts out 35-40% of the cost of building these homes.

Simplicity Living’s proposed Hinaki Street development in Glen Innes, Auckland (Photo: Simplicity Living/Supplied)

‘All about waiting and opportunism’

I asked Brealey why the rest of the industry had developed in such a toxic way.

“Two words: waiting and opportunism. If you look at any construction site at any time… tell me how many people are actually building that project, and how many are waiting, standing, talking, chatting, looking for an instruction, looking for approval, waiting for a drawing, and all that type of stuff. It has to be paid for,” he says.

“Which brings me to the second word: opportunism. If you’re a quantity surveyor pricing as a subcontractor or building contractor, you’re only guessing how much waiting you’re going to have to do… And so you invariably put on as much contingency as you think you can get away with, whether you spend it or not.”

A filo pastry of fees

Strip out the waiting and opportunism and NZ Living can focus on the building.

“Michael Schumacher, his favorite thing was go-kart racing rather than Formula One, because it was pure racing. And so what we’re doing here is we’re pure building,” says Brealey.

Simplicity plans to create a rental management operation that offers much longer-term tenancy agreements for homes designed to be rented, and lived in as communities.

“We intend to own these for 100 years and rent them affordably on very long term rental contracts. For 100 years, they got to be built really well. So actually it’s not actually about saving costs. It’s about building something to last,” says Stubbs.

“You can do things much cheaper, but here’s the trick, the secret sauce – most people build development sell homes with a five year view at most. You just want to develop it and sell it to make a margin. So they start thinking about as a property asset, and I want property type margins for all that risk, right? We’re derisking it by vertically owning it, the whole thing.

“We will end up actually owning a whole lot of homes that are incredibly high quality, but also incredibly good value.”

Simplicity’s plan is for certain of its KiwiSaver funds, and its investment funds, to own and provide funding to Simplicity Living through a wholesale funding arrangement. The funds will get the capital growth and income generated.

Stubbs thinks the build-to-rent business is an attractive substitute for fixed-interest investments like bank deposits and investment-grade bonds.

“Rather than stick the money in the bank and get 1% return, instead we can rent them out to people and get two or three times that over 100 years. That’s a fantastic investment. For those of you who are financially inclined, it’s like it’s a perpetual and floating-rate inflation-adjusted bond.

“The instrument doesn’t exist in the New Zealand market. You have to create it by creating long term rental streams.”

A different approach

Stubbs says a longer-term view will be crucial to the project’s success.

“You need to have a lot of money and you have to have it more vertically integrated. You got to be prepared to control and own things, rather than get into this eternal finger pointing that goes on in the industry, blaming someone else for the excessive costs,” he says.

Brealey is looking forward to utilising the NZ Living approach to property development on a grander scale than ever before.

“We’ve got one person doing what we used to have four people doing, and the rest of the market probably takes eight people to do. Our labour costs and our labour numbers have plummeted as we’ve innovated and become more productive,” he says.

“I’m guessing that we’ll probably get first choice on the parties that we want because we’re such low risk, predictable and enjoyable, pleasant sites to work on, when you’re working collaboratively.”

Stubbs is blunt about how different Simplicity Living’s approach will be.

“There’s three magic words there: ‘we trust you.’ It’s amazing what you get out of somebody when you trust them. This industry is so built on mistrust, margin-shaving and litigation and chipping each other. It’s just rubbish.”