The Maori business revolution

By Nick Smith

Friday 16th July 2004

In 1984, Maori leaders held a series of meetings that set the framework for an economic renaissance that is beginning to assert itself on the New Zealand business landscape.

To many National Business Review readers wearily familiar with tales of misappropriated taxpayer money and squandered treaty assets, a Maori business renaissance may seem an oxymoron.

But Maori business is one of the unsung New Zealand economic success stories, which is why NBR is publishing a series of profiles over the coming weeks uncovering some of the best-kept secrets of Maori success.

As the New Zealand Institute of Economic Research has noted, Maori exports were worth $650 million in 2000 (and will have easily exceeded $700 million now).

The Maori share of overall exports in 2000 was 2.3%, comparing favourably with the overall 1.4% share of the entire economy, the latter in itself an impressive statistic, even though Maori are responsible for 10% of consumption.

As Maori leaders say, Statistics New Zealand does not collate business activity by ethnicity, making it difficult to properly appraise Maori progress.

But for the purposes of its report, NZIER defined the Maori economy as assets owned and income earned by Maori, including collectively owned trusts and incorporations.

The Maori economy was weighted disproportionately to primary and service sectors, the authors found.

But it "has a higher savings rate than the New Zealand economy, [and] in fact, Maori are net lenders to the rest of New Zealand."

What really surprised the authors was that "in aggregate, the Maori economy appears to be more profitable than the New Zealand economy," with Maori generating 2% of operating surpluses, despite "only accounting for 1.4% of the value added."

Plainly, something is going very right in Maori commercial sectors.

Career diplomat Phillip Klap is sick of Maori business not receiving the kudos it richly deserves for its achievements.

"I'm working with people who want to do things ... and believe me, these guys aren't looking for handouts," says the 64-year-old, who last year returned from 24 years as a trade commissioner overseas to head the New Zealand Trade and Enterprise's Maori enterprise team.

"I found some damn good companies operating, about which the majority of people have no idea ... particularly since you rarely hear anything positive about Maori in the media.

"Welfare doesn't come into the picture; there's no such thing as welfare in a business sense. A lot of these guys have the same philosophy as non-Maori, they have the same objectives, which is to maximise profits for shareholders."

Indeed, it is a theme reiterated by the eight company heads NBR spoke to, entrepreneurs such as IT innovator Sarah Reo, a director at Wellington computer company Cultureflow: "People are immersed in grievance. The worst thing about colonisation is when people believe they are victims."

Or Nelson-based Koru Investments chief executive John McLaughlin: "The business community does not seem to realise that Maori are in their own right significant contributors to export earnings ... and the promotion of New Zealand generally in terms of the New Zealand brand. These people make a big contribution to that."

It is a point Klap is at pains to emphasise, saying, "Maori business is part and parcel of 'New Zealand Incorporated' because they go offshore, just like any other company, and they are all prepared to have a go ... They tend to look at things and analyse them and then go for it.

"If we don't embrace [Maori exceptionalism], we are stupid," Mr Klap says.

Like many New Zealanders, when it came to Maori businesses, he was aware only of high-profile fisheries companies such as Moana Pacific and Sealord.

He has since met a new breed of Maori entrepreneur, a group of businessmen and women he describes as "networkers par excellence."

Maori do dominate fisheries, comprising 37% of the industry, but also account for a significant 7.5% of agricultural commercial activity.

Again, that only tells a little of the Maori business success story.

In the 1990s, underlying growth of the Maori economy exceeded that of the rest of New Zealand, NZIER says: "The 1990s were little short of spectacular for the Maori economy," driven primarily by strong growth in the primary sector.

This expansion is expected to continue. For instance, fish prices are expected to rise dramatically and even the projected 1.5% increase in production is "not enough to offset growing demand."

"The relatively small size of the Maori economy belies its importance either to Maori or to New Zealand. Rapid development of the Maori economy will boost the overall growth rate."

So where did this Maori business success stem from? The genesis, says Paul Morgan, deputy chairman of the Federation of Maori Authorities (Foma), was the 1984 Labour Party conference.

Foma is a "business network of Maori communal assets, organisations, a host of legal entities, trusts and runanga and companies" and was charged with taking the Maori cultural renaissance and working a comparable economic revolution within Maoridom.

Although the focus was Maori economic and business advancement, the issues facing Foma were generic: "Land, taxation ... the barriers affecting business," Morgan says. "We've had a lot of success in shifting those producer board reforms, [for instance].

"We took a very strong view that we wanted choice, and the outcomes [for all New Zealanders] have been very good."

He cites an upcoming commercial opportunity and potential policy problem as water: "The reality is there is a scarcity and we need better management of those resources, a better framework and policy.

"The normal model for [resource allocation] is first-in, first-served, use it or lose it ... and there is some merit in that. But from the planning point of view, it can get shambolic. Strategic planning is needed."

Other policy problems are "property rights issues, the protection of property rights ... watering down those rights is not good for business," he says, echoing the position of the Business Roundtable.

Of treaty settlement, he says that "people don't realise it's not going to be a panacea. It's a small part of our asset base anyway. Maori have got on with their lives.

"Our perspective has always been residual assets how to improve ourselves, get an economic return on those. In the '90s, we've seen that kick in and the result of those improved returns is greater investment in communities."

He talks of the business workshops, instilling the disciplines of good management and governance, the workshops on industry-specific issues, the diversification of assets, and the use of collective business muscle to grow these resources and add value to the end product.

He uses a high-tech fish farm at Parengarenga Harbour as an example.

"A lot of our [150 members, representing 2500 Maori businesses] are moving from low-end products into investing in processing. We've moved on in the past 10 years; Maori business won't be supplying the domestic market, their only market is international."

The NZIER report notes the Maori economy is more exposed to international trade than even the most open economies in the world, after spending a "long period trapped in the New Zealand domestic market."

It also notes Maori business is not yet adequately diverse, overly represented in a few sectors and notably absent from the knowledge economy (in 2000 at least), a point readily accepted and being addressed, Morgan says.

"There are a lot of areas we are not in: finance, IT, biotech knowledge-based industries. And we are applying our minds to how to get into those industries.

"[Another is] the stockmarket," he says, adding that companies must be mindful of protecting assets. "You've got to show a prudent strategy."

As Koru Investments' McLaughlin says, Maori business objectives "would be slightly different in a commercial company."

Koru is typical of many Maori businesses ultimately owned by their founding trust's recipients, in this case Motueka and Nelson Maori.

It has taken largely undeveloped land assets and created a diverse portfolio and a $33 million business encompassing agriculture and horticulture, property development, seafood and investments.

Because the over-riding philosophy driving its expansion is the desire "to create a future well for the respondents of the original trust, it's intended as an infinite resource for future generations and in that regard we are different," McLaughlin says.

"In all other respects, we mimic best commercial business practice. [Maori] are here for the long term, investing for the long term, and the way they invest is to protect their assets as much as to grow them."

As the NZIER report shows, Maori trusts have a lower return on equity than other businesses.

Klap says it is simply a case of Maori developing a "slightly different business culture. Maori business works hand in hand with non-Maori business when it comes to export, especially in the seafood sector. Maori and non-Maori they all work together in overseas markets. It's good for Maori but it's also good for the country."

Morgan will allow that "there is a downside not enough tension in terms of performance but there is a lot of Maori shareholder activism now."

There also new opportunities, such as the energy market. "A lot of co-partnerships are in the energy sector. There's a small business in Taupo, a 100MW geothermal station. And there's a significant horticultural development exporting 60 tonnes of high quality produce a week that is feeding off the heat of this plant. That's a classic example of the potential."

Maori are already heavily involved in tourism and much of that industry's exceptional growth in the past decade is attributable to Maoridom's commercial contribution.

In 2000, one in five tourists experienced a Maori performance, now one of the top 15 attractions for international visitors.

Klap says various groupings of companies are "heavily involved in cultural tourism [and are] working together to offer a real cultural experience."

Cultural tourism is an industry that he picks to add an export element to the already massive contribution the industry brings to the economy from international visitors.

"There is huge interest in this particular area [of indigenous culture]," he says, citing a contemporary art exhibition in Canada in which Maori pieces sold for up to $60,000 each.

"What we need to do, with the help of organisations, is to organise the industry," he says.

"People are making money out of it but not maximising what we can make out of it, and that is what it's all about.

"What I think for sure, is we have to embrace the fact that we have a slightly different culturally business community in New Zealand, just as we embrace the fact that when we hand over a business card in Asia we use two hands.

"We're not embracing the fact we have a Maori business culture ... and we're missing out on growth opportunities for New Zealand."

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