NZ EXPORTERS FEAR BEING LEFT BEHIND AS COUNTRIES OPEN UP

Next year is shaping up to bring more high prices but labour shortages and foreign investors insisting on face-to-face meetings are causes for concern, writes Melanie Carroll.

New Zealand’s exporters are earning more than ever despite Covid-19 but there are still fears the country is being left behind while other countries open up. The world likes what New Zealand has to offer – food, to a large extent but other products, too – so our exporters have been able to keep selling during the pandemic. But the inability to easily get people into and out of the country has been a major pinch point for some industries.

As Covid-19 closed in, the country shut its borders on March 19 last year to everyone except New Zealand citizens and permanent residents.

By July of that year, MIQ facilities were bursting at the seams, thanks to one of the world’s strictest managed isolation systems. They have managed the arrival of more than 180,000 people but it was still impossible for many others to come to New Zealand.

Border restrictions have now begun to ease, with shorter periods in MIQ for arrivals and more travellers soon able to self-isolate at home.

But as countries such as the United States and Australia open up their borders more dramatically, there is less incentive for people to try to come to New Zealand to work.

There were concessions to allow workers from the Pacific to enter the country under the Recognised Seasonal Employer (RSE) scheme to help the horticulture and viticulture sectors.

The Government also made a border exception for 200 dairy workers, a move that was criticised as too small compared with the need for 2000 to 4000 workers.

‘‘If you talk to horticulture exporters they’ll say that’s been helpful but it doesn’t fill the gap relative to the number of people that are no longer in the country,’’ Westpac senior agri economist Nathan Penny said.

‘‘Most apple growers . . . tell me that usually their workforce is a third local, a third RSE workers and a third backpackers. So essentially the first two are still around or available but the last one is not. No backpackers means that in particular, in the last summer, apple growers were really struggling.’’

Labour was now the top concern for farmers and growers, overtaking compliance and regulatory load. Increased global demand this year had made the problem worse, with some commodity exporters unable to take full advantage of record highs because of a lack of people to produce or pick the goods, Penny said.

‘‘Labour is mobile internationally. New Zealand has been a great place to be during Covid but I’d argue that status is on the wane.’’

For many agriculture exporters, next year is shaping up to be another year of more record high prices.

‘‘In general, the export sector is healthy. And that’s a broad-brush categorisation – it’s healthy in general but could be healthier if these other factors weren’t in play,’’ Penny said.

In an ideal world, less labour availability pushed companies to invest in more technology which then improved productivity, something that has long dogged New Zealand.

Penny said technology was being adopted in the agriculture sector but it could not be installed overnight.

‘‘You can’t just snap your fingers and suddenly have the latest technology. It’s a process they need to go through, and they are going through it but they need time and they’ll need money as well, and education is another thing too.’’

In a very circular problem for some manufacturers, they may have installed hi-tech equipment but could not get the skilled labour in through MIQ to get

it going.

Access uncertainty

Manta5 chief executive Mark Robotham said MIQ had been a big headache for the Hamilton-based hydrofoil bike company.

Four of Manta5’s 40 staff members had travelled to Europe indefinitely because the company could wait no longer to do business face-to-face.

‘‘One of our guys was away 41⁄2-months, and they have certainly taken one for the team.’’

Two had returned and left MIQ by mid-November; another one had been booked into MIQ for later in November; and the fourth was booked in for January, Robotham said.

‘‘NZTE [New Zealand Trade and Enterprise] have been absolutely stellar at enabling us to get access to MIQ.

‘‘But, as an exporter, it continues to be a massive restriction on us because it means we need people who are willing to step into the unknown with no way back.’’

The company had been trying to raise capital overseas but there was no way for investors to visit New Zealand to complete due diligence. Travel barriers also affected the mental wellbeing of staff who could not reunite with family overseas.

Robotham and other exporters were nonplussed by local Covid-19 cases selfisolating in their homes while travellers who were fully vaccinated and had tested negative for Covid were stuck in quarantine hotels.

‘‘Controlled access through our borders and MIQ is an essential part of any exporter’s business, and we continue to not have certainty around this.’’ Business was based on building personal relationships,

which was

particularly important when there were problems to iron out such as delays in stock delivery.

Robotham did not expect a return to the way things were for at least another one to two years, meaning the company would have to continue adapting.

‘‘Having been involved in exporting for a couple of decades, the mode of being able to fly in and out and around the world, go somewhere for a week or two weeks or even 48 hours, is gone,’’ he said.

‘Too stupid for words’

For software company Portainer, the uncertainty regarding getting people into the country was crushing, chief operating officer Geoff Olliff said.

‘‘Our chief executive is overseas – he went overseas with no hope of return.’’

He said NZTE had been helpful but the spots that had been available were only a fraction of what was needed to meet demand.

A shift to home isolation in the new year could help. ‘‘This doesn’t have to be as hard as the Government is making it.’’

American investors were demanding to see company representatives face-toface, now that their country was opening up.

‘‘Their comment is: Things are not normal, they’ll never be normal again but things are definitely working,’’ Olliff said.

‘‘People have had enough of remote communications, and so our competitors and the ecosystem in the [United] States is going back to face-to-face. By insisting on being remote, we’re at a disadvantage.’’

It was an uphill journey to build a technology company from New Zealand before the Covid pandemic, and further barriers just decreased the chances of success, he said.

‘‘From our perspective we need a system where we can come and go. And even if we miraculously get an MIQ spot between now and Christmas, we need to send other people. We’re coming up to our next funding raise, and we probably need two or three people to travel to the [United] States as early as January.’’

Portainer was looking at building a sales team as it expanded, and the company had to do that now, not when MIQ problems were fixed, which meant hiring overseas.

It was not possible to put a dollar figure on the losses as a result of MIQ but it had come at a huge cost to the company’s chief executive, who had effectively put his life on hold, Olliff said.

‘‘This situation is just too stupid for words.’’

Fonterra global supply chain director Gordon Carlyle said MIQ had not been a significant problem.

The dairy cooperative expected some challenges as the export season reached its peak about mid-December. However, it had been working for more than a year with the disruptions and was confident it could keep things moving as smoothly as possible, he said.

‘‘Last year, despite all these challenges, we had our best export year on record – partly due to our joint venture with Silver Fern Farms, Kotahi.’’

Kotahi was a strategic partnership with the Maersk shipping line, which recently added an extra service to New Zealand, Carlyle said.

‘‘Globally, about

10 per cent of capacity is still being lost to congestion-related issues and that’s the real problem here.’’

A confident bunch

Catherine Beard, an advocacy director at BusinessNZ, said MIQ had caused huge problems for many exporters that did not have scale.

When the pandemic hit, people were pleasantly surprised to find technology meant they could still connect and in some cases get better meetings than if travel was involved.

‘‘There were definitely some upsides but even right at the start people were fearful that while they might be able to maintain existing relationships, the pipeline of work was not going to be filled,’’ Beard said. ‘‘Then it moved to another phase as the rest of the world opened up, and New Zealand was in more of a shut-down mode, and in particular [alert] level 4 was devastating

because food manufacturers could continue operating but non-food manufacturers couldn’t.’’

Companies had been forced to hold more inventory and faced soaring logistics and shipping costs as well as lower air-cargo availability.

But exporters were a confident bunch, she said, with a recent ExportNZ-DHL survey showing 62 per cent expected international orders to increase, pointing to a strong 2022. It also showed 51 per cent of exporters struggled to get in front of customers or find the talent they needed.

Covid had encouraged firms to put their own boots on the ground internationally, something that would be a longer-term advantage. However, the downside was a rise in manufacturers looking to move some activity offshore because they could not risk another lockdown.

Heading into 2022, agri exporters looked resilient but education and tourism had lost a lot of export earnings and there was a question about whether they would bounce

back. It was vital to make it easier as soon as possible for business travellers, who were lowrisk and important to the economy, she said.

Resilience under pressure

NZTE head of strategy, performance and partners Tim

Green said the Covid-19 pandemic had been an all-round challenge for exporters, and MIQ was part of that.

However, international revenue had grown by 4 per cent over the past year for a group of about 1400 exporters that NZTE worked with.

Food and beverage exporters had generally been OK, with high demand from most countries.

Including that sector along with manufacturing and technology, about half of the 1400 exporters were thriving while about 45 per cent were surviving and about 5 per cent were struggling, Green said.

‘‘Overall I’d categorise it as a time of incredible adaptation and resilience and innovation.

‘‘Of course there’s been a lot of pressure and a lot of challenge associated with that as well, so it’s been a tough time for exporters, being able to survive and grow through the pandemic.’’

New Zealand was not being left behind compared with a number of key international markets still seeing growing Covid infection rates and low vaccination, Green said.

‘‘At the other end of the scale, there are key markets starting to open up more now, particularly in Europe, parts of North America, in Australia.

‘‘So as our key markets do start opening up and getting back to face-toface business, that’s where we’re at risk, so that’s where our reconnecting strategy really has to come in.

‘‘We’re certainly going to be focusing on, as the border starts to free up, how do we help companies to reconnect face-toface in the market, and that’s going to be a critical phase that we’re entering into shortly, I think.’’

Over the next few months it would become clearer which countries New Zealand might open up to travel over time, he said.

World economic growth was expected to lift quite quickly next year but there was also a growing awareness of the need to more urgently tackle climate change.

‘‘We forget that climate change is a bigger trend over time than Covid has been,’’ Green said.

‘‘I think you’re seeing more New Zealand companies not just realising the importance of reducing emissions but also realising there is a genuine positioning that New Zealand can attain around sustainable products that have a premium price in high-value markets.’’