Friday, April 19, 2024

Time to sell Pāmu, says agri CA

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Chartered accountant says sale could realise $2bn.
Reading Time: 2 minutes

Pāmu has passed its use-by date, and selling the state-owned company could boost government coffers by $2 billion.

That’s the view of Canterbury-based specialist agricultural chartered accountant Pita Alexander, who is suggesting the government sell Pāmu’s  assets to New Zealand farmers or local private investors.

Alexander said the sale of Pāmu could potentially boost government finances by $2bn.

Just last month, Minister for State-Owned Enterprises Paul Goldsmith told Pāmu the company needed to lift its game, though he said selling the company was not on the government’s agenda.

Pāmu runs 110 farms across NZ with a mix of dairy, sheep and beef, deer and forestry.

In its day Pāmu farms – what were then known as Landcorp farms – were fit for purpose; right now, they’re not fit for purpose, Alexander said.

“They own 83 farms, manage another 27, totaling 358,866 hectares. 

“If the private sector owned these farms, they would operate them more efficiently than Pāmu.”

While the assets had been well-managed and in the past were useful for technology transfer and developing new ideas, Alexander said, the return on investment is now too low to make the company viable.

When it comes to running a for-profit business, it is hard to beat someone who has skin in the game, such as most family-run farms.

“It has often been suggested that it acts for a lot of industry good, and it has done in the past, and it maybe still will, but that’s not a good enough answer for the government, which has $2bn involved,” Alexander said.

“When the government has got $2bn involved, they need to think what’s the return and the return here for many years now has been poor with the corporate intent of Pāmu almost always exceeding their actual final result.

“They have tended to believe their own advertising and forward plans, which often didn’t eventuate. “There is no question that their financial results for some years have been disappointing and considering that NZ taxpayers have just on $1.85bn invested here, the return over the years has in the main been very poor. 

“With a for-profit business, there is no structure that will compete with private enterprise that would operate the Pāmu farming assets much more soundly and efficiently.”

“If the government ever needed $2bn to spend in better areas, now would be the time.

“How have they lasted this long – their industry good talk has been good, but their very low debt servicing has been the real key.

“Pāmu has passed its use-by date and passed its original purpose.”

Alexander suggested a gradual sell-down on a piecemeal basis.

“There will be surveying involved and almost certainly some capital costs to achieve the splits referred to, but the units being sold will need to be soundly standalone units.

“Some units could be leased to young NZ couples. They would need to purchase the stock and plant, but lease the land for, say, a six- to nine-year period on a sensible market-related basis.”

Sales should all go to individuals, rather than large corporates, with Alexander suggesting no sales to individuals based or living offshore but to NZ farmers and NZ investors.  

The phased exit strategy could take up to 10 years, he said.

“The present structure has good intentions, good bones, but has not been fit for purpose really for many years.

“New Zealanders, as a rule, do not like selling public assets, but sometimes this action is a no-brainer, and this is one of them.”

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