Silver Fern Farms meat processors working in Covid-19 safety conditions. Photo / Supplied
Silver Fern Farms meat processors working in Covid-19 safety conditions. Photo / Supplied
Finance Minister Grant Robertson has responded to growing criticism the Covid-19 taxpayer-funded wage subsidy scheme is open to abuse, saying the Government has "faith" most businesses won't rort it.
"We have faith in the vast majority of New Zealand businesses to do the right thing and use the money topay their staff. Anyone who abuses the system, we will chase down," he said.
Wage subsidy payments totalling around $84 million to processors in the $9 billion export meat industry are the latest to raise concern.
Sector concerns about how the subsidy scheme is being used follows news some of New Zealand's biggest law firms successfully applied for millions of dollars.
So far a total of $9.9 billion in wage subsidies has been paid out.
Of the $84m in payments to meat companies, $77.7m was to two of the country's biggest meat companies Silver Fern Farm and Alliance Group for 11,000 workers.
The head of a major New Zealand employer, not an applicant for wage subsidies, said the test for subsidy eligibility, a real or projected 30 per cent drop in revenue, can easily be rorted.
"It requires revenue for only one month in six to be 30 per cent down. Businesses will defer invoicing, slow sales down to qualify. Firms will simply load their billing a month later. Exporters will slow shipments," said the businessman, who declined to be named.
The one-month test should be across three or six months, he said.
Robertson's office did not respond to questions about the potential rorting avenues or whether the Government was considering extending the test period.
Critics claim the meat companies should not be paid because they are still operating, prices are strong and the sector is most unlikely to experience revenue loss this season.
Silver Fern Farm and Alliance have defended their subsidy applications, saying the Covid-19 distancing rule has decreased processing capacity at some or all sites by up to 50 per cent. They say they will pay back money if they find they no longer meet the subsidy criteria.
But industry critics challenge the lower production defence, saying lockdown-reduced throughput is not the same as revenue.
"The intent of the scheme is to address revenue loss. Covid-19 safety restrictions might be constraining processing capacity but this will simply cause deferment of revenue - not a loss," said one, who spoke on condition of anonymity.
Industry revenue would hold steady on last year and would likely significantly exceed it, he said.
Silver Fern Farms meat processors working in Covid-19 safety conditions. Photo / Supplied
Silver Fern Farms, half owned by Shanghai Maling (Hong Kong) and half by a New Zealand farmer co-operative, was paid $43.3m in subsidies. It recently announced a $70m net profit for FY19. Alliance, a farmer cooperative, was paid $34.4m. It posted a before tax profit of $20.7m for FY19.
Several smaller meat companies have also been paid subsidies, but some larger players in the industry, which employs around 22,000 people, have not applied. They include Affco, Greenlea and Hellaby which between them employ more than 6000.
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A spokesman for Affco, owned by Motueka's Talley's Group, said the company didn't intend applying for the subsidy because it didn't forecast a 30 per cent drop in revenue, despite lower processing because of virus restrictions.
"We didn't think the wage subsidy was intended for those still operating or to cover wages of staff still working."
Waikato beef processor and exporter Greenlea said production volumes were down due to safety restrictions but it was financially secure and believed essential services were "in a privileged position".
"We believe that Government support - which is not unlimited - should go to those in genuine need and small business in particular," said managing director Tony Egan.
Greenlea Premier Meats managing director Tony Egan. Photo / Supplied
Fred Hellaby, managing director of Auckland-based WilsonHellaby, which employs 700 people and mainly supplies the New Zealand market, said his company had not applied because retail sales, particularly to supermarkets, were very strong.
Industry critics of the payments said the $585 per week wage subsidy amounted to about 80 per cent of an average meat worker's wage.
If all meat companies claimed the subsidy, taxpayer support to the industry would come to about $150m, said one.
"This is an extremely competitive industry with tight margins, so companies that claimed the subsidy will benefit by paying only 20 per cent of their normal wage costs. Those that didn't claim paid full wage costs."
The meat industry was prone to seasonal highs and lows and seasons of varying lengths every year. Lower throughputs did result in higher costs but they were minor and taxpayers should not be expected to meet them, another critic said.
Alliance chief executive David Surveyor said the company had saved nearly 1000 jobs from an early season termination and secured 3800 others by continuing to safely run its plants, though far less efficiently.
Alliance exported about 95 per cent of its products and demand in a number of markets had declined significantly. Global market prices had decreased substantially across all species since last year.
Alliance Group Chief Executive David Surveyor. Photo / Supplied
A Silver Fern Farms spokesman said the subsidy was applied for when there was great uncertainty around the company's ability to operate under Level 4 restrictions, and because of global market supply chain disruption.
It had committed to employees still working that their pay would not be less than 95 per cent of a normal pre-Covid-19 production day, despite lower throughputs. It had also implemented a bonus for production staff.
Herald inquiries show Lean Meats, 97 per cent owned by Chinese company Binxi, received $1.05m for 151 staff.
Prime Range received $1.09 for 156 workers. It is owned by Cuilam Industries Ltd which also has Chinese interests.
