Goodbye to the export comfort zone

By CHRIS DANIELS

On May 14 and 15, New Zealand's far flung trade commissioners will converge on Auckland for Trade NZ's first trade conference.

Their mission is to find ways to stimulate export growth.

Not that New Zealand is a weak exporter. Far from it. Exports are the backbone of the nation, what makes New Zealand known around the globe - butter, apples, beef and lamb.

The problem is that the export burden is being shouldered by a small number of companies.

Rod MacKenzie, Trade NZ general manager of marketing, says figures clearly show that only a small number of exporters are generating the vast majority of export earnings.

He says it is critical that more companies start exporting if New Zealanders are to become richer.

The figures concerning Trade NZ come from Statistics NZ and show that 1.6 per cent of all businesses that export account for 78.4 per cent of export value.

That is just 152 companies out of the 9462 businesses that export. Dairy giant Fonterra, with $7 billion of annual exports, makes up nearly 23 per cent of the total value of exports.

Murray Davies, national president of the Export Institute, said many of New Zealand's small companies needed to take the risk and move into exporting.

Small businesses - generally privately owned, often by a husband and wife team - feel secure doing business in New Zealand.

"The biggest challenge for them is having the courage to go across the ditch," he says.

Small business owners often did not realise that there were a whole range of financial products that could protect them from disaster should a big export deal go wrong, said Davies.

"The orders you get from overseas generally tend to be a lot larger than you might get from a New Zealand company.

"Often the business thinks 'gosh - that's 50 per cent of my turnover'. In some cases they don't have the resources to place that order."

Davies paid tribute to the work of Trade NZ, which helped with market research for aspiring exporters.

Such praise is music to the ears of Trade NZ chief executive Fran Wilde. She says it is frustrating to see so many companies failing to export.

"There is massive potential going to waste. That's what makes us so frustrated, because we know there are many more that could be working properly."

Wilde prefers to focus on practical advice to exporters, rather than getting involved in debates about the macro-economic explanation of the New Zealand situation that may restrict export growth.

One feature of the New Zealand economy that cannot be ignored when looking at poor exporting performance, she says, is the extremely small size of most of New Zealand companies.

Wilde believes that many of these firms are loath to get new partners involved, fearful of losing control of their business to outsiders, regardless of an obvious need for more capital and expertise.

New Zealand's top innovators are often filled with good ideas, but are not necessarily as skilled in marketing or other business skills needed for export success.

There are many examples of people with a great product, who do not run their business properly, says Wilde. People are either too optimistic, not properly funded, or do not want a partner.

Trade NZ is particularly interested in those firms who are capable of exporting, may have proven it by already doing some, and developing them - getting them into a good level of profitability on a sustainable basis.

"There's no point us keeping on taking on a whole lot of companies that will fall over and their being subsidised to do something they can't afford. If you can't afford to export, then you shouldn't be doing it.

"I'm not saying you can't be a successful small exporter - you can be. But you have to have enough profitability so that in the bad years you can stay in the market."

One member of the Trade and Development Board, former union leader Ken Douglas, told the Herald in January this year that one of the limiting factors in expanding New Zealand's foreign exchange was the "comfort zone" enjoyed by those exporters who had climbed into the $10 million-to-$15 million range.

These firms have the opportunity to expand their export base by bringing in new capital, investing in joint ventures or franchising.

But they do not want to do this, says Douglas, as they do not want to take the risk that could jeopardise their business.

WestpacTrust chief economist Adrian Orr says it is important not to assume that the small percentage of companies accounting for such large share of total exports is necessarily a bad thing.

Rainfall and grass growth were NZ's strength so primary producers would always lead exports.

* In Forum tomorrow, aluminium exporter Gilbert Ullrich and Trade NZ's general manager of marketing, Rod MacKenzie, discuss how to help our exporters.