The controversial Provincial Growth Fund (PGF) has been handing out taxpayers' money at a great rate of knots.
Its first funding commitment was announced on February 23, 2018 and it had allocated a massive $1.97 billion for 296 projects by the end of last month.
The fund continues to make commitments at a breakneck pace and has announced the following funding since the end of June:
• $40 million to convert waste, including plastic waste, into materials and products useful to businesses and consumers
• $421,050 to prepare young women for training and employment in the forestry sector
• $3.3m for manufacturing and tourism activities in the Kāpiti area
• $948,000 for youth training in the Wairarapa
• $200,000 for tourist initiatives in Manawatū
• $15m to Geo40 Ltd to build a silica extraction plant near Taupō
• $7m to Eco Gas Ltd Partnership to build a demonstration biogas plant in Reporoa, 41km south of Rotorua
• $27.1m to support wood processing, medical research and social enterprise in Gisborne
• $3.3m for Gisborne's road network
• $3.6m to enable Riverland Fruit Company Limited, a Gisborne-based family owned business, to expand and create more fulltime orchard jobs
• $5m to address environmental issues in the East Cape
• $450,000 to support "a Māori Incorporation in the Gisborne District to move to a more productive and sustainable land-use model".
As the original objective was to commit $1b per annum over a three-year period, the fund is expected to allocate a further $1b before next year's general election. This would bring the total figure to the anticipated $3b.
These are massive figures, as Callaghan Innovation, the government agency supporting hi-tech businesses, dispersed grants of only $202m in the June 2018 year and $169m in the previous year.
Information regarding the 300-plus Provincial Growth Fund projects is sparse and it is difficult to know if the disbursements will be squandered or if taxpayers will get full value for their money.
Auditor-General John Ryan has noted that the PGF needs careful scrutiny because "the speed with which the fund was established and continues to be developed, the nature of many of the funding proposals, and the high level of public interest have meant that the processes and types of funding provided might be different from traditional public sector arrangements".
Ryan went on to write that the Auditor-General would carry out "additional work on the accounting treatment for the various contracts" and "will also review the systems and controls in place to evaluate applications, disperse funds, manage contracts, and monitor the outcomes achieved".
This is a welcome announcement because the $3b expenditure must be assessed in terms of its effectiveness at delivering regional development goals.
With this in mind, it is doubtful that Regional Economic Development Minister Shane Jones and his public servants have sufficient time and expertise to assiduously evaluate, manage and monitor the huge number of PGF projects.
The fund goes back to the September 2017 general election, when the governing National Party won only 56 of the 120 seats in the House of Parliament. In the post-election negotiations, Labour managed to form a Coalition Government comprising itself (46 seats), New Zealand First (9 seats) and the Green Party with 8 seats. Act New Zealand won the remaining seat.
As part of the Coalition agreement, New Zealand First negotiated the $3b Provincial Growth Fund, which had several objectives including:
• Significant investment in regional rail
• Planting 100 million trees per year in a billion trees planting programme
• Commissioning a feasibility study on the options for moving Ports of Auckland, including giving Northport serious consideration
• Other large-scale capital projects
Jones, a New Zealand First list MP, was appointed Minister of Regional Economic Development with political responsibility for the PGF.
He had been a Labour Party list MP between 2005 and 2014 when he was involved in two major controversies. These were the use of a Crown credit card for personal expenses and the approval of a citizenship application for Chinese businessman William Yan against officials' advice.
Yan subsequently pleaded guilty to money laundering charges.
Jones resigned from Parliament in April 2014 but returned as an NZ First list MP after the 2017 election.
A PGF Cabinet paper, dated December 2017 and authorised by Jones, stated: "I anticipate the bulk of investment decisions will occur between 2018 and early 2019 and the bulk of delivery will take place from late 2018 through to 2020", the latter being the year of the next general election.
The paper divided funding projects into the following three tiers:
1) Regional Projects and Capability with an upper funding limit of $10m. The aim of this tier is "to build on the strengths of the existing Regional Growth Programme", with senior officials able to sign off on commitments of up to $1m while four Government ministers are required to sign off applications between $1m and $10m.
2) Sector Investments, which are "high-value economic opportunities with a greater commercial component". These projects are in excess of $10m, with Cabinet approval required.
3) Enabling Infrastructure Projects, which are developments that "enable regions to be well-connected (to other regions and within regions) from an economic and social perspective, including rail, road and communications".
The accompanying table lists the Fund's 12 largest projects, which represented $1.1b of the $1.97b announced as at the end of June. The information is contained in spreadsheets on the fund's website, which provides links to press releases issued by Jones.
The website states: "We are committed to proactively releasing information about the Provincial Growth Fund, and funding decisions. As careful stewards of public money, we recognise the importance of keeping you informed and engaged about the work we do".
This objective hasn't been achieved, as it is extremely difficult to assess the larger projects, never mind the 180 projects that have been allocated $1m or less.
How does the fund monitor the $56m allocated to these 180 projects? Does it or some other government agency have the capability to ensure this money isn't squandered or spent on unproductive projects?
There was considerable interest in several fund announcements this week.
The first was the revelation that it would give $15m to Geo40 to build a silica extraction plant near Taupō. The fund announced that the commitment was in the form of a loan and convertible notes, with the latter converting into shares before Geo40 listed on the Australian sharemarket in the next 12 months.
How many of the Provincial Growth Fund's commitments are in the form of loans and equity investments and why is it providing pre-listing funding to a company that plans to list on the ASX when the private sector normally provides this facility?
In addition, three of Geo40's five directors live in Australia.
The fund also revealed this week that Eco Gas Ltd Partnership will receive a $7m loan from the fund "to build a demonstration biogas plant near Reporoa".
The biogas plant will be a partnership between Eco Gas and T&G Global, the NZX-listed company that is 74 per cent owned by a German multinational.
Information on the PGF's Geo40 and Eco Gas allocations beg more questions than answers, as do most of the other PGF allocations.
Taxpayers deserve far more information on the activities of the PGF than they are receiving.
• Brian Gaynor is a director of Milford Asset Management.