By Mark Patterson New Zealand First MP, Spokesperson on Primary Industry.
The sale of Kiwi ice cream brand Tip Top to European company Froneri was a sad occasion indeed for New Zealand – a piece of kiwiana flogged off to the highest bidder.
But New Zealand First’s concern with Fonterra’s sale of the brand isn’t just about losing an iconic Kiwi company to foreign control – it’s the setback it represents in the pursuit of the volume to value dream we all share for the New Zealand economy.
That dream is of a value-led export sector.
This is achieved through the manufacturing of products such as ice cream and timber, instead of the low-value and volume-centric export of milk powder and raw logs, which leaves our economy perennially exposed to the volatilities of commodity markets.
However, that dream is at risk.
Continually, we witness an alarming trend of some of our largest value-add companies being sold to foreign interests. Tip Top certainly isn’t the only such company to be sold off overseas recently.
Silver Fern Farms, our leading marketer, processor and exporter of premium quality lamb, beef, and venison to the rest of the world, was sold to Chinese company Shanghai Maling in 2016. Westland Milk, our second-largest dairy cooperative, is currently under offer from Chinese multinational Yili.
And Tip Top, our country's largest ice cream manufacturer, has now sold to a company part-owned by Swiss giant Nestlé.
Now, no one disputes the economic reality of Fonterra’s situation.
Its debt position is concerning and it needs a capital injection to reduce that debt, after reporting its first ever full-year loss, Tip Top was at the top of its list of assets no longer deemed ‘core’.
But it can’t be understated just how much these sales harm New Zealand’s long-term interest.
As explained in my April column for Magic Talk, despite the foreign ownership of land being the more emotive issue, retaining control of our productive industries is of equal strategic importance to our economy.
That’s because the higher returns that, for instance, Tip Top captured by adding value to our basic milk product now goes to a company headquartered in London, instead of staying onshore.
Simply put, to transition to a high-value economy our productive sector must remain Kiwi-owned.
Companies like Fonterra, Zespri and Alliance Group must lead the way. In Government, boosting the value of our exports is a key focus and New Zealand First is walking the talk.
We recognise the need to boost productivity and move away from commodity production to become price-setters, rather than price-takers, on the international stage.
That’s why New Zealand First negotiated a $1 billion Research and Development tax credit and a $3 billion Provincial Growth Fund to realise those high-value economic growth opportunities in the regions. To realise the full benefit of these investments for our economy, we need to resist the urge to sell off our assets that create value-added opportunities for short-term gain, and instead put in the hard yards to retain their control.
Foreign investment needs to support New Zealand’s interest.
Which is why we secured a review of the Overseas Investment Act. With the first tranche of reforms complete, the second phase will review the nationally strategic asset provisions of the Act. With an increasingly large portion of the productive sector falling to foreign ownership, this review couldn’t come soon enough.
The Coalition Government is doing what it can to make the volume to value dream a reality.
To realise that future for our export sector, companies like Fonterra need to do what they can to ensure our value-added local industries remain in Kiwi hands.
Mark Patterson MP is New Zealand First Spokesperson on Primary Industry.