Māori business show new investment appetites, says ANZ report

Iwi are expanding their investment outside more traditional areas like forestry. Photo / Hawkes Bay Today.

The Māori business economy shows a growing tolerance for risk with more start-up and private investment, with many iwi debt-free and with large holdings of liquid assets that can be reallocated, says a new ANZ report.

ANZ's annual Te Tirohanga Whānui report, which compiles financial information provided by 34 iwi and hapu with combined assets of $5.4 billion, said the commercial engines of post-treaty settlement iwi have to manage some unique challenges but for most there are positive signs for the future.

Iwi business continued to deliver strong year-on-year net asset growth and solid returns, while governors of iwi assets faced an increasingly complex business environment and diverse expectations of beneficiaries, the report said.

"There is pressure to increase returns and distributions, driven by growing populations hungry to see the tangible fruits of their tribe's treaty settlement," said ANZ head of Māori relationships, David Harrison.

"Opposing the need for strong financial return is the deep responsibility iwi and hapu carry as kaitiaki, often creating challenges in balancing risk and reward."

The Māori economy represents $50b in assets, about six per cent of New Zealand's total asset base.

The report, with guiding metrics, was distributed to participants earlier this year.

It showed the overall trend for post-settlement iwi had similarities to the start-up "hockey stick" effect with initially modest capital growth starting to build.

For participants, the most common asset in the top quartile for underlying returns was the significant holdings in managed funds which have performed well in recent years.

On the flip side, most participants in the lower quartile were actively managing large farms.

"In many cases cultural reasons were an important driver in the investment decision. This highlights non-economic considerations may be impacting financial outcomes," said Harrison.

One of the hardest commercial decisions for iwi was whether to distribute or reinvest profits, said the report, which this year included new metrics to help iwi discuss whether they have the right balance between earnings from business operations and how much they're investing in non-business activities.

Balance sheets showed, on average, just over half of iwi assets comprised cash and managed funds. These were available when promising investment opportunities arose.

Maori investment, historically focused in primary industry, had recently been extending into tourism, horticulture and commercial property.

Headwinds for iwi investment included exposure to commodity cycles and new challenges confronting the primary sector, in which iwi on average have one-third of their assets, said the report.

Fishing and farming faced increasing sustainability scrutiny and along with forestry, were threatened with disruption from science and technology-derived alternatives.

These assets had largely been returned through settlements or had been bought with cultural considerations, and were generally not for sale.

This situation put increased pressure on the rest of the assets to ensure they were allocated or re-allocated to best-fit investments that provided greater returns with the right balance between income and growth, the report said.

Business investment also tended to be swimming against the tide, it said.

Over the past three years, although the median reported dividends represented about one-third of pre-tax commercial operating profits, ANZ estimated that half was actually required to cover the non-commercial operating deficits.

"We can see those tribes 10-plus years since settlement have a median non-commercial operating deficit that is more than 50 per cent larger than others, so you would expect the demands on commercial profits will only increase going forward as tribes become more established - a pressure already felt by many commercial boards.

"Add to this the Māori population growth and inflation and iwi need to generate 3.5 per cent just to stand still."