Watchdog plans close look at millions of dollars in subsidies being paid to primary-sector giants

The Auditor-General is to investigate a flagship Government project which involves millions in subsidies being paid to some of New Zealand's biggest primary sector businesses.

Plans by the public-spending watchdog to take a close look at Primary Growth Partnership programmes is outlined in an appendix to the Auditor-General's annual plan for 2013/14.

An Audit Office spokeswoman said: "We undertook some initial research on (the Ministry of Primary Industry's) Primary Growth Partnership before independently deciding to add it to our planned work programme."

She said: "We are in the early stages of planning the work. We do not yet know when the work will start, what it will cover, and when and how we will report on it."


The ambitious PGP programme was set up three years ago. Designed to support primary sector innovation and lift exports, the ministry has invested $190 million in 15 schemes over the past three years, according to figures published on its website.

Private-sector partners in dairying, horticulture, fishing, farming and forestry have matched the investment dollar for dollar, or in some cases by more.

The expected investment over the life of the project is $670 million, half of it coming from taxpayers. The ministry claims the country could benefit by some $7 billion a year by 2025.

The programme allows private-sector partners in the deals to retain any intellectual property which might arise from research.

The project has come under fire for its generous public subsidies for work that would be done anyway, and for excluding industries which could potentially deliver more bang for the taxpayer, such as the pipfruit or viticulture sectors.

One hurdle for smaller players is they need a minimum $500,000 investment to qualify for public funds.

Further, no independent assessments have yet been published of any returns from the existing 15 schemes, even though several have been going for three years and a number make rosy claims on the ministry website about their progress.

Three audits of schemes have been published, two done by the ministry and one by accountants Ernst & Young, but no quarterly reports, as required by the projects, have yet been made publicly available.


Last week the Minister for Primary Industries, Nathan Guy, signalled he wanted "greater visibility" around the programmes.

Applicants wanting a slice of the PGP funds submit proposals to a Government-appointment assessment panel made up of some of the country's leading business figures and company directors.

Recommendations from the panel go to ministry director-general Wayne McNee for final approval.

Mr Guy said he wanted officials to provide more details about the investments and "returns being gained".

He welcomed the Audit review, saying: "We already have a strong governance and monitoring programme, and this would add to that."

Labour's primary industries spokesman, West Coast MP Damien O'Connor, who has asked questions in Parliament about the initiative, said he was pleased the Audit Office was going to review the scheme.

He said the programme lacked transparency and accountability.

Several of the schemes which had been granted millions in funding were little more than "business as usual", Mr O'Connor said.

"My reading is there's nothing here that firms wouldn't be doing anyway to get returns for shareholders. All we've done is supercharge things.

"It's ironic that a sector that says 'We don't want subsidies, we're going to stand on our own feet' is lining up for funds. We can't afford to waste taxpayer money and that's why we need the Audit Office to take a look."

Growth stake
What is a Primary Growth Partnership?

• One programme is a seven-year, $85 million dairy sector investment, which Fonterra, Dairy NZ, majority Chinese-owned Synlait and several other commercial partners will match to raise productivity on dairy farms in a programme which also funds doctorates and scholarships.

• The second biggest is a $59 million investment in the meat industry with partners Silver Fern Farms and Landcorp, a state-owned enterprise.

• Another meat company, the Canterbury-based and majority Japanese-owned Anzco Foods, is getting $43 million to add value to the beef carcase.