Very little land run by the state farmer Pamu would be available for privatisation, inquiries by interest.co.nz reveal.
That's because most Pamu land is either not Pamu’s to sell, or is committed to Treaty of Waitangi settlements in various forms.
Pamu is the brand name for the state owned enterprise (SOE), Landcorp, which runs 110 farms comprising 360,000 hectares on behalf of the Crown. This makes it the largest pastoral farmer in the country.
Privatisation of state assets has been raised by the National-led Government as an issue that needs to be looked at. The Prime Minister Christopher Luxon is adamant nothing will happen during this parliamentary term, but privatisation could happen after the next election.
However, its ACT coalition partner has gone further, with its leader David Seymour saying the public should not be “squeamish” about privatisation, and its agricultural spokesperson Mark Cameron insisting Pamu should be sold to let taxpayers “off the hook” for a poor performing company.
Pamu made a net loss of $26 million in its last full year, down from $9 million in the prior year. But it says conditions are improving and the figure for the current 12 months will be a lot better.
These numbers would affect the sale price of Pamu, if privatisation actually goes ahead. But interest.co.nz has found privatisation is an unrealistic prospect anyway.
Half of all Pamu acreage is tied up in the lease of the Molesworth station in Marlborough. The Department of Conservation actually owns the land, meaning Pamu’s hands are tied. Pamu’s second largest parcel of land is the Wairaki Pastoral Estate, between Taupo and Rotorua. This has 20 dairy units and is leased from private owners in Auckland, which brings complications similar to those of the Molesworth Station.
All of Pamu’s 44 farms in the South Island are registered to Ngai Tahu under the principle of Right of First Refusal (RFR), which is an extension of the treaty settlement process. While they are still owned by Pamu, they could not be sold unless Ngai Tahu gets first dibs and turns them down.
Similar arrangements affect farms in the North Island, but differ in that Ngapuhi, for example, has not yet reached a treaty settlement, so state farms in Northland are maintained under a different legal category. But either way, sale of these lands would be difficult if not impossible.
Management at Pamu are watching this process with interest. Its chief executive, Mark Leslie, has no quarrel with elected politicians but points out several issues to do with privatisation that need to be dealt with.
“An SOE’s value is delivered in many forms," he says.
"We have a cash dividend, but equally, there is equity growth, which sometimes gets lost in the conversation. We also do research, which has a flow-on effect out to the broader farming sector, and that value could potentially be lost if the company is privatised.”
Leslie adds selling Pamu’s five most profitable farms would eat up one third of total profitability, putting greater stress on the balance sheet. That process could also require extra debt repayment under banking covenants, which would leave less money available to be disbursed to the Crown from any sale.
“It is a decision for the Government about whether to privatise, but there are some important narratives and practicalities around any sale. One of our properties is worth $100 million dollars. Who is going to buy that?" Asks Leslie.
“There are other challenges. I don’t think commercial farmers would thank the Government for putting a whole lot of farms on the market at once, since it would drive down the values of the farms they are trying to sell at the same time.”
Leslie adds the sale of the South Island farms could be difficult, because Ngai Tahu might like to exercise its RFR gradually, not in one big hit, which could put the iwi's balance sheet under strain.
The Labour Party is sceptical of privatisation in principle, calling it standard Tory mantra that doesn’t work. But one of its members, Damien O’Connor, adds a qualification: Pamu is the heir to years of hard work and inventiveness that makes it worth more than its financial figures might suggest.
O’Connor oversaw the farming sector for Labour for decades, either as Minister or opposition spokesperson. He says some of Pamu’s farms were inherited from poor quality sites run in previous eras by the long-defunct Marginal Lands Board. They were then turned into workable units. In addition, Pamu made a practice of bringing young people into the farming business with fair sharemilking arrangements. Although this practice was sometimes discontinued after pressure from Treasury to increase revenue, O’Connor says the policy over time gave Pamu social value for New Zealand as a whole.
“Pamu started with a base of land that is really hard to farm. And so, the expectation that they should meet the returns of the best dairy land is completely unrealistic. It’s a valuable asset for New Zealand….selling it off now would be a short term hit for the books, but potentially, we would lose the opportunity to have some influence over the direction of agriculture.
“Pamu is one way in which the Government can take a risk and maybe take a lower return, but lead the way in terms of better direction for New Zealand as a whole,” O'Connor said.
Federated Farmers does not have a view on this issue but will discuss it next week. Its national president Wayne Langford adds there are conflicting views on Pamu’s benefit for the farming community as a whole.
“In our view, it needs to be a profitable business operation. The second thing is that it needs to be a good neighbour, and in some cases, it can be a large-scale business making a loss and competing with neighbours who are mum and dad farmers and are trying to make a profit.
“Thirdly, we appreciate the industry-wide work Pamu does on trialing new systems of farming and this is really appreciated by the farming community.”
This research covers things like methane emissions and the retention of bobby calves for meat production, which is intended to reach 100% of all bobby calves on Pamu farms by the end of the programme.
Eric Frykberg is a Wellington-based freelance journalist who writes on trade issues. This article was sourced HERE
Privatisation of state assets has been raised by the National-led Government as an issue that needs to be looked at. The Prime Minister Christopher Luxon is adamant nothing will happen during this parliamentary term, but privatisation could happen after the next election.
However, its ACT coalition partner has gone further, with its leader David Seymour saying the public should not be “squeamish” about privatisation, and its agricultural spokesperson Mark Cameron insisting Pamu should be sold to let taxpayers “off the hook” for a poor performing company.
Pamu made a net loss of $26 million in its last full year, down from $9 million in the prior year. But it says conditions are improving and the figure for the current 12 months will be a lot better.
These numbers would affect the sale price of Pamu, if privatisation actually goes ahead. But interest.co.nz has found privatisation is an unrealistic prospect anyway.
Half of all Pamu acreage is tied up in the lease of the Molesworth station in Marlborough. The Department of Conservation actually owns the land, meaning Pamu’s hands are tied. Pamu’s second largest parcel of land is the Wairaki Pastoral Estate, between Taupo and Rotorua. This has 20 dairy units and is leased from private owners in Auckland, which brings complications similar to those of the Molesworth Station.
All of Pamu’s 44 farms in the South Island are registered to Ngai Tahu under the principle of Right of First Refusal (RFR), which is an extension of the treaty settlement process. While they are still owned by Pamu, they could not be sold unless Ngai Tahu gets first dibs and turns them down.
Similar arrangements affect farms in the North Island, but differ in that Ngapuhi, for example, has not yet reached a treaty settlement, so state farms in Northland are maintained under a different legal category. But either way, sale of these lands would be difficult if not impossible.
Management at Pamu are watching this process with interest. Its chief executive, Mark Leslie, has no quarrel with elected politicians but points out several issues to do with privatisation that need to be dealt with.
“An SOE’s value is delivered in many forms," he says.
"We have a cash dividend, but equally, there is equity growth, which sometimes gets lost in the conversation. We also do research, which has a flow-on effect out to the broader farming sector, and that value could potentially be lost if the company is privatised.”
Leslie adds selling Pamu’s five most profitable farms would eat up one third of total profitability, putting greater stress on the balance sheet. That process could also require extra debt repayment under banking covenants, which would leave less money available to be disbursed to the Crown from any sale.
“It is a decision for the Government about whether to privatise, but there are some important narratives and practicalities around any sale. One of our properties is worth $100 million dollars. Who is going to buy that?" Asks Leslie.
“There are other challenges. I don’t think commercial farmers would thank the Government for putting a whole lot of farms on the market at once, since it would drive down the values of the farms they are trying to sell at the same time.”
Leslie adds the sale of the South Island farms could be difficult, because Ngai Tahu might like to exercise its RFR gradually, not in one big hit, which could put the iwi's balance sheet under strain.
The Labour Party is sceptical of privatisation in principle, calling it standard Tory mantra that doesn’t work. But one of its members, Damien O’Connor, adds a qualification: Pamu is the heir to years of hard work and inventiveness that makes it worth more than its financial figures might suggest.
O’Connor oversaw the farming sector for Labour for decades, either as Minister or opposition spokesperson. He says some of Pamu’s farms were inherited from poor quality sites run in previous eras by the long-defunct Marginal Lands Board. They were then turned into workable units. In addition, Pamu made a practice of bringing young people into the farming business with fair sharemilking arrangements. Although this practice was sometimes discontinued after pressure from Treasury to increase revenue, O’Connor says the policy over time gave Pamu social value for New Zealand as a whole.
“Pamu started with a base of land that is really hard to farm. And so, the expectation that they should meet the returns of the best dairy land is completely unrealistic. It’s a valuable asset for New Zealand….selling it off now would be a short term hit for the books, but potentially, we would lose the opportunity to have some influence over the direction of agriculture.
“Pamu is one way in which the Government can take a risk and maybe take a lower return, but lead the way in terms of better direction for New Zealand as a whole,” O'Connor said.
Federated Farmers does not have a view on this issue but will discuss it next week. Its national president Wayne Langford adds there are conflicting views on Pamu’s benefit for the farming community as a whole.
“In our view, it needs to be a profitable business operation. The second thing is that it needs to be a good neighbour, and in some cases, it can be a large-scale business making a loss and competing with neighbours who are mum and dad farmers and are trying to make a profit.
“Thirdly, we appreciate the industry-wide work Pamu does on trialing new systems of farming and this is really appreciated by the farming community.”
This research covers things like methane emissions and the retention of bobby calves for meat production, which is intended to reach 100% of all bobby calves on Pamu farms by the end of the programme.
Eric Frykberg is a Wellington-based freelance journalist who writes on trade issues. This article was sourced HERE
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