Banks to blame for Crafar saga - Fed Farmers head

Grumpy Federated Farmers head Bruce Wills fingers his former industry for the Crafar Farms mess, which he says will lead to less foreign investment. 

Government ministers today endorsed an Overseas Investment Office recommendation, paving the way for Chinese company Shanghai Pengxin to buy the 16 Crafar farms through its subsidiary, Milk New Zealand Holding.

Mr Wills, a former banker with AMP Investments, told NBR ONLINE the "unfortunate" affair could have been stopped 15 years ago by more prudent, sensible bank lending.

"How on earth did we get into a situation where we've now got a farming business with debt higher than assets?

"It just makes me a little bit grumpy when some over-enthusiastic lending by the banks a decade or more ago created this situation in the first place."

He says bankers, including himself, heard what went on with the Crafar farms, the owners of which "have been highly-indebted farmers for a long, long time".

"Maybe if someone had just been a bit more prudent 15 years ago we wouldn't be talking about this subject today, because it wouldn't have happened."

Mr Wills says rural debt stands at $47 billion. New Zealand debt levels are very high, "particularly on our farms, particularly on a worldwide basis".

The banks have to take some responsibility for the situation, he says. 

"My sincere hope would be that they learn from this experience. We need banks - of course we do - but they need to be prudent, long-term lenders and not allow this situation to happen again."

The Crafar farms saga will lead to less foreign investment in New Zealand and more scrutiny of Overseas Investment Office decisions, he says.

Already, some overseas investors have bypassed New Zealand, he says, "because it all just looks a bit hard to go through this process".

World leaders

The difficulty for New Zealand farmers is to remain world leaders requires continued investment, he says.

"If we're going to say to no to foreign capital, we've got to find that money from somewhere else to do the things we need to do to continue improving productivity."

He says there might be public resistance to the Crafar farms sale because of existing offshore ownership of New Zealand banks, insurance companies, commercial property, listed companies, and forestry assets.

"Maybe we're saying enough's enough.

"But we've actually got to get some fundamentals right which is all about really having a stronger saving culture so we've got investment funds in here to fund progress that we need in our important industries."

Mr Wills says the country has to "wake up" to save more and borrow less.

$12.5m for development

Land Information New Zealand's Crafar decision, dated Monday, reveals selling the farms to Milk New Zealand Holding will pump $12.5 million of overseas investment into the country for development purposes.

The decision says the sale satisfies the contentious "benefit to New Zealand" criteria, as stated in the Overseas Investment Act.

The 16 Crafar farms cover about 7900 hectares in four areas of the North Island. Three of the farms are drystock farms, with the remaining 13 in dairy.

The decision says: "Currently, due to the receivership, the farms do not have long term investment plans and the applicant claims that productivity is below the potential of these farms."

According to the Foreign Investment in New Zealand website, foreign direct investment in the country was $11 billion in 1991. That rose to as much as $49.3b in 2001.

Today's decision has sparked a fresh round of heated comments about the sale.

Alan McDonald, the spokesman for the Sir Michael Fay-led consortium Crafar Farms Purchase Group, declares the group's fight against the sale is not over, while BusinessNZ chief executive Phil O'Reilly says the decision shows the world New Zealand is "open for business".