Business North May 2021

| 3 REGIONAL DEVELOPMENT BusinessNZ Helping Kiwi businesses to adapt T T Richard Loader Flow-on effects : “Every time those alert levels change in Auckland it affects a lot of other people in the country and not just from a tourism perspective”. Above, Auckland’s Wynyad Quarter which recently staged the America’s Cup. F rom its Wellington headquarters, Busi- nessNZ is New Zealand’s largest business advocacy voice, with a mandate to en- gage with companies, organisations, local and central government promoting New Zealand’s success through sustainable growth. With its roots stemming back over a cen- tury, the organisation became BusinessNZ 20 years ago and is owned by four regional business organisations — EMA, Business Central, Canterbury Employers’ Chamber of Commerce and Otago-Southland Employers’ Association. Operating a diverse range of well-known brands like Sustainable Business Council and ExportNZ, BusinessNZ has a direct member- ship relationship with 140 of New Zealand’s largest companies. Through its shareholding base the organisa- tion has connectivity with around 80,000 busi- nesses ranging from sole traders to Fonterra. At the helm of BusinessNZ is CEO Kirk Hope, whose experience includes CEO of New Zea- land Bankers’ Association, Executive Director of the Financial Services Federation, and a range of senior positions in Westpac. Kirk reflects on the global turmoil over the past twelve months to illustrate BusinessNZ’s efficacy in looking after the interests of Kiwi businesses over that period. “Because we’re connected to such a wide range of businesses we were getting business intelligence in January 2020 from businesses exposed to the tourism industry to say their revenues were down about 30%, which is highly unusual for this time of year. “So we triangulated the intelligence with the Ministry of Innovation and Employment in terms of visitor arrivals and they said ‘Oh my god, this is true — there are 30% less visitors than were here last year.’” This revelation occurred just after the Wuhan incident at a time when there wasn’t a great understanding of what Covid was, nor had New Zealand shut its borders to China. Things were still operating at a relatively normal pace. With mounting concerns, BusinessNZ took a delegation of stakeholders to meet with Government officials. “We explained the serious impact on the tourism industry and recommended designing and deploying a wage subsidy scheme,” says Kirk. “Very early in March we met with a wide range of Ministers and senior officials and soon after that the wage subsidy scheme was set up to be accessible. We didn’t realise at that point that we might have to go into a lockdown.” In March the circumstances escalated globally. Italy was shut down and the globe started to see lockdowns in other economies. It became painfully clear if New Zealand didn’t lockdown the impact would be very signifi- cant. Actively involved in the lockdown and the design of alert levels, BusinessNZ’s view was that it was better to go through that lockdown process and get it over with to get the econo- my running again to give businesses the best chance of surviving. In addition to proactive advocacy for wage subsidies, BusinessNZ was also at the forefront running on-line webinars to keep people apprised of developments with cabinet ministers providing official advice. BusinessNZ’s continued role during the pandemic has included working with the Government in regard to changes to alert levels and providing an advisory help-line to businesses, even if they were not members of BusinessNZ’s four regional shareholders. “We were involved in how the cash-flow loan scheme was developed. “If you had five to ten employees the small business cash-flow scheme was a well used and picked up tool. Something nearing two billion dollars has gone out the door, interest free if repaid within a certain period, and that period has been extended.” Working with the Ministry of Innovation and Employment (MBIE) BusinessNZ helped provide a ‘safe harbour’, advising business on things like what happened when trading while insolvent. “There was a lot of uncertainty. People were looking at how they could restructure their affairs, retain capital and thinking about the other side of lockdown. With the agreement of fifty percent of their creditors and a couple of other terms and conditions, that ‘safe harbour’ meant businesses had breathing space for about six months while they considered if they needed to restructure their operations.” Continued changes to alert levels in Auck- land have posed significant challenges to businesses. With a population base of 1.6 million souls unable to travel outside of Auckland the impact has been massive, with the wake felt throughout the country. While New Zealand’s third quarter GDP was very strong as a measure of recovery, the fourth quarter GDP was negative, which Kirk says paints a clear picture about what was going on. “Auckland went into another alert level increase late in the third quarter last year and that had a massive impact on GDP. “Every time those alert levels change in Auckland it affects a lot of other people in the country and not just from a tourism perspec- tive. “As the alert levels were moderated allow- ing more and more activity under an alert level, what you still found was the face-to-face services still couldn’t open under Alert Level 3. In Auckland there have been three lots of that. Even when the rest of the country is in Alert Level 2 there are significant implications for businesses.” Kirk reflects that throughout the crisis three key features of good leadership stood out, the first being resilience. “Essentially, the Government stopped the economy which is remarkable — it’s never happened before. “When economic cycles change that hap- pens over a period of time, it doesn’t happen overnight. So resilient leaders who were able to provide their workforce with a clear picture of what the business might look like com- ing out the other side were generally pretty successful.” The second part is around business and operational management. “This is really nuts and bolts stuff, but senior leaders with really strong leadership teams around them could quickly respond and adjust their business to the circumstances and continue to operate. “... there are a range of contingent costs that are coming into businesses that were not there before Covid, as well as quite patchy demand for services as a result of Covid for some businesses.” Kirk Hope “So having some real operational muscle was critical within senior leadership teams and senior leaders themselves.” The third area is around strong strategic judgment. “Ok, so there are four revenue lines chopped out of nine —what could we replace those with? How could we do that and rede- ploy capital to support that quickly and what people do we need to do that? So having a really strong strategic approach and not just being reactive was key. “You could have pivoted numerous times and still be left with money running out the door. Without a really strong strategic ap- proach that’s what could well have occurred.” Beyond Covid, Kirk says over the past three years New Zealand businesses have had to contend with a raft of other issues including increases to the minimum wage, increased sick leave and additional components to sick leave including domestic violence leave and miscarriage leave. “So there are a range of contingent costs that are coming into businesses that were not there before Covid, as well as quite patchy demand for services as a result of Covid for some businesses. “The impact is quite a lot of increased costs. Even if you didn’t have any minimum wage workers in your team it is likely there will be pressure on wages.” In addition to examples of non-minimum wage staff seeking parity with minimum wage colleagues, Kirk says the biggest challenge is that businesses have to be able to pay the additional costs before they have even sold a product. “That means they either have to increase their own pricing to manage those costs, or absorb the cost and reduce their capital or investment profile, not hire the next person or what ever it is that will enable them to contin- ue to operate in that new cost environment.”