Coronavirus impacts ‘real and raw but we will come through’

QUIET AT THE PORT: The sight of an empty port will be more common over coming weeks . . . this picture was taken yesterday before the arrival of the Baltic Fox log ship. Three other log ships are due this month. Picture by Liam Clayton

About 300 workers and as many as 50 businesses here are already impacted by the economic crisis surrounding the Covid-19 coronavirus, but “we will come through this” the regional economic development agency says.

Trust Tairawhiti chief executive Gavin Murphy said first and foremost it was important to remember that this was a highly uncertain and rapidly-evolving situation.

“There's no doubt while the world's focus is on the containment of Covid-19, that it is significantly and increasingly affecting the world's supply chains.”

Specifically, over the past few weeks export supply chains to China were particularly affected.

“From a New Zealand perspective, the primary sector impacts to date have been on our exports to China, while containment is the primary global solution. Stopping it spreading means stopping or slowing supply chains.

“That has significant impacts across several sectors and in Tairawhiti that includes forestry, fishing, farming and horticulture — but given the size of forestry, and its heavy reliance on the China export market, it has been the most impacted.

“That's not to underplay the effects on fishing and crayfishing, which are significant. We are also aware the red meat sector has got cool storage constraints because they haven't been able to get their products to China and, coupled with the drought situation, they are also experiencing difficult times.”

Business trips to China, aimed at boosting trade between China and Tairawhiti businesses, had also been cancelled, Mr Murphy said.

“Forestry probably accounts for about 6 percent of Tairawhiti's GDP and employs something in the region of 1200 people across the supply chain. What we've seen with the containment is log inventory in China has built up substantially from normal levels, to the point where there is very limited to no capacity for the Chinese supply chain to absorb any more logs.”

Significant impacts were expected on harvests over the coming six weeks or more.

Last week the Prime Minister announced a “small support package” which included the expansion of the Regional Business Partner programme (administered here by Trust Tairawhiti).

“We've actually been using the RBP resources to organise specific hui for businesses and employees with our agency partners, to understand the issues of those affected.

“More support to do that would be great but if that's the only measure that comes through it will be very limited. It needs to be part of a bigger programme.”

Economic Development Minister Phil Twyford visited the region last week to hear first-hand what was needed on the ground, and was providing that information to the Government.

“The region has done a lot, but our resources are relatively limited. We think there are potentially 40 to 50 businesses affected right now and probably more than 300 individuals who are seeing reduced hours or have lost their jobs, and that could get worse over the next six weeks.”

Mr Murphy added it was still unclear as to how long it would take to see a real improvement.

“There could be a long tail on this and from our perspective, the fundamental issue is to keep those small-to-medium whanau-owned businesses in business and keeping those workers together — so that when it picks up, and it will pick up, that the supply chain can get going again and our people have stayed in work.”

The situation also reaffirmed why the actions in the new Tairawhiti Economic Action Plan (TEAP) around economic resilience and diversity were so important.

The trust’s activities in supporting an increase in wood processing facilities and capability here were also critical for the medium-term solutions.

“Having domestic processing for logs to create valuable, diversified products able to go to a range of domestic and international markets is key, and the current situation has reaffirmed why wood processing is a key regional strategy.

“We are talking to the Government about any ways they can help us accelerate that programme of work.”

Mr Murphy said with the coronavirus impacts showing the exposure New Zealand had on exports to China, it was increasingly important the Government was able to establish free trade agreements with other nations and territories.

That would help to diversify exports from the region.

“It’s critical to have a more diversified and resilient economy. Having FTAs with other trading partners should always be the aim. This does affirm that . . . but it is exacerbated here because of the strong supply chain and market that has been built up. What has been very good is now a bit of an Achilles heel.

“The region has recognised that and we have a TEAP that has a number of other actions in it for regional investment in wood processing.

“This is a very crucial and real and raw situation for whanau, businesses and communities linked to this, but as a region we will come through this.

“From the trust’s perspective, we will continue to show leadership and grow other areas of the economy as a region, and it’s important we keep going with that.”

The continuing impacts of Covid-19 in China are being keenly felt in the region’s forest industry, as the log inventory in China now exceeds 6.9 million cubic metres.

“After weeks of uncertainty, what we do know is that it is going to take months rather than weeks for the log storage levels to get back to ‘normal’, which is around 4.0-4.50m3,” Eastland Wood Council chief executive Kim Holland said.

“Up to now everyone has been assessing operations and work on a week-by-week basis, trying to keep people working through managing operations, quotas and work days. However, now, what this means for our small businesses and contractors is that they have had to move from managing work, their workforce and cashflow to business-protection mode; this is particularly challenging for the smaller businesses, those that are fairly new to the industry, and our cartage contractors.

“The reserves and resilience are running out, the number of redundancies is increasing. More of our businesses are on a knife edge.

“As the financial stress increases, we are all mindful of ensuring that our small business owners, contractors, workers and whanau are supported. There has been overwhelming support from a range of sectors including social service agencies, government agencies and other organisations and individuals to support whanau.

“The key challenge is keeping businesses solvent with a reduced cashflow whilst retaining the skills and experience in our forestry workforce — the ability to get through the current situation, knowing that when we do, we are going to need people and especially skilled, trained and experienced people.

“After last week’s ministerial visit it is heartening to hear they are ready to implement a range of initiatives and actions aimed at supporting businesses, keeping people working, supporting workers, with a focus on getting everyone through these tough times and to be ready to pick back up again when we get to the other side.

“Finance companies have been supportive, and Te Uru Rakau (Forestry NZ, part of the Ministry for Primary Industries) met with the finance and banking sector on Friday to discuss how they can help businesses get through.

“On a positive note, we are appreciative of the offers of work for contractors, crews and individuals across other primary industry sectors in the region, including horticulture and agriculture — particularly horticulture, with the seasonal work currently available in kiwifruit.

“It is also an opportunity to take advantage of the downtime to build skills and capability of our existing workforce through work-based training, and there are a number of options being considered by Government and Te Uru Rakau. These will help retain our workforce and add value for both the employee and the employer; however, these options need to cover the costs to the employer in paying wages, perhaps through a training subsidy or allowance.

“We have just started our fifth cohort of the Generation Programme because we know that when we come through this, we are going to need more people. The biggest fear is that when we get through this we will have lost valuable people — not just from the forest industry but also from the region.”

Although China had closed its doors to rock lobster imports due to the Covid-19 virus outbreak, fresh domestic and frozen export fish products have not been hit at this stage.

“Crayfish is New Zealand’s highest-value species per kilogram and is the hardest hit thus far,” Ngati Porou Seafoods chief executive Mark Ngata said.

“This could all change if Covid-19 continues beyond March and begins to impact fish products also.”

Should the impact broaden, there were ways to support commercial fishers who supplied Ngati Porou Seafoods.

“Alternative product forms can be produced which may bring a lower value return for the company and lower income for fishers, but allows them to keep going,” Mr Ngata said.

Rescheduling vessel repair and maintenance was another option. It was also important to keep fishers continually updated.

“The industry has met with Government officials and a range of options for relief have been discussed. The decision to allow a 10 percent carry-over of uncaught (rock lobster) quota is part of that relief but more will be required as Covid-19 continues to spread.”

While the industry had sought a full carry-over of uncaught rock lobster ACE (Annual Catch Entitlement) to next year, Fisheries Minister Stuart Nash approved only a one-off 10 percent carry-over, said Mr Ngata.

Ngati Porou Seafoods owned quota in three rock lobster fishery zones along the North Island’s eastern coastline but CRA3, the East Coast zone, was not eligible because Mr Nash said he would not consider a carry-over option in CRA areas that were already looking at TACC (Total Allowable Commercial Catch) reviews and envisaged cuts.

“His rationale was that even a 10 percent carry-over would impact the sustainability of those fishery areas and recovery, as more crayfish would be removed the following year than would be anticipated.

“The industry did not agree with that view and believed the fishery would be sustainable even with a cut. However, the Minister, and some industry players, took a conservative view.”

Gisborne-Wairoa Federated Farmers president Charlie Reynolds said coronavirus impacts had affected all parts of the country’s agricultural sector.

“Our community’s wellbeing, our financial viability and our ability to safeguard our environment, are all at risk. The current situation is one that has not been seen before by the New Zealand economy.”

Mr Reynolds said negative impacts on New Zealand during the Global Financial Crisis in 2008 were primarily countered by the exporting of food to the world.

“People have to eat, and that’s what got this country through the worst of the GFC — our farmers producing food.

“This virus, however, restricts global human movement which, along with the current drought conditions in places, is having a very negative effect for us.

“The large amount of stock needing to go to the plants has filled the ageing chillers and the very limited refrigerated port space available.”

Mr Reynolds said the extreme limitations on current distribution logistics, namely the limits on human movement, had reduced the flow of containers around the world.

“This is greatly impacting on the available cashflow of every farming family, and that in turn reduces the amount of money that is able to be spent on goods and services — that circulates through the Tairawhiti region.”

He pointed to the major risk of the virus infecting employees of processing plants.

“With the current level of hysteria in the world, what would be the effects if an employee was infected at one of our meat processing plants or one of our vegetable processing plants?

“How long would that plant be closed down, and would people still buy their products?”

Mr Reynolds said to ensure our community got through this situation, we needed to ensure that our food producers got through it.

“People have to eat, they have to buy food and they can get it from their local markets. That is the one and only positive for our country.”

AgFirst consultant Peter Andrew said the impact of the coronavirus was definitely a “scary time” for the region’s farmers and unfortunately it came during a long, hot, dry spell.

“It should be remembered, though, that we produce good food in Tairawhiti, and the world needs to eat.

“The impact of the dry weather and the virus has been lower stock sale prices, and that farmers have not been able to kill some classes of stock, especially cull ewes.”

Mr Andrew said it had also been difficult to kill prime cattle, and if they got processed the prices had been very low compared to a few months ago.

“However, the situation is far from doom and gloom. Despite the turmoil, farmers are still receiving $120 for a 19kg carcase-weight lamb, and there is no real delay in lamb processing.”

He said farmers were selling bull beef at $1500 for a 300kg carcase-weight animal.

“There is also no real delay in getting bulls killed.

“These are strong prices and very comparable to the prices we received 12 months ago.”

Mr Andrew said Gisborne-East Coast farmers had a very strong spring/early summer with stock prices and favourable grass growth.

“So they had good momentum going into this current difficult period.

“This time of year is also when we traditionally receive our lowest prices due to stock supply, so getting $6.90kg for lamb is pretty amazing,” he said.

“The store lamb price has dropped but this is mainly due to the dry soil conditions across much of the North Island.”

Trust Tairawhiti general manager tourism Adam Hughes said the coronavirus situation would definitely have an impact on the tourism industry in Tairawhiti, but not for a few months.

He also said it would not impact here as seriously as in other tourist locations in New Zealand, because Tairawhiti had always been primarily a domestic tourism destination.

“The virus is having a major effect on the visitor industry globally,” Mr Hughes said.

“It’s disrupting global flights, it’s disrupting everything, and the full effect of it will not be felt entirely for the next few months.”

Mr Hughes believes it will affect the industry globally well out into our next summer season, because of the flow-on effect.

“Visitors go on a journey of dreaming about a holiday, planning it, booking it and taking it.

“So for international visitors that cycle is much longer, anywhere from three months to two years to get through that whole journey. So that has an effect on travel.”

Mr Hughes said that would be where the virus will impact on Tairawhiti tourism operators.

“The effect on this region will not be felt as acutely as other regions, because we are primarily a domestic destination.

“However, because of the global scale of the situation it will have a flow-on effect to the New Zealand domestic market, and that in turn will have some impact on tourism in our area.

“But at this stage, in the immediate future, that impact will not be too great.”

Eventuallly it would mean smaller tourism growth numbers for New Zealand, he said, “and ultimately smaller growth numbers for Tairawhiti”.

“The tourism pie will just get a bit smaller, and so will our slice of it.

“But we will maintain our position within the tourism market because we are pretty resilient to this kind of international shock in Tairawhiti.”