The great Wellington techxodus

The tech sector has been billed as the growth engine of Wellington’s economy, but the closed border means the capital’s digital darlings are being forced to move business offshore, or risk being left behind.

Gaming success stories PikPok and A44 are following in the footsteps of Weta Digital and Vista Group and are setting up offices abroad. This is a direct result of a skills shortage exacerbated by New Zealand’s closed borders.

‘‘I’m flying blind,’’ said Mario Wynands, the founder and chief executive of PikPok, one of the country’s largest games studios. Next month he is getting on a plane to Colombia, with no way home, to set up his company’s first offshore office. ‘‘But we’ve had our hands forced, somewhat.’’

A profitable industry was being suffocated, said Derek Bradley, chief executive of Wellington gaming company A44, which makes Ashen.

‘‘We can’t get people into the country for love or money,’’ he said. He has plans under way for an office in Melbourne.

The pandemic has highlighted issues facing New Zealand’s traditional, primary industries: The over-reliance on physical exports has reinforced the need to grow weightless exports, which create high-skilled, high-paid, sustainable jobs.

The tech sector could become a key growth area. It is already one of the country’s biggest earners, contributing $12.7 billion to the economy in 2019, including $9.4b in exports. As the fastest growing industry, it could be worth $16b by 2030, according to NZTech.

WellingtonNZ says tech is one of the capital’s key sectors, and the one industry where local government can directly influence growth.

But in its statement of intent to 2024, the economic development agency identifies the risk of failing to seize the opportunities presented by the screen, VR, gaming and technology sectors to grow export oriented businesses of scale.

Tech execs say this is exactly what’s happening.

Thanks to increased demand for tech solutions, and the workforce deficit, a bunfight for the small pool of workers still in New Zealand has ensued, pushing salaries up.

Weta Digital was one of the first to make the move, announcing a new office in Los Angeles last year, and Vista Group is setting up in Mexico. Now PikPok and A44 are following. This techxodus will see a direct drop in income tax and lifestyle spending in the capital – most of the workers earn over $150,000 a year.

Meanwhile, the absence of uniquely experienced workers means students and juniors won’t be able to learn the skills they need to advance. Tech execs say this will stymie growth, innovation, and risk the capital’s position as a global tech leader.

Wynands of PikPok said the border situation created a ‘‘one-way membrane’’ – while tech companies couldn’t bring in the workers they needed, they were losing people to other countries – about 10 from PikPok have gone so far.

‘‘The suggestion that we’re supposed to be leading the economy out of this, while also being completely hamstrung in our ability to do so — it’s just incredibly frustrating.’’

Wynands said the move came with a degree of reluctance. ‘‘We started with just three of us in a flat in Lower Hutt, and we’ve grown it to a company that earns tens of millions of dollars and creates hundreds of jobs.’’

But some of those jobs will no longer be in Wellington.

In Manawatu¯, Frogparking chief executive Shareena Sandbrook said sales and revenues were being hit by the closed borders.

Highly skilled Kiwis moved back from Covid hot spots early in the pandemic, but if the country didn’t support domestic tech companies, those same workers would go again, she said.

All the tech executives spoken to said they feared this was the beginning of a brain drain.

‘‘Whilst we are mitigating the impacts as best we can at the moment, we can’t keep treading water waiting for the border to open so that we can get in front of clients,’’ Sandbrook said.

Luke Irving, founder and chief executive of Hawke’s Bay restaurant tech company Fingermark, can’t wait any longer for in-person meetings with staff and clients. So, he’s upping sticks to resettle his family in the US.

NZTech chief executive Graeme Muller said there was a disconnect between the rhetoric surrounding the opportunities presented by the sector and the reality companies were facing.

The Government committed $44 million to its digital boost strategy in the 2021 budget. Cabinet is currently considering a suite of digital growth and cybersecurity strategies.

But there was no ability to implement these strategies without the workforce.

WellingtonNZ chief executive John Allen knows there’s a problem brewing among what he calls the city’s most important, and exciting, growth engine. He’s concerned about the potential for lost opportunity.

‘‘It’s a short-term issue in a sense, but it has long-term ramifications, if we don’t open the borders relatively soon,’’ Allen said.