It seems like every quarter there’s another ‘report card’ indicating how robust Hawke’s Bay’s economy is in the overall New Zealand scheme. We’re always in the higher performing group, at times the top provincial economy.
The latest from Infometrics reports that Hawke’s Bay, at 8.7%, has enjoyed the greatest growth from pre-pandemic levels of any region. “Strong levels of primary sector production have elevated spending levels and boosted employment activity across regions,” said Infometrics.
Each such report is followed by a media release from one or another of our councils, proudly boasting about our economic success.
But at the same time, Farmers Weekly cover headlined that three of NZ’s leading export sectors – kiwifruit, apples and sheep & beef had lost an estimated $400 million in revenue in the past year due to labour shortages and sickness. Hawke’s Bay suffered its share of that loss.
What to believe?!
Our councils believe the region needs a regional economic development agency (REDA) and last December announced collectively contributing $1.7 million to establishing one. This action followed a comprehensive review of local government investment in business and industry support across Hawke’s Bay.
The review recommended these priority activities for ratepayer investment:
• HB Business Hub;
• Programme Management support for Matariki Regional Development Strategy;
• Industry and sector development (the Food Industry Programme, the Technology Programme and an additional sector development initiative);
• Investment and talent attraction;
• HB brand strategy and activation;
• Coordination of skills and employment initiatives;
• Provision of funding to support a ‘by Māori for Māori’ approach to regional economic development;
• Additional funding for SME and start-up support – if funding allows and a clear gap or need is identified, but delivered by other providers.
Our councils’ announcement claimed: “The review highlighted a range of inefficiencies with the current system and a clear opportunity to do better to meet the region’s needs and potential. The platform will also present a strong and united voice and vision to external investors, talent and Central Government.”
BayBuzz applauded, as we do with all such regional consolidation, but in view of several failed past efforts to create a regional economic driver, asked these questions:
• What is the actual governance structure and representation? The statement said: “an independent entity governed equally between business, iwi/hapū and local government”.
• Does this $1.7 million annually replace what councils already spend on ‘economic development’? And if not – as is likely – what related spending and ‘ED’ programmes remain at the discretion of individual councils?
As it stands, the funding allocation is 29% from each of HBRC, HDC and NCC, 8% from CHBDC and 4% from WDC. According to then regional development manager Sarah Tully, “The existing joint economic development funding across the five councils (totalling circa $500k) will be going towards the entity. Each council’s individual economic development funding or activity will be an area for each council to address and comment on further.”
• Related to that, what will the agency itself actually do? The media statement is long on ‘one voice’ and collaborative rhetoric, but notably devoid of any programmatic detail.
• Will the other ‘partners’ – iwi and business – ever put any cash up? Or are they just on board to spend ratepayer money?
The REDA was to be in place by this past July, but is languishing on the design table. Perhaps because answering these questions – particularly the balancing of purely economic goals against social objectives – are thornier than expected.
So, does Hawke’s Bay need a REDA? What would it do? And what’s the delay?
What is economic development?
Perhaps the most meaningful and truest measure of ‘economic development’ is job creation … but not just any jobs, but rather well-paying jobs in environmentally sustainable business activities generating valuable products and services that will carry us into a resilient prosperous future. To anyone informed on the issues, that is a very ‘packed’ sentence.
Nevertheless, that’s the goal our REDA would seek to foster, within increasingly demanding environmental and social norms.
But apart from the public sector workforce itself – at 10,000 plus workers, about 11% of HB’s workforce, providing effectively a permanent, relatively well-paid base – it is private businesses that create jobs. And the most expansionist of those businesses are aimed at markets and consumers far beyond Hawke’s Bay.
Each of those businesses makes its growth plans based entirely on its own needs, capabilities and opportunities … a ‘regional plan’ created by bureaucrats is largely irrelevant to their decision-making.
How then does local government and a REDA fit in?
For businesses that grow or manufacture ‘things’, mainly by making available land and physical infrastructure (e.g., transport, water, waste disposal) and issuing the consents involved in an efficient manner. The fact that we have five councils involved in such decisions is not helpful. However, with REDA, the individual councils will still hold that decision-making power. So no gain there.
Nor will having a REDA remove the underlying contentious issues … like who ‘gets’ the finite land (and water) – agriculture, industry, housing; growth versus sustainability trade-offs; and funding public infrastructure at an acceptable pace. Arguments around all of these issues will persist. REDA is just another, possibly helpful, venue to have them.
If our REDA is truly facing the future, the job growth it would seek to somehow promote must address the issue of sustainability and resilience. What jobs do we now have that might be jeopardised by future trends, what opportunities cannot be fully captured by our existing workforce and infrastructure, and what new opportunities might those trends create?
However looking into the future in that manner suggests – in over-simplified terms – picking winners and losers … not in terms of individual companies, but certainly in terms of sectors and types of economic activity. Where can our region most safely and proactively try to head in the future? And we are politically loathe to have ‘bureaucrats’ do that. But if not them, who?
We – planet, nation, region – can no longer operate as a mob of free agents. Climate change is driving the spike through that heart, although other pro-social goals would require the same.
What’s a poor REDA to do? Try to plan for our greater good for the future and use moral suasion to urge councils and businesses in that direction.
Today’s regional job profile
Looking at HB’s present job line up, the graph (on facing page) shows the “Top 10” industries making up 35% of the region’s 92,000 person workforce.
Arguably this profiling (and predicting of future need) is the very first job the REDA must undertake far more rigorously than it has been to date. The latest MBIE data cited here is from 2018.
A new player on the scene aims to fill some of the region’s workforce needs, the Hawke’s Bay Regional Skills Leadership Group (RSLG). Just launched in July, the RSLG is focused on two immediate projects – providing driver training for Wairoa teens (not having a driver’s permit is a key barrier for young job aspirants) and filling a special need to fill entry level jobs in the disability care sector.
Looking to the future, the RSLG will focus on these areas – training for jobs in the primary (initially horticulture and meat processing) and construction sectors, supporting wāhine Māori to transition into sustainable employment, providing career advice to young people (rangatahi) and providing them with ‘work ready’ life skills.
Note that this initiative, hugely important, is about filling jobs, not creating them.
Agbiz growth
And indeed in our agriculture sector, at present and near term, the problem is not creating jobs, it’s filling them. By now, we’re all familiar with the region’s ongoing migrant/seasonal worker shortage (comprising about 7% of our workforce); a bit less familiar with shortages of Halal butchers, other meatworkers, packhouse workers and right up the chain to orchard and farm supervisors and managers.
According to Silver Fern Farms chief executive Simon Limmer, “Competition for labour was and will be for the foreseeable future an issue for the whole primary sector.”
Other than sharpening our understanding of the labour need, it’s not clear that our REDA will have any tools to resolve these shortages. Those are ultimately matters for our MPs to address through immigration and other policies.
Meantime, more agriculture growth is predicted, with orchardists’ demand outstripping the trees to plant. Are they simply ‘growing’ our ‘rotten apples on the ground’ problem?
Yet an ambitious company like Rockit forges ahead successfully, at some point growing more apples outside the region than within. Its production and marketing strategy is international in scope. Rockit told BayBuzz, “We have 165 permanent staff in Hawke’s Bay (as at the end of July), compared with 127 in July 2021.” That’s 30% growth and the new roles are technical, marketing, managing. All Rockit has needed from council (HDC) was consent for its new packhouse and office HQ (Te Ipu).
What a REDA might offer a Rockit is unclear. In a sector where finding technology efficiencies (e.g. use of robotics) and ‘added-value’ is critical to business success, such companies have at hand the business intelligence and access to capital they need to expand.
As at Rockit, Bostock, Scales (owner of Mr Apple), Apatu or Brownrigg each charts its own business development, it has no particular need to ‘fit into’ a regional strategy. So if the REDA’s regional strategy were to envision – in the interests of regional sustainability and resilience – greater diversification toward non-agriculture related technology and IP services, our leading agbiz players would have little stake in it.
Similarly with the individual non-corporate farmers looking to prosper sustainably in the future. Their fate lies in adopting farming and growing practices that are environmentally and financially sustainable. With sector, government and academic players providing that guidance and incentives, this also does not seem to be a likely contribution from the REDA.
So, arguably a REDA, which has no consenting authority (land use, environmental or otherwise), has little or no relevance to our region’s largest economic sector.
Moreover, it already has a potential competitor waiting to launch (but also delayed, scaled back, and with no identified users), Foodeast, which received $12 million from the Provincial Growth Fund amidst claims it would potentially create 500 jobs and add $100 million to the regional economy in the next fifteen years. More than a glorified meeting café? BayBuzz will be following.
If HB agbiz is not a major beneficiary of the REDA, let’s look then at the other end of the spectrum, HB companies looking to thrive and grow in the non-agriculture technology and IP space.
Greater diversity?
According to a TechNZ report, there are around 500 firms in the region’s tech sector, with about 240 members in a network called H-Tech Hawke’s Bay. Most of these companies are much less known to the general public than our food producing giants.
For example, how many drivers routinely circle one of the main roundabouts into Havelock North and wonder, ‘What is that company?’ No, not McDonald’s; I mean Fingermark.
Fingermark, a digital signage, touchscreen, user interface, and vision intelligence company, got started in Havelock North in 2016, when founder Luke Irving moved his family and the company’s Parnell-based staff of eleven here, a lifestyle choice. The company services some of the world’s best known brands, from food services like KFC, Starbucks and McDonald’s as well as providing remote monitoring systems for employee safety in mining and industrial environments.
Fingermark recently tipped over the 100 employee mark with around 60 in Havelock North, and has often recruited overseas. And Fingermark’s Jeremy Hunt notes, “Over half of our team are in technology/developer roles so salary levels reflect those in-demand skills” adding that across the company no employees would be earning less than NZ’s median wage.
With high-skilled staff so critical, Hunt believes that “Local government as a whole has a role to play in contributing to Hawke’s Bay being perceived as a desirable place for people to live, work and play. Having the Bay on people’s radars for the right reasons makes it a lot easier to attract the skilled people we need from Auckland, Wellington and further afield. It also increases the likelihood that more founders and leadership teams will consider making the move for their businesses and families.”
Asked how valuable a REDA might be in growing the HB economy, Hunt replied, “Probably marginal but I’d love to be proved wrong.”
In earlier interviews with BayBuzz, founder Irving lamented that councils did not do more to attract businesses to the Bay. “You have to have a scheme and strategy; to be brave and go into the cities and say we want your business in Hawke’s Bay and this is what we’re going to give you as an incentive … They’re not providing the support or incentives … businesses don’t just move here off their own bat.”
These days, Irving is more apt to put his energy behind Innovate HB, whose aim is to surface and mentor new entrepreneurs in the region. He describes it as “a tight network of entrepreneurs, mentors and investors within the central region like never before.”
Probably better known around Hawke’s Bay is technology veteran NOW, whose ancestry in the Bay traces back nearly 20 years.
NOW CEO Hamish White told BayBuzz that the business has grown 120% over the past five years, adding, “Albeit that much of the growth is from outside Hawke’s Bay, what gives me the greatest pride is that this growth creates jobs here in Hawke’s Bay. The number of employees have grown from 40 to 78, with the vast majority of these in Hawke’s Bay. By 2028 we will have around 140 employees.”
White is a bit kinder to our local councils than Irving, probably in part because he does business with them.
As for a REDA, White is clear about what his sector might find useful. First is a focus on “our weightless scalable economy … Agriculture and horticulture are very important, but are not infinitely scalable. Training and development of industry specific skills would be hugely beneficial for the tech sector, including Call Centre capability.” He notes, ‘We have had to set up a second office in Christchurch as there simply hasn’t been the talent pool in Hawke’s Bay to fill vacancies. On any given day over the last 18 months we’d have circa ten vacant positions.”
He also comments on the cost of doing business outside the Bay for HB companies. “Having a Regional ‘Koru-styled’ business facility in central Auckland and Wellington, where we don’t have our own offices, would be of significant value to the many businesses like NOW who do business in the larger centres – our people spend many an hour between meetings sitting in cafes in downtown Auckland drinking coffee.” He sees this underwritten by local government, but with self-funding through a membership programme.
What does he not want from an REDA? “Though not impossible, the pursuit of attracting businesses to relocate is a waste of resource in my opinion. We need to look after and grow what we’ve got, rather than take it as a given that Hawke’s Bay based businesses will stay domiciled here.”
An early pioneer in the regional economic development endeavor was Murray Douglas, then chief executive of the HB Chamber of Commerce and now owner-operator of Te Mata Figs.
Douglas was an original driver of Business Hawke’s Bay, created in 2011 and buried in 2021 when councils declined further funding in favour of setting up the new REDA.
As he recounts, its purposes were to: act as a single point of contact for government in dealing with HB on business matters (and vice versa); provide guidance to start-ups, including business training for new entrepreneurs; provide regional economic data and linkages to possibly supportive local companies; coordinate ‘regional projects’ – nowadays zero carbon, transport, Covid response; and advocacy on long-term economic planning.
And further: attempt to coordinate the economic staffs and activities of the councils. Douglas notes that this failed: “It failed in that often irrespective of the staff willingness, their parent groups may have had other agendas that militated against co-operation.”
His assessment: “I would still see all of the above as relevant.” He would eliminate the councils’ existing economic development units “as this will continue to offer the confusion and distraction that frustrated Business HB” and encourage parochial initiatives.
Where does the REDA sit?
Stalled.The original target to establish the REDA was 1 July. But according to HBRC staffer Michael Bassett-Foss, who hands-on directs the establishment process: “In response to discussion between the three parties involved in setting up the REDA, councils agreed to relax the 1 July start/ transition date to allow a more staged transition to developing the structure and governance arrangements for the new entity.
This is a more pragmatic and positive approach and we expect to have a fully formed company and REDA board appointed before the latter part of this year.”
BayBuzz hears that disagreement amongst the three parties – councils, business, iwi – has stalled the process. Not a good sign for an entity that is supposed to energise regional development with unity of voice and vision.
However, interviewed by BayBuzz, HDC chief executive Nigel Bickle, who’s overseeing the establishment process in his role as chair of the councils’ chief executive group, insists that REDA will be created and have its paid Board in place before year’s end.
Bassett-Foss says: “(REDA) will be a partnership model between business, iwi/hapu and local government, with the sole purpose of supporting growth and productivity across our regional economy.”
So, is business on board? “Business is actively involved in the establishment of the REDA with a nominated representative as part of the REDA Establishment Group and the Board Appointments Panel,” says Bassett-Foss.
However when BayBuzz approached that representative, Brendan O’Sullivan, to address REDA issues, he was too busy, sending a brief reassuring ‘rah, rah’ email instead. Actually probably a good indicator of the general lack of business enthusiasm we’ve found for this undertaking … and a fundamental reason past efforts have failed.
Is a REDA worth the candle? Early optimist Murray Douglas once said: “We’ve got to be like a centipede walking on every leg we can find.”
True, but will the REDA contribute much to that? Nigel Bickle says, “Yes, but we’ll need to see the proof in the pudding.” Or is that custard? I tend toward Jeremy Hunt’s view: “Probably marginal but I’d love to be proved wrong.”