RURAL ENTERPRISE A Rural Renaissance – The farm is fertile ground for companies

Primary industry success has leveraged off New Zealand’s natural advantages including climate and geography. But it’s taken entrepreneurial spirit, innovation and adaptation forced by New Zealand’s small size and isolation and, according to Foundation for Research Science and Technology (FoRST) chief executive Murray Bain, long history of research investment to turn those natural advantages to account.
Solutions that worked overseas didn’t necessarily work here, he says, and that encouraged innovation and adaptation. “The distance from markets and often relatively high production costs (particularly the labour content) meant that the added-value imperative was very strong.” He hesitates to ascribe success to the overused ‘Kiwi ingenuity’ preferring instead to point to New Zealand’s “record of good science – particularly relative to our small size”.
In his book World Famous in New Zealand – How New Zealand’s Leading Firms Became World-Class Competitors, professor in the department of management at Otago University Colin Campbell-Hunt pointed out that the creation of global leaders from small, isolated New Zealand enterprises took the support of range of government programmes and incentives. This was certainly the case for success stories like Tait Electronics and Gallagher Group.
“The basic work on mains-powered electric fencing was done at the government-funded Ruakura Research Centre in the early 1960s, and was the ultimate source of Gallagher’s world-beating innovation. The company received further support during the long eight-year process of commercialising the technology.”
Less direct, but just as critical was the government’s contribution to Tait’s success. Campbell-Hunt again: “Tait mobile radios would not have been possible without the investment of the government-run New Zealand Post Office in national network of transmission stations. The early development of this network fostered the creation of mobile radio industry in New Zealand, from which Tait eventually emerged triumphant and went on to take his world-class devices into the much larger British market and thence the world.”
And in Campbell-Hunt’s recently co-authored book (with Geare, D Ruwhiu, and R Bull) The New Zealand Management Supplement (McGraw Hill Irwin, Sydney, 2005), he points to another critical success factor inherent in the rural sector, but this time using the example of the multiple Oscar-winning team behind Weta Workshops and Weta Digital – designers, creatives and model-makers for The Lord of the Rings films:
“Richard Taylor has powerful insights into the reasons why he and his colleagues were so successful in an industry where New Zealand was unknown just decade ago. He stresses that one of the reasons is the creativity that he found in young New Zealanders, most of whom were recruited from rural areas where people have to create their own fun. good proportion of the people working for Weta on the The Lord of the Rings project came from south of Christchurch, the least densely populated region of very low-density country.
“Richard himself grew up on farm in the North Island and made his first models out of margarine because he didn’t have modelling clay. To create the chain maille for The Lord of the Rings, 14 kilometres of small gauge alkathene pipe, commonly used in farming, was sliced into little rings and threaded together to create chain maille that looked and acted like the real thing. Hollywood’s version of chain maille had traditionally been knitted out of wool, and was never convincing.
“As Richard says, being creative is often the result of not knowing how things are supposed to be done, of giving your own ideas go and facing the possibility of failure (ie to aim at failure – but miss!).
“Richard Taylor’s insight is that the sources of creativity that powered the huge success of Weta Workshops and The Lord of the Rings project stem from the same isolation which appears to be New Zealand’s weakness within global competition. Unlike the firms embedded in the huge and sophisticated European and North American economies, ready-made solutions are often not close at hand and innovation is required to solve problems.
“When these solutions produce world-class results, as in the Barmac rock crusher, the Formway Life Chair and Weta’s brilliant designs for The Lord of the Rings trilogy, the result is competitive advantage derived from an isolation that more densely packed economies lost century ago.”
Campbell-Hunt told Management that advantage is not necessarily disappearing alongside our shrinking isolation. “Inherently, you might expect that New Zealand’s increasing integration to the world economy and culture, and the rapidly falling cost of contact to the world, would diminish our idiosyncratic advantages.
“On the other hand, it may be that what matters is relative not absolute difference. We may get to be more like the rest of the world than we are now, but we will always be one of the most isolated economies on earth, and relatively distinctive – by contrast say with the highly integrated economies of north America and Europe.
“I am no farmer, but what I have observed over the last three decades living in New Zealand is wonderful flowering of diversity in farming strategy since deregulation in the mid 1980s. No more scrub retention schemes and sheep-fat bonus payments.
“Instead I see energetic diversification in livestock and agricultural/horticultural varieties, and individual farms running diverse business portfolios that run from adventure rafting to homestays in addition to range of more traditional farming activity. All this says to me that innovation is alive and thriving out there, and will continue to be one deep source of creativity for us all.”
The Government recognises the agritech sector, with revenues in excess of $3 billion, as major contributor to economic growth, in contrast with the prevalent feeling not so long ago that agribusiness and forestry were sunset industries, with declining contribution to GDP.
In policy document, Contribution of the Land-based Primary Industries to New Zealand’s Economic Growth, the Ministry of Agriculture and Forestry pointed out: “In fact, since 1986/87 (after fiscal support for agriculture has been removed) the contribution of agribusiness to GDP rose from 14.2 percent to an estimated 16.5 percent,” and the current estimate is around 20 percent with “every possibility of this rising over time”.
The paper pointed out that the 1990s’ ‘tech revolution’ fuelled belief that IT would transform New Zealand into wealthy knowledge economy without an agribusiness and manufacturing base, but in fact IT’s main contribution has been as an enabling technology boosting the productivity of the primary sector. It also noted tellingly that “exports of software per se are very minor compared to earnings from dairy, meat and forestry exports”.
MAF’s report also noted suggestions that New Zealand’s “long-term historical decline in… terms of trade” could be “reversing in our favour” due partly to the impact of growing markets in Asia such as China, Vietnam and Thailand, but also due to our mix of agribusiness and forestry merchandise.
Many New Zealand businesses, the majority of which are SMEs, have traditionally suffered from lack of development capital because of the limited local investment sources, and this has hampered economic growth. Businesses in the development phase and seeking public shareholder investment are constrained by the pressures to produce profits in the short term.
But as the MAF document points out, the rural sector doesn’t have some of those pressures: “New Zealand agribusiness is based around the family-owned farm and orchard and lot of its economics has been based on farmers balancing short-term cash flows with longer-term capital development and eventual gain.”
There is now of course growing trend towards corporate farming with “substantial external equity investment”. And noti