Thursday, January 26, 2012

Crafar Farms - Some Sanity

On Tuesday and Wednesday mornings I listened to Sean Plunket deftly inciting hysteria on NewstalkZB presumably to help his ratings. In my view there were very few objective callers and nervous listeners are probably waiting for China to invade if the sale to Pengxin goes through - as it should in my opinion.

Why do I think the sale to Pengxin should proceed:

1. The vendors are the Receivers appointed to protect the interests of Crafar Farms creditors. They have a legal obligation to get the best sale, which includes price, price for the creditors - something Plunket and his callers chose to ignore. Recievers also have a pecunary interest as they are rapacious fee chargers so the better the price the better their payment I would think.
2. As I understand it if the sale to Pengxin goes through Landcorp will then lease the properties. Penguixn will pay tax on the income received and unless they are going to be funding the farm improvements, or have done a deal with the Government, they will have very limited scope to reduce their NZ tax liability. Landcorp will employ the core staff probably along the following lines:
a) 16 farms will require 6 New Zealand managers.
b) Each farm will need at least 2 and up to 5 New Zealand general staff, depending size and herd sizes etc.
c) NZ contractors will be required for specialist work.
3. It is logical to expect the sale agreement to include allowing Pengx1n to send staff from China to gain experience on New Zealand farms. I would expect them to be extra to the core NZ staff requirements and they would probably be paid by Pengxin thus bringing overseas funds into NZ, possibly with some tax liability in NZ plus the GST on their spending while here.

If I have one reservation it is the likelihood that Landcorp will manage the properties. Their history of providing good returns on capital is not good and I think that Pengxin would do better to employ professional Farm Advisers and have the New Zealand Managers run the fars for them. I have no doubt this would produce significantly better returns on their capital investment.

These are the main points that I see around this issue. Hopefully it brings some realism to the mass media hysteria, and particularly on NewstalkZB orchestrated by Sean Plunket. By contrast what I have heard of Danny Watson he has been much more rational.

Meanwhile the Homeguard remain on standby pending word of the advancing Chinese.

6 comments:

Anonymous said...

As a NZer, I would feel aggrieved if I wanted to buy land in Oz or Argentina e.g and was blocked because I was a NZer; for xenophobic reasons
Peter

Anonymous said...

I don't think its as simple as we like to think because we respect fair play while some other cultures would see that as soft.

I remain uncomfortable when people compare the Chinese with any other race that might want to own land or operate here. While there are no doubt dodgy doings from all sorts of people of all sorts of races the Chinese are, in my view, different from most in the west in that they have a far longer term vision (nothing wrong with that) and will do pretty much anything to get there (not always so good). They are controlled by a state apparatus which is vastly different from what we are comfortable with.

The Chinese will look after their own (as long as they don't rock the Party boat) at our expense and NZ labour on the farms seems less imressive than NZ owners and workers.

If we are prepared to insist the Chinese Communist Party play the game according to NZ rules that's fine but I suspect we are not - them being rich, ruthless and powerful will eventually make us squirm. These buyers are not of the same ilk as the local market gardener.

There is some opinion that the best price would be achieved by selling as separate farms and I'm unsure as to why the fixation with a job lot. That would appear to open us to choices other than the Chinese or that darned Michael Fay.

3:16

pdm said...

3.16 - excellent comment.

I find it hard to believe that under the current Government that Pengxin would get any leeway other than maybe some tax incentive for a limited period. Certainly not to the extent that reflects the current hysteria that is being whipped up.

Blair said...

There is only one reason this sale should proceed. The reason is that both parties to the sale want it to proceed, and because it is a private transaction it is none of our bloody business.

End of story.

Anonymous said...

You are in a sad desperate place if you are subjecting yourself to listening to Plunkett & Watson - have some pride man

homepaddock said...

The company met the critiera required by the OIO.

If people don't like that they should lobby to change the rules, not get xenophobic about the people who play by them.