Why New Zealanders avoid greenfield investments
Overseas investment will remain essential for any greenfields development in New Zealand while local investors minimise their risk, former Reserve Bank governor Don Brash says.
Dr Brash is one of two remaining directors of Oceania Dairy Group, which attempted to raise capital for a $90-100 million milk plant in South Canterbury.
Instead the company has sold its consents and land purchase option for a site at Studholme near Waimate to one of China’s largest dairy companies, Inner Mongolia Yili Industrial Group.
The site is near a milk powder plant built by New Zealand Dairies, a Russian-backed venture that failed and is now owned by Fonterra.
Yili intends to spend twice the orginal sum, some $214 million, on an infant formula plant.
Oceania’s failure follows a similar unsuccessful attempts to attract capital by Synlait Milk, which then received backing from China’s Bright Food Group, and Hamilton fruit extract company BioVittoria, which is now backed by global food ingredients company Tate & Lyle.
“New Zealanders tend to be focused on property or Fonterra and greenfields investments are considered much riskier. However, it’s lower risk for large companies as Bright Food and Yili,” he says.
Dr Brash and fellow director and South Canterbury dairy farmer Paul Park visited one of Yili’s modern dairy plants in Hohhot, a city of four million and capital of the autonomous Inner Mongolia region in China last October.