On Monday, the New Zealand Manufacturers and Exporters Association (NZMEA) hosted a forum to discuss policy issues of importance to manufacturers, featuring Hon Steven Joyce, National MP and Minister for Finance and Infrastructure, Grant Robertson, Labour's Finance Spokesperson, and James Shaw, Co-Leader of the Green Party. This was a great opportunity to hear three representatives from major parties engage with NZMEA members in a quality discussion on manufacturing, and today the NZMEA is releasing its list of policies for the 2017 election.
Mr Dieter Adam, CE, NZMEA said, “With the election only 7 weeks away, it’s important that all parties put forward their vision for creating a more prosperous and high-value economy, with manufacturing playing a key role.
"We believe the policies set out here will contribute to growing high value industries in New Zealand.
“We would like to see all parties include all or at least some of our 10 policy points in their election policies. These include working to develop a better understanding of manufacturing and its future potential through a Minister for Manufacturing, addressing skills shortages that hold back the industry from growth and changes to R&D settings to help increase business R&D spending.” Said Dieter.
The 10 NZMEA policy positions are outlined below. A full list can be found below and by clicking here.
Fundamentally change the policy approach to economic development, focusing on growing high-value exports
Appoint a Minister for Manufacturing
Improve and reform the education sector to address current and future skill shortages
Review immigration to ensure a more targeted approach to filling short-term skills shortages
Encourage and support increased business R&D and innovation through R&D tax credits
Introduce accelerated depreciation for new machinery and equipment
Work to create a level playing field for manufacturers in trade agreements and trade practices
Provide the right incentives for shifting more investment into the productive sectors of our economy
Review and reform monetary policy
Adopt effective and equitable policies that lead to improved environmental outcomes , especially in the areas of global warming and fresh water quality
”Our policies will help to create an environment where high value producers, particularly manufacturers, can thrive, grow exports and provide well-paid incomes so New Zealanders can have a more prosperous future. “ Said Dieter.
The NZMEA forum offered a robust conversation about the opportunities and challenges manufacturers face, focusing on the steady and growing contribution manufacturing is making to the goal of New Zealand exports reaching 40% of GDP, staying abreast of advancing technology and investing in a skilled workforce.
“Manufacturing has changed offering new opportunities for countries like New Zealand to grab and run with," says Mr Adam.
“Manufacturing is also entering a rich pipeline of innovations in materials and processes – from 3-D printing to advanced robotics, which promises to create efficiencies and speed to a global market.
“The future is more and more about innovation, increased productivity and global trade of high value components and we want to hear how our political leaders plan to support this.
“The forum was a positive step forward and we were pleased to hear politicians acknowledge the vital role both process and product innovation plays in growing our sector, " he says.
Prof Jane Goodyer, Head of School of Engineering and Technology, Massey University, moderated the event from a highly experienced perspective.
“The manufacturing sector is the backbone to NZ’s prosperity through taking our innovations to the world, " she shared.
“NZ has an opportunity to really add value to our economy. Industry, Government and education need to work closer together to make this happen,” says Prof Goodyer.
Prof Goodyer’s comments reiterate recommendations in a 2012 McKinsey report on the future of manufacturing, which concluded that two key priorities for both governments and businesses are education and the development of skills. They will need qualified, computer-savvy factory workers and agile managers for complex global supply chains. In addition to supporting ongoing efforts to improve public education—particularly the teaching of math and analytical skills—policy makers must work with industry and educational institutions to ensure that skills learned in school fit the needs of employers.
Management at one of McCain Foods’ processing plants in Timaru, New Zealand, has found over 100 opportunities for improvement in its logistics following a two day “energy blitz” from employees.
Production Manager Sonny Quilliam explains the thinking behind the move, with energy efficiency being key to the facility’s operations. “We’d picked all the low hanging fruit through previous work but we needed ideas to generate more energy and water saving opportunities. We knew they were there but we needed to shine a light on possibilities.”
Twenty people from all areas of the facility that produces 146,000 tonnes of chips annually took part, from management to factory floor workers. The team scoured every area of the plant, resulting in a spreadsheet of 113 viable ideas designed to improve logistical efficiency.
Ideas at the top of this list include the optimisation of refrigeration systems, recycling heated water and fixing general leaks.
“Completing the prioritised projects will reduce energy and water use and save thousands of dollars a year,” Quilliam continued. “This frees up energy and water for the local community and allows us greater freedom to invest back in the business.”
Research exercises like this can be greatly beneficial to businesses, with the Energy Efficiency and Conservation Authority quoting that firms can save up to 20% on energy costs with smarter energy use.
| A Supply Chain Digital release || August 7, 2017 |||
Youth Minister Nikki Kaye tonight announced details of the $6 million investment over four years under Budget 2017 to fund more youth enterprise initiatives.
Ms Kaye made the announcement at Victoria University’s Rutherford Building in Wellington, where eight teams of young people had gathered to take part in the Greater Wellington Region finals of a ‘Dragons' Den’ competition, pitching their ideas for innovative companies to a panel of local business leaders for a share of $5000 of prize money.
“Youth enterprise funding is about supporting young people to develop entrepreneurial skills through a range of youth-focused business and enterprise initiatives,” says Ms Kaye.
“It was great to announce details of the funding at an event where the ingenuity and business acumen of young people was on show for all to see.
“In a rapidly changing global economy, young people with entrepreneurial knowledge, skills and aptitude are more likely to succeed in all areas of life, so this is about inspiring our next generation of potential leaders and innovators.”
The funding announced as part of Budget 2017 will include the following investments:
Around $1.2 million in the contestable Youth Enterprise Opportunities for Young People Fund, to directly support young people who have a new or innovative enterprise idea or project, to enable them to develop and execute their project
Around $1.6 million for a targeted fund to support organisations with a track record increasing enterprise learning in a school environment, and/or supporting the establishment of enterprise start-ups involving young people
Around $1.2 million in the contestable Youth Enterprise Fund, to support organisations which are working with young people to help them develop entrepreneurial skills, business acumen and financial competencies
Around $2 million in the Partnership Fund, which was set up in 2016 and involves the Government and business, philanthropic and iwi partners working together to grow youth development opportunities – this $2 million investment will support partnerships aimed specifically at generating enterprise opportunities, which enable young people to develop entrepreneurial skills and/or innovative products or businesses.
“Young Kiwi entrepreneurs are already developing new and exciting businesses that are succeeding here in New Zealand and overseas, some already worth millions of dollars,” says Ms Kaye.
“This funding is about inspiring and supporting more of our young people to develop the skills and confidence they need to take their innovative ideas to the next stage and turn them into reality.
“Through the initiatives the funding will support, young people will develop a range of transferable skills such as problem solving, communication, decision making, team work, financial acumen and leadership.
“I expect around 5,000 new opportunities will be created through this funding.
“The next big company to make waves on the international stage could be born out of one of the initiatives that will be supported, just as it could emerge from the young finalists gathered in Wellington tonight.”
The latest growth figures from Statistics New Zealand and the latest OECD report review of our economy, published yesterday, show that while our economy keeps growing, we’re lacking in areas that can really make us a wealthier nation, say the New Zealand Manufacturers and Exporters Association.
NZMEA Chief Executive Dieter Adam said, “Our GDP is rising, but on a per capita measure, it is much less impressive – we need to harness our potential and work on growing our high-value productive industries to improve this. Real GDP per capita growth in New Zealand is currently below the OECD average, and remains well below what we achieved for the 20 years up to 2007, as the latest OECD figures show.
“Productivity improvement is the key to improving our economic growth, incomes and wealth over time, however, it continues to lag in New Zealand. For example, the OECD report highlights labour productivity in terms of GDP per hour worked falling consistently behind Australia and the United States over the last 20 years.
“The thing is – as Sir Paul Callaghan told us many times before his untimely death in 2012 – we’re not going to grow the value of what we create every hour from having more tourists and more cows in the country; hence the title of his last book “Get off the Grass”.
“To really grow our economy, we need to produce and export more high-value goods and services, and we need to do so more efficiently, increasing productivity. Manufacturing and ICT, two sectors growing more and more intertwined as digital technologies penetrate our manufacturing businesses, already are key contributors to our economy, and they primarily are the ones to turn to when we look for more high-value products and services.
“The key to growth in manufacturing and ICT is innovation, and in the case of manufacturing, process innovation. There is a raft of new digital technologies coming to manufacturing, often referred to as Industry 4.0 or the Industrial Internet of Things. New Zealand needs to embrace these technologies, while at the same time investing in new and smarter products, services and business models.
“The OECD report provides us with some pointers for how to achieve more innovation and productivity. For example, we need to increase non-residential investment, an area we are low at by international comparison, and we need to invest more in innovation activities - again an area we fare poorly compared to the rest of the OECD.
“The report recommends “More fiscal support for business research and development” – we believe that is best achieved through a general R&D tax credit replacing the cumbersome current grant scheme. But the report also points out that our corporate tax rate still is higher than most of our competitors – again a disincentive for more private investment in R&D.
“It will be interesting to see whether the Government takes any note of the sobering figures and sensible recommendations contained in this OECD report. Let us hope we’re not going to squander another opportunity to really put our economy on a stronger footing.” Said Dieter.
Cultivation of the manuka tree has become a priority on hillsides from Nelson to Waikato.
The manuka tree, a member of the myrtle family, is the basis for the sharply growing industry in the production of therapeutic manuka honey.
The health benefits of the manuka tree (pictured) were introduced to the rest of the world by Captain Cook who dubbed it the tea tree.
The demand for manuka honey has created another cooperative opportunity in the form of share production between farmers and apiarists.
In return for allocating blocks of land for the location of hives, the farmer receives a cut from the revenue derived from the honey produced.
International demand for manuka honey more than matches supply which means that apiarists are in the most coveted position of New Zealand primary exporters in that they are able to set their own premium price.
This is as opposed to accepting the international commodity price.
Because the manuka tree flowers out of synch with other nectar-producing flora, the manuka content of the honey can be defined.
StatisticallyNew Zealand is the world's third-largest exporter of honey by value, behind China and Argentina.
Manuka honey accounts for most of this.
Even so these figures account only for the foodstuffs value of the honey. They do not take into account the branded manuka honey dedicated to medical applications.
The activity around the hives is conferring meanwhile a healthy transfusion to regional joinery firms and transport operators among others.
The joiners who once made trusses, doors and window frames are rapidly converting to making hives while truck operators are busy transferring the hives between locations.
Similarly regional construction firms are building honey pack houses.
Farmers are finding their marginal lands, especially the areas on which sheep cannot be enticed to graze, have become a new source of shared profit..
What could go wrong?
In a word, Australia.
The manuka tree also grows in Australia. It is claimed too that it originated in Australia and found its way to New Zealand as an element of the southerly migration of flora and fauna.
Australia offers economies of cultivation scale and viewed as even more significant is its terrain allowing for the rapid shuttling of hives between flowering districts and pack houses.
Some have seen a comparison between the New Zealand kiwifruit boom and the resulting competition from countries such as Chile.
But such quibbling aside, it is hard not to see a new and diversified frontier opening up for hill country farmers.
There is no investment in things like heavy duty fencing (deer and goat farming.)
Even where manuka plantations need to be established, farmers are able run sheep in the plantation once the trees became established after 3-4 years.
In addition there is now good shelter for the stock.
Today we have learnt of the sale of Sistema Plastics to US multinational Newell Brands, in addition to the recent sale of Compac Sorting Equipment, another highly successful New Zealand manufacturing company, to Norwegian company TOMRA in October, say the New Zealand Manufacturers and Exporters Association (NZMEA).
NZMEA Chief Executive Dieter Adam says, “These sales, alongside the recent announcement of the closure of the General Cable plant in Christchurch, may well leave some wondering what is happening to manufacturing in New Zealand. In reality, the situation is ‘steady as she goes’, with manufacturing continuing to be the second-largest contributor to GDP and showing moderate long-term growth rates with less of the huge swings in export revenue, for example, that characterises the commodities part of our economy.
“Within the manufacturing sector there is constant change, with companies closing down and new ones arising, and others growing their business. Most of our manufacturers are fully exposed to the rough winds of global competition, whether that’s in exporting, or in competing with importers in our domestic market, not to mention the effect of an overvalued currency hitting margins and competitiveness.
“Our manufacturers have made big changes, especially post-GFC, to get and stay fighting-fit in tough markets, and sometimes conditions change to an extent that makes it unsustainable to continue.
“While each story needs to be examined on its own merits, there are common elements between Compac and Sistema. Both have been built into large successful New Zealand manufacturing companies over the past three decades by owners who have put a lot of hard work and money into it. They now want to exit the company while ensuring the new owners will keep it on a steep growth path, and preserving jobs in New Zealand.
“One might have preferred for the business to ‘stay in New Zealand hands’, but the reality is that not only are our capital markets thin as we collectively prefer to invest in real estate rather than the productive parts of our economy, but the deals also make a lot of commercial sense, as the new owners in both cases provide access to their resources, including vast marketing, sales and distribution networks.
"As Brendan Lindsay says “Newell has the expertise and market access that will enable them to take the business to the next level and create new opportunities for the company, especially in North America.” Add to that a huge investment in a new production facility in Auckland and an employment guarantee for its 700 staff and you have a reasonable prospect of this deal working well for New Zealand, with the only possible downside being the common international business practice to minimise local tax obligations leading to a loss of tax revenue for New Zealand.
“It is vital that we keep building our manufacturing base and capability to produce more high-value products, especially when the manufacturing eco-system relies on a network of capable manufacturers making up each other’s supply chains and building the industry’s general ability to produce complex goods and skills. Our focus needs to be on building an environment where manufacturing can grow and prosper. The availability of suitable skilled staff, keeping up with changes in manufacturing technology, and a less punishing exchange rate especially with Australia, our main trading partner, will be critical for that.
“We hope to see quality discussion on how to make the most of our manufacturing base to grow exports and jobs going into the next election.” Says Dieter.
Total manufacturing sales rose in the September 2016 quarter, led by a rise in petroleum and coal product manufacturing, Statistics New Zealand said today.
After adjusting for seasonal effects and removing price changes, the volume of total manufacturing sales rose 2.1 percent in the September 2016 quarter, following a similar rise in the June 2016 quarter.
"This quarter's rise in petroleum and coal manufacturing sales followed a sizeable fall in the June 2016 quarter," business indicators manager Neil Kelly said. "This industry often has quite large quarterly movements and is not adjusted for seasonal effects."
Ten of the 13 manufacturing industries had sales increases in the September 2016 quarter. The largest increases were in:
petroleum and coal product manufacturing – up 8.1 percentmeat and dairy product manufacturing – up 1.6 percent, following a large rise in the June quarterchemical, polymer, and rubber product manufacturing – up 5.5 percent.
The trend for total manufacturing sales volume, which gives a longer-term picture of movements, is rising.
The actual volume of total manufacturing sales was up 4.8 percent on the September 2015 quarter. When price changes are included, the value of manufacturing sales was $23.3 billion in the September 2016 quarter, down $332 million (1.4 percent) from the September 2015 quarter.
New Zealand has enjoyed good growth in average income since the global financial crisis. Labour participation is strong and our public finances are in relatively good shape. But one area holding the economy back is our persistently weak labour productivity, with the OECD estimating that New Zealand had the fourth lowest labour productivity growth of OECD countries between 1995 and 2014.
Fortunately New Zealand is in a good position to address this area of persistent weakness.
Achieving New Zealand’s productivity potential is the Productivity Commission’s commentary on New Zealand’s productivity performance. The report shows that New Zealand needs to shift from a model based on working more hours per person to one that is focused on generating more value from time spent at work. “With labour force participation forecast to decline with population ageing, the focus now needs to go on lifting productivity” says Paul Conway, Director of Economics and Research at the Productivity Commission.
The report draws on powerful new data (the Longitudinal Business Database) to provide a fresh and practical insight on New Zealand’s productivity performance.
“There is a view that some businesses stop growing once the owners achieve ‘the three Bs – a bach, boat and BMW’. But new evidence means we can look beyond this and better understand what in the business environment is holding back some Kiwi firms. We can measure the impact of small domestic markets, low levels of competition in services, and the role of barriers to export success, like market knowledge and financing.” says Mr Conway.
With technology creating new opportunities for small and remotely-located firms, an important challenge is to improve the flexibility and resilience of the economy to make the most of important changes in the global economy. The Government has implemented a Business Growth Agenda (BGA) with the aim of building a more productive and competitive economy. The report’s analysis shows that the BGA is targeting the right areas.
“The BGA is subject to annual review. This means that it can respond and evolve as knowledge of the New Zealand economy deepens. Our report gives the Government further insight into why our productivity performance is not as good as it could be and informs possible changes to the BGA that could make a difference” says Mr Conway.
The report highlights several areas for further work, including housing market reform so that people can live where their skills are most valued, and lifting the skill composition of migrants. The report also emphasises practical measures to lift competition in the services sector. Connections across the innovation system could also be strengthened, and the Foreign Direct Investment regime and remaining tariffs need review in the context of growing international trade in services and digital products.