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Home / Business

Support for councils to sell assets

By Steve Hart
NZ Herald·
24 Jul, 2013 05:30 PM5 mins to read

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Shane McKillen, managing director of VnC Cocktails Ltd. Photo / NZH

Shane McKillen, managing director of VnC Cocktails Ltd. Photo / NZH

Auckland Airport, Ports and Film Studios cited as saleable, reports Steve Hart

BusinessNZ surveyed its membership of small-medium companies using key questions from the Mood of the Boardroom CEO's survey.

Cashing up assets owned by local authorities was widely supported, with comments such as "transferring investment from one asset to another is a sensible approach" being indicative of the general consensus.

One respondent said: "Existing assets will be much easier to sell than trying to get investors into new transport assets whose performance is less certain."

Another said: "Local bodies exist to provide services, not investments on which they don't have expertise. At the moment the boards of these investments supply jobs for directors who don't have the knowledge to contribute, and dividends are used to hide council purchasing from the ratepayers."

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Of those who responded to the survey, 60 per cent say Auckland Council should sell its shares in Ports of Auckland (of which it owns 100 per cent), Auckland Airport (22.4 per cent owned) and Auckland Film Studios (100 per cent owned).

There was slightly less support for Christchurch Council to sell its business interests, with 54 per cent of respondents supporting the idea. The Christchurch council has shares in eight companies, among them Christchurch Airport (75 per cent), Lyttelton Port (79.3 per cent), and Red Bus (100 per cent).

Nineteen per cent of respondents said Auckland Council should retain its business interests, and 25 per cent said Christchurch Council should keep its businesses.

Asked if councils should start businesses at all, 14 per cent said yes, and 77 per cent said no.

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"Don't pick winners, and don't start businesses that the private sector should otherwise start," said one.

"Councils should stick to the original remit - not provide social services."

With regard to the Christchurch rebuild, just 20 per cent thought it was going well. One person said: "As a supplier into the Christchurch rebuild I am shocked by the hand-wringing incompetent people making decisions for the council."

Regrets, they've had a few, 27 per cent said they did not react fast enough to change and missed spotting key trends. Others (25 per cent) were disappointed for not achieving business targets and losing business to competitors.

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Just under a fifth (19 per cent) dropped the ball when it came to human resources, with respondents saying they did not communicate well with staff, manage them effectively, put people in the wrong roles, and made poor hiring/firing decisions.

When it comes to closing the skills gap, 62 per cent want more funding for tertiary education in subjects relevant to skills shortages, and 27 per cent said funding for courses offering low-demand skills should be reduced.

Looking forward, just 54 per cent said they believe that though the economy will get better in New Zealand during the next decade, the country won't reach its full potential.

Two thirds of respondents said the last National Budget created a good environment for growth.

And while just under half (47 per cent) agreed that enough had been done on the tax reform front, 41 per cent believed there was still room for improvement amid calls for lower corporate taxes.

Shane McKillen VNC Cocktails

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Despite the issues faced by exporters, VNC Cocktails boss Shane McKillen is "fiercely patriotic" and prefers to export from New Zealand rather than base the business in the US.

"New Zealand can take on the world. The only problem we have is freight, and in the equation, that is quite a small component; it is not the difference between success and failure. We are 100 per cent NZ-owned and over the years the brand has gained distribution in over 30 countries worldwide."

Drawing on his experience of exporting 42 Below vodka into the US, McKillen launched a range of pre-mixed drinks under the VNC Cocktails brand in 2007.

"VNC Cocktails was always set up to be an export business," McKillen says. "As a founding funder of 42 Below [sold to Bacardi in 2006], I gained a lot of experience exporting to North America, Central and South America.

"The US is a difficult market to distribute alcohol in because it is heavily regulated, every state has a different liquor law, and there are different taxes. About 75 per cent of our cocktails are exported to the USA."

The company's ready-made drinks are targeted at women, as an alternative to white wine, says McKillen, and feature local fruit juices - mainly apples - locally made vodka, mangos from Colombia, lime juice from the West Indies, and tequila from Mexico. They are made at a plant in Tauranga, near the port.

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McKillen says the New Zealand Government doesn't get in his way when it comes to exporting, "I don't get a lot of help, but I don't get a lot of hindrance either." Export issues are typically to do with the destination products are sent to. "If I can use the US as an example, you have Federal regulations, mandatory formula approvals, label approvals - so it is the importing area where government can get in the way."

McKillen launched VNC just before the 2008 global financial crisis hit home. Back then, the US exchange rate was 62c to the Kiwi dollar (today it's around US78c).

"I went to New York in February 2008 and it was like the world had stopped," he says.

"While things have improved substantially, going against that is the exchange rate - it's been as high as US85c and that puts a lot of pressure on exporters. But it makes you more efficient; you either have to adapt or not be in business."

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