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Photo: Getty Images
Photo: Getty Images

OPINIONBusinessMay 26, 2020

How a taiao-based model could lead NZ to sustainable economic recovery

Photo: Getty Images
Photo: Getty Images

Could a taiao values approach to our economy be the key to bridging the gap between protecting our environment and prospering as people? Dr Amanda Black from the Bio-Protection Research Centre explains how.

Aotearoa has been economically dependent on our primary sector for generations. But in this new Covid-19-framed world, that dependence will be magnified.

Already we see government-led job creation in sectors such as forestry and conservation. While tourism and hospitality shed tens of thousands of jobs, the world still demands – perhaps more than ever – products from our farms, orchards, vineyards, market gardens, and seas.

While our economic recovery depends on our primary industries, our primary industries depend on our environment. But the exponential decline of our natural environment continues. We have major water quality issues and a biodiversity crisis, we’re still building sprawling subdivisions on some of our best food-growing soil, and the massive elephant in the room – climate change – looms large.

As a parent, I worry that the decisions we make about our economic recovery will leave our country and world in an even worse state for our children. We can’t afford to carry on extracting wealth from our environment in an unsustainable fashion, be it through tourism, dairying or forestry.

We need a paradigm shift to achieve a sustainable economic recovery. Taiao, a Māori world view that speaks to the interconnectedness of people with their land, can provide the structure through which we shift our values and practices to unite our economy, society, and environment.

Photo: Getty Images

An approach unique to Aotearoa, taiao links environmental health with the health and wellbeing of people and generations. It recognises that human activity is at the root of many environmental problems and must be at the heart of the solutions.

As a scientist of Māori descent, I see this as a logical step in managing our natural assets.

What would adopting a values-based taiao model look like at an operational level? Tuaropaki Trust, an Ahu Whenua Trust located in Taupo, provides a good model. With assets of $700 million, its mission is to use wisdom, knowledge and science to address current and future challenges. Its guiding principles include “look after our land, and the land will look after you”.

Tuaropaki income streams are diverse and include beef, lamb, and dairy farms; milk processing powered by its significant geothermal energy plant (which also feeds power into the national grid); geothermal energy services and engineering; temperature-controlled horticulture; and lately, a hydrogen energy trial associated with those geothermal plants. These integrated operations deliver solid financial returns, allowing the Trust to pay workers a living wage and providing their community with grants and scholarships.

The key to Tuaropaki Trust’s sustainable operations is that it owns the whole-of-system value chain and is moving operations towards a circular economy model while restoring parts of its land back to native vegetation to confer the ecological benefits that biodiversity brings.

A taiao-based model, where the health and wellbeing of the people are linked with the land, would look to move our current unsustainable export model systems based largely on unprocessed (eg logs and wool) and partially processed (eg milk protein, meat and fish) commodities to fully processed high-value products (eg wine) and more restorative practices with more diverse income streams on smaller, community-oriented farms. Another benefit of this is that it has the ability to attract more people back to rural communities.

I believe a taiao values approach for New Zealand’s primary industries can bridge the gap between protecting our environment and prospering as people while delivering food for the nation and income from exports. Uniting under a values-based taiao framework may be the post-Covid guide New Zealand needs for a sustainable recovery.

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The New Zealand dollar will help exporters (Image: Getty)
The New Zealand dollar will help exporters (Image: Getty)

BusinessMay 26, 2020

Sold for a buck: Why Stuff and other huge businesses change hands for $1

The New Zealand dollar will help exporters (Image: Getty)
The New Zealand dollar will help exporters (Image: Getty)

When Stuff’s parent company Nine sold up in a management buyout, the sale price for the whole business was $1. So what does it actually mean when businesses are sold for a buck?

When local media giant Stuff was sold earlier this week to CEO Sinead Boucher, one of the biggest talking points was the price. After all, on paper the whole company cost less than what you’d pay for a copy of one of their newspapers. 

Outgoing parent company Nine was never the most interested owner of Stuff. Nine picked it up in the first place almost by accident, and have spent pretty much its entire period of ownership looking for a way to get rid of it. That’s not necessarily because Stuff is a bad organisation, or unviable as a business – Nine just didn’t have much interest in owning a New Zealand media company. 

So why do businesses sell for a dollar? And what is actually tied up in that sale? 

First of all, for a contract to be signed, there has to be some sort of exchange – hence the need for a nominal price tag. According to Ivan Tava, business broker at Divest, “the dollar component is only there to fulfil the requirements of a legal contract. There’s six elements of contracts that are required, and consideration is one of them – so some amount of money must change hands.” 

“It makes a sexy headline, and it’s all very interesting, but it’s really just someone rubber-stamping the requirements,” he added. 

Why not two dollars, or even a nice round hundred? You could still express the sale with a single piece of currency, and couldn’t anyone walk in off the street and slap it down on the reception desk?

Unfortunately, such a sale probably wouldn’t meet due diligence requirements, said Tava. There are far wider and more important considerations than the nominal price paid.

“The vendor and any financial backer would have to be satisfied that the purchaser could operate the business successfully enough to meet its operational commitments and pay down any outstanding debt,” said Tava.

“There’s going to have to be a lot of standing contracts, that people are happy to assign.” Tava cited the assignment of leases as an example, which “all manner of people would have to be happy with”. He also speculated that financial backing would likely have to be in place behind any bid. “Whoever steps up, thinking about it from the vendor’s point of view, those people would have to be satisfied that the buyers would be able to manage. That would be the biggest barrier to someone coming up with $2.” 

Clearly, Nine had to be getting something worthwhile out of the deal, and one thing Boucher could offer was to take Stuff’s various liabilities off its hands. There are costs of operating for any business, and sometimes bearing those costs can end up dragging a parent company down. Nine will also be keeping ownership of the printing presses used by Stuff, and will lease them back, so there will be ongoing revenue for Nine if the buyer stays viable.

Sinead Boucher, Stuff CEO, has purchased the company (Photo: RNZ/Supplied)

At the last time of asking, Stuff was moderately profitable, posting a $5.5m profit for the year ending June 2019, out of revenues of $269m. But importantly, those revenues were moving in the wrong direction, which means that in the coming years Nine may have found itself having to eat costs for a business it didn’t want in the first place. 

While Forsyth Barr business analyst Matt Henry said he didn’t know the exact details of Stuff’s balance sheet, he said the sale “doesn’t exactly highlight a positive view, does it?”.

“Essentially what they’re doing is passing over the business as a going concern, with all the liabilities, present and future,” said Henry. “Often you might see it in a situation where there are existing facilities that need to be cleaned up or shut down, or there are supplier costs or redundancies that you have to bear. So there’s a whole lot of bits and pieces that come into the determining value that sit outside the notional dollar.” 

Incidentally, the $1 price tag was also the one given by Bauer when it offered to sell its New Zealand magazine stable to the government. And it was the price offered to Nine by rival NZ publishers NZME for Stuff, in a hardball tactic after merger negotiations stalled. 

Henry says this is indicative of where the media is at right now: companies might be able to continue operating but the days of big profits are long gone. “When you sit back more broadly, clearly this is a business where the whole industry is challenged. It reflects that environment, both structurally and cyclically with Covid-19.” 

But it is important to stress that a $1 business sale isn’t necessarily a signal that the business is screwed. In fact, there have been some famous examples of such sales eventually paying off handsomely. For example, Chelsea Football Club was sold for a pound in 1982, before being sold again to Russian oligarch Roman Abramovich for $140 million two decades later. 

Stuff managing such a meteoric financial recovery is deeply unlikely. But the sale taking place as a management buyout to a former journalist like Boucher suggests one other important point. Providing costs continue to be covered, the focus of the business can now be turned more fully towards producing the news, rather than producing profits.

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