Selling state assets: it’s a crappy commercial decision – The Voice of Business
An under-reported recent story in the media revealed that 54% of small/medium sized businesses in New Zealand oppose the partial privatisation of state owned enterprises.
As Mathew Gilligan, of chartered accountants Gilligan Rowe and Associates, demanded to know,
“Why do we need to sell them when we can borrow at very low interest rates and continue to receive the dividend and interest in New Zealand rather than letting that potentially escape offshore in the future.”
This is precisely one of the strong arguments used by opponants of asset sales. Leftist political parties; community groups; other organisations; and even a certain well-known Prime Minister, have made precisely this point since National announced it’s privatisation agenda.
The Green Party;
“The four energy companies had an average return on investment of 18.5% per annum over the last five years, including both equity gain and dividends. This is more than four times higher than the Government’s cost of borrowing at 4%. Would you borrow money on your credit card at 18.5% to put in a savings account for 4%? Of course not. It doesn’t make sense. But giving up returns of 18.5% to save 4% is the same thing, and that’s what National is planning to do. In the long-run, selling highly profitable companies for a one-off gain would mean more government debt, not less.”
See: Why Keep Our Assets?
Clayton Cosgrove, NZ Labour Party
“I’m calling on him now to pull the plug on it. What we are now down to is the Government defending John Key’s pride and his political vanity in respect of these sales…
... John Key is well experienced at floating companies. He is the financial whiz kid and anyone with half a brain could have worked out that because China is slowing down, their appetite for natural resources is slowing down and commodity prices are decreasing, that Solid Energy would come under pressure.”
Bryan Gould, former UK Labour MP, former Vice-Chancellor of Waikato University
“The Government’s commitment to public asset sales, in other words, is driven by the need to raise the money to offset its failure to get the economy moving again. But there are also reasons for resisting the sale of our national assets to what will inevitably be overseas owners.
Those reasons relate to the degree of control we exercise over our own destiny. We have already sold a greater proportion of our assets to overseas owners than any other advanced country; every time we sell another important national asset to overseas owners, we lose a little more control over our own future. ”
“ Grey Power calls on Government to slow down the asset sales process, and engage properly with household consumers to find practical solutions to power price rises, cold houses, and long-term energy sustainability…
… All householders, particularly those on fixed or low incomes, will be prejudiced by asset sales because privatisation will lock in today’s industry-friendly pricing. Last year prices rose only a little, but as soon as the asset sales bill was passed we saw the highest-ever price increase in a single quarter – a 5% price rise averaged nationwide…
… Today’s regulation actively promotes wealth transfers to big businesses at the expense of small consumers. Price rises are like a tax but worse, because much of the profit would go to the private sector instead of cutting the national deficit or funding healthy homes programmes. Government has removed. ”
Hone Harawira, Mana Party
“ Assets owned by the state on behalf of all New Zealanders should not be sold to pay off a debt that was created not by NZ citizens, but by bad governance and a devotion to economic values which lead to “the rich getting richer and the poor getting poorer.”
“ State asset sales will be disastrous for electricity consumers. At present the market is distorted with domestic consumers subsidising commercial and industrial users. Privatising power generating and retail companies will make this situation worse as investors seek to push up profits. New Zealand First firmly believes that any profits should stay at home to benefit the local economy.”
Rod Oram, Financial Commentator
“The harder John Key tries to sell voters on reducing Crown ownership of five state-owned enterprises (SOEs), the deeper the hole he digs for himself and National. Here are the main arguments. None stack up…
… So, given the economics of SOE sales are so poor and the politics so unpalatable, judging by voter resistance expressed in the polls, it remains a mystery why Key is exercising such bad economic and political judgement.”
Dr Brian Edwards, Broadcaster, Media Specialist
“Well perhaps I can use myself as an example. I’m against the sale of state assets. I think selling them can’t be justified on economic grounds; and I share the nationalistic sentiments of so many Kiwis that they’re ours and we should keep ownership and control of them here.”
Chief Ombudsman Beverley Wakem
“ They will carry on the same operations as they do presently which have significant scope to impact on individuals and communities and the environment. It’s not just about commercial interests, the impact of these companies goes much wider than that and all of those interests ought to be protected…
… However state-owned enterprises are different from private enterprises by necessary definition of their ownership and purpose – that is to make profits for the Government and to expand and promote the interests of the public.”
CTU President, Helen Kelly
“The Government does not have the mandate to sell our strategic assets and it is time the public had their say.”
“In the national interest and the interests of the Crown-Maori relationship, we recommend that the sale be delayed while the Treaty partners negotiate a solution to this dilemma.”
John Key, Prime Minister;
“Now they’re highly profitable companies, the Crown’s dividend stream from Mighty River and Genesis are large so on both motivations we don’t have a debt problem and they’re acting highly effectively as companies. There is no motivation to sell assets; actually we’re about creating assets not selling assets...
… Nor am I hell bent on selling assets, actually in the world of making the boat go faster, actually, I don’t think selling assets actually makes the boat go faster.”
With business opposed to asset sales as well as a myriad of political, sector groups, and prominent citizens, this country is fairly well united with a single opposing voice; people reject privatisation, whether in part or in full. Especially when those assets are highly profitable and benefit the entire country as a whole.
The MYOB Business poll simply adds an extra dimension to the clamour to half asset sales. These are New Zealand’s businesspeople speaking out – not leftists or “intellectuals” or community groups – but hard-nosed businessmen and businesswomen who understand black and red ink at the bottom line.
When MYOB managing director, Julian Smith, says,
“Businesses do not buy the return on investment argument that the Government is running. They can’t really see how it is going to practically improve the economy or help the country.”
– then National would be foolish to ignore that opinion.
Certainly SOE Minister, Tony Ryall’s gormless comment,
“What it reflects is a wider understanding that what the Government is doing with the partial asset sales is about controlling debt.”
– is nothing more than mindless drivel.
How can Ryall claim that 54% opposition to asset sales demonstrates “a wider understanding that what the Government is doing with the partial asset sales is about controlling debt” ? Has the man actually read the poll figures before blurting out that non-sequitur spin?
With the majority of businesspeople now firmly in the anti-asset-sales camp, National has few allies left. ACT’s John Banks and Peter Dunne are it. One is a chronic amnesiac – the other a political prostitute. Not exactly a Broad Front, by anyone’s definition.
Time to call it a day, Dear Leader. When your own business allies reject your agenda, you know you’ve totally lost the battle.
Postscript: Another lesson in National Party double-standards…
According to Dear Leader, the Greens’ $75,000 spending of taxpayers’ money to stop asset sales, and thereby protect taxpayers’ assets, was a heinous crime…
“In two interviews about asset sales this morning, Key attacked the Greens for using $75,000 of its taxpayer-funded leaders’ budget to hire staff to collect signatures towards a citizens initiated referendum on the issue.
“These are the people that said they don’t have enough money to pay for (deaf MP) Mojo Mathers’ technology in Parliament but have enough money for a citizens initiated referendum,” he told Newstalk.
“This is a politically-motivated referendum.”
Meanwhile, National’s spending of $100 million of taxpayers’ money to flog off our state assets seems perfectly acceptable to Dear Leader and his cronies…
“Treasury has announced it’s appointing a panel of firms to sell 49 per cent of the shares in Mighty River Power, Meridian Energy, Genesis Energy and Solid Energy.
It expects as many as 250,000 investor applications and fees charged by brokers will run to about $100 million.”
$75,000 to save our state assets vs $100 million to flog them of, against public opinion.
Gee, that’s a ‘toughie‘.
= fs =