China Business: Rethinking the future of retail (NZ Herald)

Last year Alibaba announced its “New Five” strategy, which comprises New Retail, New Finance, New Manufacturing, New Technology, and New Energy.

At the time, Alibaba founder Jack Ma told shareholders the Chinese Government’s push for the One Belt One Road initiative presented Alibaba with a unique opportunity to grow its business globally:
“New Retail will bring about a restructuring of the global supply chain and change the complexion of globalisation from the domain of big companies to small businesses.”

Alibaba’s vision is to use its ecosystem — which now includes commerce, logistics, entertainment, cloud, and physical stores — to support its new strategy and provide a platform for individuals, SMEs and large corporates to do business globally.

This strategy has seen Alibaba experiment with new technologies over the past year, culminating in a showcase of technologies during last year’s 11.11 shopping festival that demonstrated the increased blurring between online and offline shopping.

Customers can apply makeup using augmented reality “magic mirrors”. This means they can apply as many different colours and styles as they like, and then — through the use of the mirror — immediately buy the makeup and have it home delivered.

Providing customers with the means to test different shades in a short amount of time adds an extra layer of confidence and assurance they are buying makeup that will suit them. In addition to being placed instore and in mall kiosks, the mirrors are also undergoing trials in public restrooms.

Clothing stores have begun introducing similar technology. Alibaba’s virtual dressing rooms allow customers to quickly try on a wide variety of clothes — without removing any. A shopper can find a pair of jeans they like instore, try them on virtually, then receive suggestions using artificial intelligence and their previous shopping history on alternative styles and colours that might be of interest.

“In 2016 we had a small trial of augmented reality, and we are now starting to use it on a much larger scale — this is the future,” says Maggie Zhou, Managing Director of Alibaba Group Australia & New Zealand.

Alibaba has also started rolling out its technology to transform traditional retailers throughout China, providing them with data-backed point-of-sale systems.

This will allow stores, even some in rural areas which may not have previously used any technology whatsoever, to obtain access to Alibaba’s marketing, delivery, inventory management and payment capabilities.

One example is a point-of-sale kiosk that can use facial recognition cameras to track what shoppers do, identify who they are or estimate their age, and make insights into shopping preferences — effectively bringing what already happens online into physical stores.

Alibaba’s chief marketing officer Chris Tung says the enormous pool of data and analytics expertise will help change the offline shopping experience and bring retailing back into the real world.

“We know a lot. We can model the lifestyle of 500 million people,” he says. “Bricks and mortar retailers are suffering today, but there is a way to make them just as successful as online.”

Zhou adds: “As we continue to adapt operations to better suit the digital world, traditional retailers must look at ways to restructure and enhance the customer experience and the physical retail space. New Retail is the way forward.

“By leveraging the Alibaba ecosystem and technology such as big data and smart logistics, merchants can offer consumers a more efficient and flexible shopping experience, while also improving their bottom line.”

Zhou says the success of Alibaba has been possible thanks to the internet, and believes big data will become increasingly important to business in the future.

“The next 30 years will see the era of the internet flourish. We have the opportunity to change the world and to change people’s lives,” she says.

Will we see magic mirrors, virtual dressing rooms, and Alibaba’s point-of-sale kiosks in New Zealand?

Ultimately, that is part of Alibaba’s globalisation strategy. But for now, Zhou says China’s scale makes it an ideal market to test new e-commerce innovation before taking it global.

“China is a very large market, with millions of digitally savvy consumers. This makes it a great environment to trial new technologies, fine tune them, and see what works.”

Project Auckland: A view from the summits (NZ Herald)

The Memorandum of Understanding of Economic Alliance between sister city triplets Auckland, Guangzhou and Los Angeles was signed in 2014 – and if a week is a long time in politics, three years certainly is.

Since then, New Zealand has had three prime ministers. Former Auckland mayor Len Brown “The Singing Mayor” hung up his chains – replaced by Phil Goff, known less for his singing abilities and instead for his prowess in forging New Zealand’s free trade agreement with China.

Guangzhou also changed its mayor in 2016, and although Democratic Party superdelegate Eric Garcetti is still mayor of LA, President Obama was replaced by the entirely different Trump Presidency.

Over that time, three summits were held to recognise the alliance. And just as with geopolitics, the alliance has come a long way.

The first summit, hosted by LA in 2015, was attended by a humble delegation of about 43 Auckland businesses.

In 2016, Auckland outdid the council’s own expectations with over 700 delegates and more than 330 formal business matching meetings.

Guangzhou’s turn to host took place last month, and saw 70 Auckland businesses take 97 delegates, with around 800 others from LA and Guangzhou.

“Auckland companies need to internationalise,” says Pam Ford, General Manager – Business, Innovation and Skills (Acting) at Ateed.

“They have to go global from day one – and it’s hard. “That’s why we ran workshops for attendees ahead of this latest summit. They helped to build the capability of businesses to maximise their time offshore, and gave them the confidence to take part.”

Alongside business matching, networking events and showcase functions, panel discussions and keynote presenters shared insights and ideas from speakers across the alliance.

Los Angeles 2015: New York is a river, Los Angeles is a lake

The first summit saw panellists discuss the cartoonish view of cities that people – including Americans – have about the US, and stressed that the City of Angels should be seen as more than just a gateway to the US, and certainly more than just Hollywood.

Hollywood makes up only a fraction of Los Angeles’ economy. As well as tourism, it is the US’ largest manufacturing centre, a hub for aerospace, logistics, clean technology and innovation, and home to the largest port in the Western hemisphere.

It is the country’s fastest growing tech start-up region – many arguing it has benefits over San Francisco or Silicon Valley for a tech launchpad.

Despite this, there is no denying LA remains the creative capital of the US. One in seven people are employed in a creative field, and it is the top American metro area for art, design and media employment, providing more than US$140b (NZ$203b) of annual economic impact to the city.

“One of the things the LA summit did was open people’s minds that it is more than just film,” says Ford.

“LA is the place for many of Auckland’s companies that create content. Content now fits across so many more mediums – from gaming and television to social media and particularly the influencer economy.”

“But LA is also about cleantech, food and beverage, design and manufacturing. “Because of this three-year relationship, we’ve developed solid partnerships with the organisations for our companies to access – whether that is through the World Trade Center Los Angeles or the Los Angeles Business Council – that we would not otherwise have had.”

One panellist – a resident of LA – described how the city unfolds as you spend more time there. “New York is a river, but Los Angeles is a lake. If you step outside in New York you will naturally go somewhere, the city itself will take you and it is simple to navigate.

“In Los Angeles, to get anywhere you have to actively swim there – or you risk never getting anywhere at all. But that’s what makes it so exciting.”

Auckland 2016: Partnerships, People, and Cross-pollination

The Auckland summit saw global heavyweights take to the stage at the Viaduct Events Centre, speaking about the importance of partnerships and collaboration, and the opportunities that arise when you bring people together and ‘cross-pollinate’ ideas.

Sunny Bates, a serial entrepreneur and a founding board member of Kickstarter who has served as an adviser to companies including GE, TED and P&G, insisted the economic driver of the future won’t come from factories, technology, or software – it will be down to the networks of people.

“Networks are the structural basis for globalisation and for modernisation,” says Bates.

“Networks know no boundaries, and cultural networks are extremely powerful.”

Former Nike innovation expert Erez Morag agreed that networks were critical, but said it wasn’t those networks on their own that lead to innovation, but instead the cross-pollination of ideas through those networks.

“Instead of chasing the competition, chase the insights, listen to everyone, and play bigger than your size,” he says.

Morag used jogging as an example of cross pollination. In 1961, Kiwi runner and athletics coach Arthur Lydiard organised the world’s first jogging club in Auckland, promoting the cardiovascular health benefits of easy distance running.

Lydiard introduced Nike co-founder Bill Bowerman to the concept of jogging on a chance visit to New Zealand.

“[Jogging was] invented in New Zealand and commercialised in the United States,” says Morag – all through the cross-pollination of ideas.

Throughout the Auckland Summit, then-Maori Development Minister Te Ururoa Flavell reinforced the importance of trusted partnerships to the Maori economy. “Maori want to hear your heart, not just slick words.

“If there is no connection to your heart, then there can be no deal – because it will be doomed from the start” – a message that resonated strongly with Chinese delegates, who rely on guanxi – long-term, strong business relationships, based on trust and mutual reciprocity.

Guangzhou 2017: Leverage our Chinese diaspora

Auckland-based Kenneth Leong, co-founder and director at Healthy Breath – an anti-pollution mask using natural New Zealand wool filter media for international markets – spoke about leveraging the Chinese diaspora.

“We sometimes forget Auckland is home to a large, well-connected Chinese business community,” he says.

The summit and surrounding events enabled new connections between the business delegates, and deepened existing relationships.

“Cross-cultural partnerships enrich all parties, by bringing people with great ideas together with people who have connections, capital and channels to market,” says Leong.

“There is a need to accelerate integration between the migrant Chinese and mainstream business communities in Auckland. Everyone is keen to do business together, we just need to create more opportunities for interaction and relationship building.”

New Zealand’s connection to Guangzhou goes back a long way – many of the first Chinese immigrants to New Zealand came from the Pearl River Delta region, including Guangzhou.

Now, Guangzhou is China’s third largest city, contains seemingly endless skyscrapers, and is considered a manufacturing and commercial hub.

It has been consistently ranked by Forbes magazine as the best commercial city in mainland China for ease of doing business, talent, location, and international connectivity, and in many cases, could be a more accessible market for New Zealand businesses than the more recognised larger markets of Shanghai and Beijing.

Project Auckland: A positive vector for growth (NZ Herald)

Tim McCready sat down with Vector chief executive Simon Mackenzie to discuss the future of Auckland’s energy sector, and beyond.

“It’s almost like we’re back to the future,” explains Vector chief executive Simon Mackenzie as he discusses the energy industry’s shift towards distributed energy systems.

It’s a future Mackenzie seems relatively at ease with, despite it completely disrupting the business models of the industry in which Vector operates as a distributor.

“The whole investment focus is now turning to: how do we utilise technology in the energy sector to still deliver energy in an affordable, yet renewable, sense?” explains Mackenzie.

“We’re seeing a huge tipping point in terms of customers driving what they require from energy.”

Where energy is currently generated at a centralised location — say, a dam — and then transmitted via the national grid to distributors such as Vector, increasingly customers are gaining the ability to generate the energy themselves, within — or on top of — their homes.

This shift has been driven and accelerated by global initiatives to reduce the use of fossil fuels from transport and energy sources in response to the threat of climate change.

And while the lack of international progress on emission reduction targets is often lamented, beneath the surface there has been significant subsidies provided for the development of renewable energy generation and a reduction in the price of technologies, such as solar panels.

“The customer has choice and may send energy back out to others, but even in urban environments they still probably need to move that energy around within the urban environments.”

In this context, says Mackenzie, “transmission and generation are becoming more and more commoditised. At some point in time it will be there more for a backup, or segmented needs.”

The position of Vector as a distribution company — downstream from those increasingly commoditised sectors — appears to be enabling the company to embrace the disruption.

“There’s a desire for more physical solutions — things like solar and batteries and the like — but I think one of the other sides is that we’re now seeing the convergence of transport coming into energy with electric vehicles, and that whole infrastructure to support that,” he says.

“Essentially, an electric vehicle could also be a mobile battery that you connect into your home, so we’ve got technology that enables that.”

And to complement the physical technologies being developed and deployed, Vector is heavily invested in software and digital innovation too. Data analytics is increasingly playing a role in how the company makes decisions, for example.

“We do a huge amount of work on data analytics, and we’ve worked really well and collaboratively with Auckland Council,” says Mackenzie. “We’ve got a huge amount of data and information with them.”

That includes layering data relating to housing construction and demographic trends with behavioural economics insights to generate predictions about future energy and transport usage.

Mackenzie says this unlocks “latent capacity” in the market currently; getting more usage hours for less, without necessarily needing to construct new hardware assets.

Similarly, giving customers the ability to optimise their energy usage by controlling devices from their mobile phones is another way Vector are hoping to use technology to access efficiencies.

“That’s all centred around de-complicating,” says Mackenzie. “Because we don’t believe customers want to be computer programmers to run their energy lives.”

“That sophistication now of being able to co-ordinate and optimise everything, we can provide through technology that we’re utilising.”

“That means there will be a lot more customers with those types of solutions either in their homes or on their roofs. Or they could be connected through other community initiatives such as peer-to-peer trading, or a school might have solar and battery in it that’s not used in the weekends or holidays — so then how does that get shared with communities?”

“The way we see the overall picture is Auckland becomes more and more self-sufficient, so the remote transmission and generation becomes more of a backup in the long-run, and more of a security layer, as opposed to the primary.”

Mackenzie says this vision is one in which Auckland is also a more resilient city, no longer dependent on remote transmission.

Interestingly, Vector’s modelling predicts the primary climate change impact in Auckland to be more high wind events, meaning building resilience and continuity of supply is of heightened importance.

The company also wants to raise the awareness on how climate change will differentially impact New Zealand’s various areas — with some areas more susceptible to sea level rises, for example, than Auckland.

“From the modelling we’ve done, from the global research, we worry about the fact that things are changing a lot quicker than people think, and I think we need to raise the debate and awareness around New Zealand on that.”

A company target of net zero emissions by 2030 reflects that awareness.

Another example of how the company is looking to lead the community and shift attitudes about how energy can be generated, traded, and used is the project with Auckland Council to light the Harbour Bridge using smart energy technology.

From this coming Auckland Anniversary Weekend, the bridge will be lit by some 90,000 LED lights, utilising solar-generated energy, new battery technology, and peer-to-peer energy trading.

“We saw that as a great fit for us, because it’s really iconic,” says Mackenzie of the project.

“For us, it’s a representation of giving back to Auckland but also displaying how we see the future of energy.”

The bridge will have static ambient lighting on most nights, but can be programmed with dramatic animated displays for special events, such as Waitangi or Diwali or the America’s Cup. The intention is to have between 12 and 15 of these events over the first year.

Partnerships, collaboration, and cross-industry learnings underpin much of how Mackenzie discusses Vector’s strategy in this fast-changing industry.

The company has worked with companies such as LG Chem and Tesla to bring their energy storage products to New Zealand consumers, for example.

Though there is not a great deal that is fundamentally unique about the Auckland energy market and infrastructure, or the city from an environmental perspective, these are features that has made the city amenable to innovation.

“Auckland is of a large enough scale to be globally recognised as an international city,” explains Mackenzie. “It’s got a political and regulatory environment which is seen as pretty conducive to actually adopting these technologies.

“For some of the technology companies we work with, they see that as a real positive because it becomes a proving ground for what they want to deploy into markets which are going to be a lot slower to adopt.”

Adopting new technologies early is seen as vital given Auckland’s pace of growth.

“What we’ve found, is that using technology has enabled us to build a whole new layer of networks internationally — and it’s not all from the energy sector — a lot is from outside of the sector, or from adjacencies,” says Mackenzie.

“Although we are small on a global scale, the reality is that doing these deployments or adopting these technologies early is advantageous.

“If you’re not an early adopter, by the time technologies gain a lot of interest from other parties, you’ll end up falling right down the pecking order.”

Dynamic Business: Air New Zealand, Excellence in Governance (NZ Herald)

Air New Zealand has taken out the MinterEllisonRuddWatts Excellence in Governance award in 2017 in recognition of the company’s world-class track record and its emphasis on broad stakeholder management.

Air NZ has consistently been recognised for its excellence in governance — this is the company’s third appearance in this category at the Deloitte Top 200 awards.

Of particular note, is the seamless way in which the airline has managed board and CEO transitions through its robust succession planning processes.

Since the Government-backed recapitalisation of the national carrier in 2001, it has had just two chairmen: John Palmer (appointed in November 2001) and Tony Carter (appointed in December 2010).

In that time there have been three chief executives: Sir Ralph Norris — who came off the board in February 2002 to pilot Air NZ through a major rebuild following a near bankruptcy; Rob Fyfe — who brought marketing pizzazz to the role when he took up the CEO reins in 2005 following Norris’ move to Australia to become chief executive of Commonwealth Bank; and, Christopher Luxon, who became chief executive in early 2013 introducing a global management style to the airline.

Both Fyfe and Luxon were internal appointments who were thoroughly blooded by their predecessors before stepping up to the top job.

In September, former Prime Minister and Tourism Minister Sir John Key joined Carter and fellow members Jan Dawson (deputy chairman), Rob Jager, Linda Jenkinson, Jonathan Mason and Dame Therese Walsh on the board.

Air New Zealand was recently rated New Zealand’s most reputable company for the second year in a row.

The company has continued to sport outstanding financial results since it was named Company of the Year in the 2014 Deloitte Top 200 awards.

Both Carter (2014) and Luxon (2015) have taken out the top honours, for chairman and chief executive respectively, which is another testament to the company’s overall governance record.

It was recently nominated “Airline of the Year” by leading international aviation website AirlineRatings.com for the fifth consecutive year.

The Deloitte Top 200 judges said New Zealanders’ continued faith in Air NZ was a stellar reflection of the airline’s successful governance and the positive impact it has in the country.

They added: “Air New Zealand does the best job of broad stakeholder management. The company does an excellent job for the shareholders, but beyond that it really thinks about the country.”

Air New Zealand’s concern for its wider stakeholder group is evidenced by the airline’s annual sustainability report.

First published in 2015, this annual report tracks the company’s performance socially, economically and environmentally.

These three pillars are supported by six key focus areas — the airline’s people, the communities it operates within, carbon, nature and science, tourism, and trade and enterprise.

The judges remarked that the sustainability reports were a fantastic resource and said Air New Zealand is considered among the best in the country in this area.

The airline has formed a sustainability advisory panel, which includes British environmentalist Sir Jonathon Porritt, New Zealand entrepreneur and environmentalist Sir Rob Fenwick and US biofuels expert Suzanne Hunt.

The airline industry contributes around 2 to 4 per cent to global greenhouse gas emissions.

As part of the sustainability framework, Air NZ is committed to working closely with key regional stakeholders, collaborating and helping them to develop attractive tourism propositions.

An example of Air New Zealand’s work is in Northland where, with local tourism operators, the council and other stakeholders it created a “Summer of Safety” inflight safety video, which was complemented by other tourism marketing campaigns both in New Zealand and internationally.

The judges also noted that the airline’s board had applied best practice in a number of important areas — including its commitment to creating a diverse and inclusive workforce.

The airline says its workforce reflects its diverse customer base and helps it to better serve their needs.

The company also acknowledges that its diversity helps it to be more innovative, challenging traditional ways of thinking, and introduces fresh perspectives.

Air New Zealand has made strong progress in delivering on its diversity and inclusion objectives, focusing strongly on gender representation and growing the cultural capability and fluency of leaders.

The airline recently achieved 39 per cent female membership on its senior leadership team, and has committed to reaching 40 per cent by 2020.

It has established a women’s network around the country to coach and mentor women throughout the business.

Air New Zealand has also implemented other employee networks, including Young Professionals, Maori and Pacific Islands, Pride (LGBTQI) and an Asian employee network.

These have helped to promote a sense of community and belonging across different employee groups, and increase the visibility and awareness of its diverse workforce.

The judges commended Air New Zealand’s commitment to Maori language and culture.

The airline has placed an increased focus on making this a core part of its identify — reinforcing the company’s role as the national airline of New Zealand.

Air New Zealand provides executive coaching and intensive residential, marae-based workshops for members of the senior leadership team to help them to develop greater Maori fluency. The company has also established Maori ambassadors to promote Maori culture and language among all its employees.

Finalist: Abano Healthcare

Abano Healthcare received high praise from the judges for its successful business model and steadfast focus on growing shareholder returns while fending off disruptive hostile takeover offers.

The Abano board, led by chairman Trevor Janes is focused on growing its trans-Tasman dental group — which is benefiting from economies of scale and increasing market share.

The Top 200 judges were impressed with how the board and shareholders have backed the company, particularly in light of the hostile partial takeover bid from Healthcare Partners.

Janes is joined on the board by Pip Dunphy (deputy chair), Danny Chan, Murray Boyte, Dr Ginni Mansberg and Ted van Arkel.

“The board’s resistance to attempted takeover offers has resulted in shareholders continuing to receive growing returns,” the judges said.

In particular, they were impressed that the company has not been distracted while dealing with attempted takeovers, instead remaining focused on the business and implementing strategy.

They noted the successful transition of Richard Keys into the role of chief executive. Keys was previously the company’s chief operating officer and chief financial officer, and took up the role at the company’s 2015 annual meeting following Alan Clarke’s retirement.

The board undertook a considered process to identify the best and most capable person to fill the role. Under Keys’ leadership, Abano reported a record net profit after tax of $11.1 million for the 2017 financial year, enabling an increase in its full year dividend by 20 per cent on last year.

The judges also commended Abano Healthcare for its recent record dividend of 36 cents per share, and payment of $25 million in dividends over the past five years – an indication on why shareholders continue to back the company.

Finalist: Sanford

Sanford’s recognition as a finalist is the result of the freshness of strategy and a focus on broader considerations beyond the company’s commercial activity.

The directors are acutely aware the company’s future depends on its long-term sustainability. This commitment to rigorous management of environmental performance and sustainability across all areas of the business was commended by the Deloitte Top 200 judges.

They said: “Sanford is clearly transitioning strategy around their footprint and sustainability throughout the business to build a long-term business.”

The Sanford board chaired by independent director Paul Norling includes Liz Coutts, Bruce Goodfellow, Peter Goodfellow, Peter Kean and Rob McLeod.

Sanford has placed strong emphasis on offering meaningful opportunities for continual learning and development, setting a goal to maximise the prospects of all its people.

The company has acknowledged this is not an area that has previously been managed as effectively as it could, and has put in place management systems to make it a priority.

Sanford has made a commitment to improving the wellbeing of its employees, adopting the WorkWell programme developed by Toi Te Ora Public Health to support the development of a healthy working team.

Sanford’s annual report was referred to as “absolutely outstanding” by the judges. It includes a touching story from an employee, who credits turning her family’s health and lifestyle around following a visit to Sanford by a diabetes specialist.

The judges also commend Sanford’s very strong integrated reporting. The company has been recognised by the market for this — providing a balanced picture of their economic, environmental, and social performance; facilitating comparability, benchmarking and assessing performance; and addressing issues of concern to stakeholders

Dynamic Business: The value of seizing the moment (NZ Herald)

The forces and trends that shape the world are not always front of mind when running a business.

But in a world where trends are dramatically changing the way value is created, they form an important backdrop that all company strategy and planning should be considerate of.

Some of the most successful businesses over the past decade have prospered because they have managed to successfully navigate the challenges and opportunities these global forces bring with them.

Andrew Grant, Senior Partner (Asia-Pacific) at McKinsey and Company, says New Zealand is a small, nimble nation with an inherent ability to respond quickly to global forces.

“Over the years we have had many global trends working in our favour, but we’ve failed to respond fast enough to seize the moment and capture the opportunity,” he says.

McKinsey uses the metaphor of a crucible for these forces — “a place or situation in which concentrated forces interact to cause or influence change or development,” and segments these “crucibles” into global growth shifts, accelerating industry disruption, and a new societal deal.

Some, like cybersecurity, geopolitics, and the rapid invasion of technology are already front of mind for executives and the boardroom.

Others, though not so obvious, are just as important to consider.

No one can know for sure what the future will look like. But businesses — both old and new — that grapple with these crucibles and question the assumptions of their business model, can expect to compete more effectively in the increasingly disruptive world we have found ourselves in.

1. Beyond Globalisation

Globalisation as we have known it — and as New Zealand has greatly benefited from — is going to change.

Donald Trump, Brexit, Jeremy Corbyn, TPP: the results of recent elections and referendums worldwide can be attributed to a growing sense of disillusionment, anti-globalisation and protectionism.

Traditional measures of globalisation are also slowing. Trade growth over the past decade has been half of that in the late 1990s and early 2000s.

Following the global financial crisis in 2008-2009, global capital flows as a percentage of GDP dropped dramatically — and have not returned to pre-crisis levels.

Despite this, many argue globalisation has accelerated — but it is taking place in different forms: cross-border data flows are increasing at rates approaching 50 times of those in 2005; the McKinsey Global Institute estimates there are now 914 million social networking users with at least one foreign connection.

The world now has 429 million international travellers, 361 million cross-border e-commerce shoppers, and 244 million people that live outside their home country.

Competing with the increasing number of global players means maintaining a local touch is increasingly important for companies. Rising tension between technology firms in China and the rest of the world is creating a gulf that will be an important factor shaping the future of global tech innovation.

The New York Times’ Farhad Manjoo explains: “You can be Alibaba or you can be Amazon. You can be Uber or you can be Didi. But you can’t be both.”

2. ICASA Factor

Brazil, Russia, India and China (or the “BRIC economies”) are four major emerging national economies postulated by Goldman Sachs in 2001 to become among the four most dominant economies by the year 2050 and the biggest drivers for future global growth.

But more than 85 per cent of the growth from the BRIC economies came from China.

McKinsey proposes that ICASA — India, China, Africa and Southeast Asia — will become the dominant force, primarily because the greatest growth engine has been urbanisation.

At the same time, these regions present some of the biggest risks to global growth, as they struggle to deal with internal obstacles including sustainable urbanisation, increasing productivity, mobilising domestic resources and deepening regional integration.

3. Resources (Un)limited?

As the world’s population approaches 9 billion, there is growing urbanisation which brings with it a rapidly increasing demand for resources. This includes a dramatic increase in the demand for protein, consumption of oil and gas, fresh water, and synthetic and natural fibre.

Yet advances in analytics, automation, the Internet of Things and material science are reducing resource consumption in other areas.

McKinsey and Bloomberg have estimated advanced mobility systems — including self-driving cars, ride-sharing, and electric vehicles — could yield US$600 billion (NZ$880b) in societal benefits through to 2030, by cutting the costs of traffic congestion (about 1 per cent of GDP globally), road accidents (1.25 million deaths in 2015), and air pollution (health problems like respiratory ailments).

In other sectors, algorithms are helping optimise and predict energy use, enhanced oil recovery is transforming resource production, and innovative new materials are helping reduce resource use. Demand for resources is growing, but innovation and technology provide the opportunity for the world to be more efficient with what we have.

4. Technology Invasion

Technology change is happening continuously. But Grant believes we are underestimating the scale and the pace at which technology is evolving and will shape business. “People don’t quite understand how profound and how long the journey is going to be.

“The ubiquity of technologies and the ability to roll it out globally is making new advances far more impactful than ever before.”

We’re seeing rapid innovation in areas where families of technologies are coming together.

The smartphone brought the touchscreen, applications, CPU, LCD displays, wireless connectivity, and lithium-ion battery technology together with advances in miniaturisation.

The development of the autonomous car is combining video cameras, presence sensors, Radar, Lidar, GPS and CPU technology. Instead of linear step changes, we can expect to see combinations of technologies make the scale of change much more powerful.

5. Customer-to-Business

B2C (business to consumer) and B2B (business to business) have long been commonplace, but digitalisation and new business models are giving consumers the ability to shape goods and services, often receiving free access to what would once have been paid for.

Alibaba’s founder and executive chairman, Jack Ma, declared the start of C2B, or consumer to business, open several years ago.

Rapidly growing Chinese mobile manufacturer Xiaomi uses crowd-sourcing to engage with consumers for fast, first-hand feedback on its products. Grant says Xiaomi is becoming representative of where the business world will need to position itself for the future.

Customers are increasingly dictating the terms of what they need (and what they want) directly to companies and the Internet is providing the ability for this to occur as never before. Consumers have an ever-increasing choice, and companies must make decisions about their product offering and which business models they should use to continue to create value.

6. Ecosystem Battles

Five of the 10 largest companies in the United States are platform-oriented. Airbnb now has four million listings globally, more than the top five hotel brands combined.

The company says “on any given night, two million people are staying in other people’s homes around the world on Airbnb”. Uber might be the world’s largest taxi firm, but it doesn’t own its cars. Neither of these companies existed 10 years ago.

Alibaba — the world’s largest retailer — moved NZ$37b (US$25.3b) worth of stock during its November 11 extravaganza, but doesn’t own warehouses to store the eye-watering quantity of products sold through its platforms.

These platforms offer business models that can be enormously disruptive in the way they shape the world, and are shaking up industries that were immune from significant competition in the past.

7. Dealing with the Dark Side

Cybersecurity has become a trillion-dollar issue. Grant says boards of Fortune 500 companies are now spending about 15 per cent of their boardroom agenda on cybersecurity.

The Herald’s Mood of the Boardroom in September revealed that New Zealand’s executives are highly concerned about the threat, with 67 per cent of respondents now doing significantly more to combat cybercrime and 30 per cent doing more “in a modest way”.

Previous Mood of the Boardroom reports suggest a clear — and rapid — trend: in the 2015 survey, cyber crime rated 5.9/10 in terms of impact on business confidence. Last year it became the top issue at 7.16/10, and this year it sat head and shoulders above other issues, with an impact rating of 7.64/10.

Alongside cybersecurity, McKinsey estimates that 81 per cent of executives worldwide single out geostrategic factors as the top risk to growth.

Examples of the severity geopolitics can have on business include:

  • A 4.5 million shortfall of Russian tourists as a result of the ban on agency tours to Turkey in retaliation for shooting down a Russian warplane.
  • 120,000 tonnes of Norwegian trout and salmon have been banned from Russian markets in retaliation for EU and US sanctions over the Ukraine crisis.
  • 16 per cent of London properties listed online have had their price cut after the UK referendum to leave the European Union.
  • 500 direct daily flights were halted in the Middle East as a result of the diplomatic stand-off between Saudi Arabia, Iran and Qatar.

8. Growth Formula Experiments

There is no shared narrative on why economic growth is stuck. Is the problem in developed economies a supply problem or is it a demand issue?

Monetary easing, a universal basic income, and debt mutualisation are among the suggestions on how to restart growth. There is extraordinary experimentation going on, but no consensus.

Grant says solutions will not be singularly political. They will require business, civil society, and the political arena to come together.

“Some interesting insights are coming from Denmark, Switzerland, Finland, Israel, Singapore… I think New Zealand has a real opportunity to lead on this,” he says.

9. Middle-class Progress

The benefits of globalisation have not been distributed evenly. Alhough globally the middle-class have done well, those in advanced nations have missed out.

This has created a widening of earnings disparity, and has been blamed for the increasingly negative view towards immigration, the status quo, and trade deals that appear to favour the boardroom over the workers.

Much disillusionment has been blamed on, and exploited by, politicians, but trust has become a critical flashpoint that companies must address and build back to ensure long-term, sustainable businesses.

Sources: Presentation by Andrew Grant — A new narrative of progress? Major Macro Trends Shaping our Region — to the 2017 Infinz conference; McKinsey report — The global forces inspiring a new narrative of progress.

Infrastructure: Looking at the opportunities for asset recycling (NZ Herald)

Asset recycling enables the Government to boost its available funds by either selling or offering a long-term lease of underutilised, inefficient, or surplus public infrastructure to investors in the private sector.

In exchange for the sale or lease of those assets, the Government can receive a large up-front, lump-sum payment.

Capital received from divestment can be used to revitalise existing assets, or fund new and critical infrastructure needs that might otherwise have been unfunded or funded using more traditional methods such as raising taxes or increasing public debt.

New South Wales
Since 2012, asset recycling has been one of the core principles of Australia’s New South Wales Government property policy.

The NSW Department of Premier and Cabinet says that “real property assets are only held by Government when required, and in the form necessary, to support core government service provision.”

Australia’s asset recycling has extended to the sale or long-term lease of public assets including ports, “poles and wires” electricity assets and its land titles registry, and has reached a combined value of A$53 billion.

Former NSW premier Mike Baird campaigned at the 2015 election on a platform of infrastructure investment, of which the recycling of assets was the method to achieve this.

Baird’s re-election demonstrated that asset recycling and new infrastructure funding mechanisms can be economically effective as well as politically popular – but they take leadership and vision.

A recent report on asset recycling by Property NSW showed overwhelming support for the NSW Government’s policy of recycling property assets to fund infrastructure and better services.

Of those surveyed, 71 per cent said they favoured leasing or selling under-utilised assets over more traditional measures, such as raising taxes or increasing levels of public debt.

Interest from the US
During his visit to Australia earlier this year, United States Vice-President Mike Pence told business leaders that the Trump administration hoped to emulate the Australian model of infrastructure asset recycling as part of the President’s US$1 trillion infrastructure plan.

New York’s LaGuardia Airport was cited by Pence as one example of an asset that had the potential to be redeveloped with the injection of private funds.

LaGuardia is so badly in need of upgrades, expansion and improvements that President Trump has referred to it as “like from a third world country”, contrasting it (and other US airports) to the “incredible airports” in Dubai, Qatar and China.

Upgrading Circular Quay
It is estimated that the number of jobs in the iconic Circular Quay precinct in Sydney will increase by around 4500 in the next 30 years.

The ferry wharves and adjoining promenade were built in the 1940s and are nearing the end of their life. They are also not compliant with the Disability Standards for Accessible Public Transport.

For these reasons, they are considered long overdue for a facelift.

In order to fund the upgrade, Property NSW is divesting commercial assets that are considered not core to service delivery or of long term strategic importance.

This includes the sale of rights to the ground lease rental income at Darling Quarter for 30 years, for an upfront payment of A$192 million ($215m).

The revitalisation of Circular Quay will support new construction jobs, and the upgrades will deliver improved transport services and an enhanced retail offering for workers and visitors, boosting economic growth and tourism to the precinct.

Viewpoint: Michael Barnett, Auckland Chamber of Commerce chief executive
It would easy to be populist and label it privatisation and kill another opportunity for Auckland. The reality is, existing funding models are failing us and we either need to find an innovative response to this or pay the price of a lack of investment in our infrastructure over the last 40 years with low productivity and community frustration.

Old style asset recycling was essentially selling one lot of assets to fund other priorities – this often meant selling an income generating asset to fund another asset that didn’t.

Today it’s about maintaining ownership control and not owning – an example of this could be with Ports of Auckland where the land and the business could be separated or perhaps an environment where an investor of “like values” might take partial ownership of an asset investing say on behalf of a superfund of New Zealanders with only the intention of investment and not for selling on.

Of course, any funds released should then be invested in our infrastructure needs (transport) – the important thing here would be to have a narrative that articulated the benefit to Auckland that may not be in cash but in productivity, employment opportunities and growth.

Viewpoint: Kim Campbell, Employers and Manufacturers chief executive
If we are to have sufficient funds for the development of Auckland’s growing infrastructure needs we will need to find more innovative funding devices.

The community appears allergic to rates, and tolling the roads is consistently blocked by central government. So what’s left?

Recycling of assets is a tried and proven device overseas where city assets are identified as being underused, redundant or inappropriate, and sold. The funds are immediately put to use for items which will increase the city’s overall productivity.

There are many such assets in Auckland. They may have some amenity value, but the benefits may accrue to a small part of the community. This includes shares in airports, golf courses, quarries, forests, transport corridors, water systems and theatres – to name a few.

Their sale is quite legitimate as long as the money is put to more productive use immediately. Often the sold assets become more productive under new owners as we have discovered with the sale of our electrical generation assets. NSW has a long and successful history of this, including Barrangaroo and White Bay.

Viewpoint: Paul Blair, Head of Institutional Banking, BNZ
BNZ is open to talking about ways to solve the big issues facing New Zealand. Countries and governments around the world are facing infrastructure challenges – New Zealand is not alone.

It is important to look at and consider potential ways to solve issues and have those challenging conversations, but any single “tool in the tool box” (like asset recycling) can’t be a silver bullet – multiple approaches and great collaboration is more likely to get a good result.

Governments face ever-rising demands for new and better enabling infrastructure. Asset recycling is one of the tools that have been used successfully in NSW and other overseas jurisdictions. New Zealand has an opportunity to learn from these case studies.

There are many other tools as well (including modern regulation of infrastructure sectors, centralised and specialist procurement, integrated planning, governance and finance, the use of incentives to encourage private sector and local government investment, etc) and a combination of approaches is likely to be needed as these are complex problems.

New Zealand is an extremely open economy. New and modern business models and exponentially expanding technology mean we are highly integrated into global business flows and trends which are changing at an unprecedented rate.

Business and society change is driven by new technology such as artificial intelligence, social media, robotics, data science, 3D printing as well as big macro shifts in demographics, infrastructure pressures and geo-political changes.

All of this change, coupled with government’s relatively limited risk appetite and the complexity of legislating for and regulating this change, means that governments need to look at alternative models to deliver the infrastructure required to meet New Zealand’s social and economic needs.

Infrastructure: Could smart-tracking solve Auckland’s congestion problems? (NZ Herald)

Singapore aims to have the world’s most advanced road pricing system by 2020.

The Global Navigation Satellite System (GNSS) will make Singapore the first city in the world to include a dynamic distance, time, location, and vehicle type road pricing scheme.

The S$556 million (NZ$566m) project was won by NCS and Mitsubishi Heavy Industries Engine System Asia – a price that is less than half the S$1.2 billion submitted by the other qualified bidder, ST Electronics.

The island-wide system will use satellite navigation technology to detect and measure distance travelled, as well as provide real-time traffic for every road user. Drivers will be warned before entering a charged road, giving them the option to divert elsewhere if they prefer.

Parking information obtained from every driver and automatic streetside carparking will mean circling around for a carpark and digging around for cash to buy a parking ticket will be a relic of the past.

In areas where satellite coverage could be weak (including tunnels and beneath viaducts), it is anticipated that signal beacons will be put in place.

Though some say the new system will mean personal cars become less about freedom and more like a “private taxi”, Singapore has long been ahead of the world in road user charging.

In 1998 – when Auckland was suffering from a five-week power outage in the CBD caused by multiple power cables failing – Singapore was rolling out what was then the most sophisticated urban congestion charging system on the planet.

This gantry-based electronic road-pricing system targets roads that are heavily congested, and mostly operate at peak times, applying prices to achieve a minimum “level of service”.

Though some privacy concerns have been raised around the level of surveillance that comes with tracking all road users, there are similar issues with other forms of modern transport.

A push for alternative transport
Despite Singapore moving towards a sophisticated and expensive road pricing system, car ownership is low by global standards. This is largely due to the hefty price of a certificate of entitlement – S$36,000 (NZ$36,790) for cars up to 1600cc – which allows the certificate holder to register, own and use a vehicle in Singapore for a period of 10 years.

When you consider 12 per cent of the small country’s land area is consumed by roads, it is unsurprising that Singapore’s Minister for Infrastructure and Transport, Khaw Boon Wan, has set a target for 75 per cent of trips to take place by public transport by 2030, and 85 per cent by 2050.

Singapore is also significantly boosting its bus fleet, rail network, cycling paths, and the distance of its covered walkways.

Driverless cars are tipped to be a further game-changer. Singapore’s well-maintained roads and contained geography make it an ideal location for autonomous vehicles, expected to offer greater fuel efficiency, reduced road congestion and carbon emissions, and a significant reduction in accidents.

Last year US autonomous vehicle R&D firm nuTonomy ran a limited public trial for the world’s first driverless taxis in Singapore.

Despite one of nuTonomy’s self-driving cars hitting a truck, the trial was considered a success.

The company noted the accident was due to “an extremely rare combination of software anomalies,” and intends to launch a commercial service in Singapore in the next year.

It is therefore not unthinkable that at some point, mass use of driverless cars and public transport could remove the need for congestion charging altogether.

Capital Markets: Direct Capital spurs private equity market (NZ Herald)

Tim McCready talks to Direct Capital’s managing director, Ross George about the firm’s latest capital raising, lessons from past investments, and the state of NZ’s private equity industry
Late last year, Direct Capital raised its fifth private equity fund in New Zealand. Since it began in 1994, the firm has raised $1.2 billion, with its latest $375 million fund coming almost exclusively from existing investors in just two months.Herald: Direct Capital’s first fund was raised in 1994 — 23 years on, what has changed most in the New Zealand private equity industry?

Ross George: When Direct Capital began, private equity was a very established industry offshore, but it didn’t exist in New Zealand in a formal sense. We had to go out and explain who we were and what we wanted to do with investors, advisors, and private companies. Now Ryman Healthcare, Scales and NZ King Salmon are on the sharemarket — people know they came from private equity, and the private company market is well regarded by investors. One of the most positive changes has been the New Zealand Stock Exchange. When we started 23 years ago, you couldn’t necessarily invest in companies and then list them — the stock exchange said they were too small.

Around the world, all successful markets mirror their economies and their company stock base. The stock exchange here has now grown substantially by appealing to a broader set of companies, and it means you can keep them here in New Zealand.

Herald: You’ve just finished raising your fifth fund in the last quarter of last year. How did it go?

Ross George: We had a two-month window, and we were easily able to raise it. We wanted to cap it at $375 million, but could have raised significantly more. Over 23 years we have performed very well for investors. The feedback we receive is that we don’t take inappropriate risk, and that our performance has been consistent and very good relative to other categories. We are in the fortunate position of being able to go back to our existing investors and raise capital. That’s real recognition of our performance and just how big the private company opportunity is.Herald: What is unique about the private equity industry in New Zealand?

Ross George: In New Zealand, you can find yourself investing in the top five companies within a sector. We have managed to invest in Ryman Healthcare — the biggest in its industry, Scales — the second biggest apple producer in the country, and King Salmon — the largest salmon producer. In Australia, you’re more likely to invest in the top 15. Economically, New Zealand is doing very well, and there are a lot of good opportunities. But it’s a double-edged sword. We’re not the only ones that have noticed New Zealand is going well — the global corporates have noticed too. There is now a real desire to be here. Also, private company owners in New Zealand tend to be older than offshore. In our size bracket, that’s a real feature. As owners near retirement age, they might want to sell down but remain a 20 per cent shareholder, or change their role but stay on the board. We can work with them to understand how they want to change their life — because more often than not they don’t want to stop working abruptly.

Herald: Direct Capital’s investments have been across many different sectors — from technology and e-commerce to forestry and pharmaceuticals. Are there any particular areas you’re targeting for this fund?

Ross George: You can’t just choose an industry in New Zealand and invest in it. There are some areas such as food and primary industries that dominate in New Zealand and that we get a lot of recognition for.

These will always be a cornerstone of our funds, but we try to follow big long term trends. Food for Asia is a big trend that we think will suit us into the future. In the short term, New Zealand has done well economically over the last decade, and there has been a lot of money spent on infrastructure.

Although we’re not an infrastructure investor ourselves, we do invest in companies that provide services into the industry.

Herald: NZ King Salmon was one of your most recent exits, listing on the NZX and ASX last year. What was it that appealed to you about the company?

Ross George: NZ King Salmon is a company with good insights into how to run a primary industry. When we did due diligence on the company, we liked that it had its own hatchery, farms, processing plant, brand, and export operation. If you put that in the context of other primary industries, it has every step covered. It is a real pleasure to turn up in London and see Ora King salmon on the menu, and you think that started from the production of an egg by the one company. When we came to listing it, that was a really appealing thing. The main comment from the institutions is that this is how a lot of other primary industries should be organised.

NZ King Salmon has been a stellar performer for a long time. It produces a premium product that doesn’t have a commodity price attached to it, and can sell every kilogram of salmon it produces. The issue now is how it continues to grow. It’s a very large employer in Marlborough, and because it is a year-round employer it’s a sought-after place to work. The only problem is that it can’t grow its production enough. The government and regional councils talk about growing regional businesses that can create employment, but there has got to be enabling tools and legislation to allow them to do it.

– NZ Herald

By Tim McCready

Capital Markets: Revised NZX stance on diverse governance (NZ Herald)

Tim McCready

Some of New Zealand’s biggest businesses will now have a comprehensive, measurable diversity policy to follow.

As part of the NZX’s new Corporate Governance Code, NZX-listed companies are recommended to make their diversity policy and objectives public, and explain their attitudes and goals to achieving better diversity in the workplace.

These goals should be measurable and progress tracked. This includes reporting on the number of men and women on the board, at senior management level, and across the entire organisation.

If an organisation doesn’t have a diversity policy, the new corporate governance code requires them to explain why not.

These changes will lead directly to more listed companies establishing display metrics — including gender, but also hopefully extending to address areas such as equal pay and flexible working arrangements

Joan Withers, chair of Mighty River Power and The Warehouse, believes these changes will lead directly to more listed companies establishing diversity metrics.

“This includes gender, but also hopefully extending to areas such as equal pay and flexible working arrangements,” Withers says.

“Measurable objectives lead to greater diversity; greater diversity leads to better business outcomes — delivering to the bottom line through improved productivity, profitability and performance; better growth, innovation and customer service; and an enviable ’employer of choice’ reputational standing.”

The revised code aligns to Australia’s ASX’s diversity policy regime, which has a similar ‘if not, why not’ requirement.

Since those reporting requirements were introduced in Australia, the number of women on boards increased by 47 per cent (from 15 per cent in 2012 to 22 per cent in 2015), and the number of women in senior management positions increased by 30 per cent (from 20 per cent in 2012 to 26 per cent in 2015). Now, 99 per cent of ASX200 companies have a diversity policy in place.

A combination of reporting and voluntary target setting saw the number of women on UK’s FTSE100 boards increase by 52 per cent over four years (from 12.5 per cent in 2011 to 26 per cent in 2015).

The changes are not a quota and won’t force companies to have a specific number of women on boards.

Withers, who is also vice-chair of Global Women, is against the concept of quotas because she thinks they are demeaning.

“All of the women that I work with around the board table are there because of their all-round directorial competence. They can hack it with any of the male directors that are sitting around those same tables.

“The changes are saying that we need to be utilising — as a nation — the whole talent pool that we have got.”

Withers notes she has never been in a position where a board she is sitting on hasn’t been able to find skilled women across all areas.

Hamish Macdonald, General Counsel and Head of Policy at the NZX, says that the NZX Code sets out a series of recommendations, such as diversity, that listed companies are recommended to follow.

“Our role as a licensed market operator is to act as a standard setter but it is up to companies and the industry as a whole to progress change,” he says.

“Naturally, the aim of the NZX Code is to improve governance standards, particularly for listed companies which are smaller in size or at an earlier stage of development.

Many of New Zealand’s top listed companies will already be meeting the practices outlined in the NZX code.

“We hope the updated NZX Code leads to improved corporate governance, but ultimately it is up to shareholders to decide if they are comfortable with a company’s governance practices based on the disclosure triggered by NZX’s rules,” Macdonald says.

New rules for CEO transparency
The NZX’s Corporate Governance Code, released last week, represents a significant step forward for corporate governance reporting requirements in New Zealand.

The NZX Code has eight parts, covering principles that reflect internationally accepted corporate governance practices intended to protect the interests of and provide long term value to shareholders while also seeking to reduce the cost of capital for issuers.

Principles include ethical behaviour, board composition and performance, board committees, reporting and disclosure, remuneration, risk management, auditors, and shareholder rights and regulations.

Each principle contains specific recommendations and explanatory commentary that NZX-listed issuers are encouraged to adopt. It’s been more than 13 years since the NZX Code was reviewed.

The remuneration principle requires the pay of directors and executives to be transparent, fair, and reasonable, and includes the following recommendations:

  • An issuer should recommend director remuneration to shareholders for approval in a transparent manner. Actual director remuneration should be clearly disclosed in the issuer’s annual report.
  • An issuer should have a remuneration policy for directors and officers, which outlines the relative weightings of remuneration components and relevant performance criteria.
  • An issuer should disclose the remuneration arrangements in place for the CEO in its annual report. This should include disclosure of the base salary, short term and long term incentives, and the performance criteria used to determine performance-based payments.

Companies that do not comply with the recommendations will have to justify their decision. Currently, companies only have to report on the number of people who earn over $100,000 within salary bands of $10,000 above that threshold — and it is not always the case that the chief executive is the top earner.

Hamish Macdonald, General Counsel and Head of Policy at the NZX, says the code recommendations were designed to drive increased transparency for shareholders.

“Sound corporate governance practices can lead to a lower cost of capital and higher valuations for New Zealand listed companies. The streamlined NZX Code will result in greater transparency for investors and hopefully drive increased confidence in our capital markets.”

The NZX Code was subject to extensive market consultation — more than 80 submissions were received throughout the consultation process from major governance groups, issuers, corporate firms and investors in New Zealand and overseas.

“The extensive engagement NZX received as part of this review reflects the industry’s desire for strong corporate governance and the key leadership role NZX plays in encouraging these improved practices,” Macdonald says.

Capital Markets: Time for Prospectus NZ? (NZ Herald)

Fran O’Sullivan and Tim McCready

New Zealand is in a sweet spot.

Surely it’s time for our sharpest brains to come up with a major campaign to spruik New Zealand as an investment destination and go hard on capital markets?

“I just think the genie is out of the bottle with New Zealand,” says Nicholas Ross, country head for UBS New Zealand. “People are just going to keep coming and coming and coming.”

“If there was ever a time to be bold and to borrow a bit more this is it,” he adds. “Markets are in very good shape, they are very receptive to good proposals and interest rates are very low.”

It is a stance shared by a growing number of senior NZ capital markets players and business leaders.

New Zealand arguably remains behind the pace when it comes to applying financial leverage to fully fund the growing infrastructure gap sparked by rocketing net migration.

A Government spooked by a series of major earthquakes is wary of accruing too much debt in case it needs to use its balance sheet in the event of another costly natural disaster or recession. But this appears short-sighted when Trump’s America and Brexit have affected international perceptions and this country is increasingly viewed as a safe haven for people and capital.

Auckland Chamber of Commerce CEO Michael Barnett points out there are many options for funding the city’s growth.

But they all require capital.

Commonwealth Bank’s Andrew Woodward says the NZ debt market has shown it has the capacity to complete larger project finance transactions.

Woodward – who is general manager of CBA’s NZ operations – points to Transmission Gully and the Puhoi-to-Warkworth projects, which attracted support from domestic and offshore banks and investors and competitive outcomes for the NZ Government.

He says the continued success of this style of transaction – as well as funding of significant investment by the likes of Auckland Council and Auckland Airport – will continue to rely on domestic and increasingly international debt markets supporting growth projects, with both having targeted international debt markets to meet their growing funding requirements this year.

Says Woodward: “To aid the further development of the NZ debt market there continues to be a strong role for Government in outlining a clear pipeline of projects (across a range of asset classes including toll roads, prisons, hospitals, and rail projects), so foreign capital keeps New Zealand on the radar, as well as ensuring legislation around areas such as interest withholding tax are competitive versus other jurisdictions, and encourage investment in New Zealand.

“While the domestic debt market can meet requirements up to a certain capacity, foreign capital is expected to play an increasing role to meet the planned infrastructure spend.”
Kiwis who have collectively saved more than $40 billion in KiwiSaver – an average of just under $15,000 per person – might also question whether investment allocations are structured to deliver sufficient funding for NZ growth (and the needs of savers).

Australian research firm Strategic Insight has released figures showing total KiwiSaver balances hit $40.651 billion at the end of March; up from $38.416b at the end of December.

With KiwiSaver poised to turn 10 this year, it is worth asking whether more avenues for investment should be provided onshore.

In its report, World awash with Money, Bain & Company looked at capital trends through to 2020.

The consultancy firm predicted that for the balance of the decade, markets will generally continue to grapple with an environment of “super-abundance”.

It says there has been a power shift from the owners of capital to the growers of good ideas. “In this environment, investors’ success will be determined less by how much money they command than by their ability to spot an investment’s true creation potential and act on it nimbly.

Those that can react with speed and adaptability will be best able to identify the winners, steer clear of bubbles and generate superior returns.”

There is an abundance of innovation in New Zealand. Time for that Kiwi prospectus to fund our growth and our ideas.