The Māori economy has doubled over the past nine years. It can grow by more than 150 per cent by 2040 with targeted investment. The supply side can get a slice of this action.
But, the challenge of investing in New Zealand directly is a lack of scale, high transaction costs and long delays in deploying capital. This is in part due to a lack of capacity and capability on the asset owners’ side of the investment but is often shared – especially culturally by all parties.
These challenges are no different to almost all investment activity undertaken globally.
They are a lack of forward-looking certainty, common goals, cultural barriers, risk-sharing agreements and longer-term use of assets. Hence the use of external managers and investment mandates in almost all cases of direct investing.
Consequently, the NICF committed to the establishment of Rauawa in 2023; an external manager/clearing house/aggregator of investment opportunities into the Māori economy. Rauawa will act as kaitiaki of Māori access to capital with four objectives to be achieved over a transition period through to 2040 – Te Tiriti o Waitangi’s 200-year anniversary:
- Implement a systemic response to eliminate hurdles, creating the right capital markets for Māori participation – paradigm shifts.
- Empower Māori to be accountable for the performance of the Māori economy in all respects. Eliminate Māori enterprise dependency on the Crown and work collaboratively – Mana Motuhake and Kotahitanga.
- Create an enduring Māori asset class (collective asset management) in the capital markets, aligning the supply and demand of capital in a sustainable way.
- End game: Lifting Māori life expectancy and quality of life.
While the notion of the Māori economy has been around since the early 2000s, and offers a baseline measurement for the demand and supply of capital, its full use as a benchmarking tool has not gained traction. Therefore, NICF commissioned a fiscal analysis of the Māori economy – entitled Ngao Tu, Ngao pae (translation in this context meaning the vertical and horizontal energies and efforts for investment.
These terms are taken from the traditional art of whakairo, Ngao tu – along the grain, Ngao pae – against the grain). What is evident are the unmet opportunities, the unmet needs and the unmet impacts. Unmet needs exist both on the asset and investor side. Social investment is paramount to integrate wellbeing investment to reduce the costs of unmet needs (education, health, housing and deprivation).
Our estimate for the cost (gaps) of deprivation is $8 billion per annum, $1.6b paid out in cash. If we improve the Māori economy, then every 10 per cent change in the level of deprivation is worth $160 million in cash. If you include the cost of a life, low-income jobs and inadequate access to education, the total value would be $800m.
In other words, what gets measured gets managed.
The arguments from the analysis for investment are compelling. The quantum of capital needs is significant and the potential contribution to the New Zealand economy can be described as remarkable.
In comparison to other sectors, the Māori economy would outperform our biggest contributors to GDP.
Today’s Māori economy, with $92b of assets, drives $23b of New Zealand’s GDP. This will grow faster than the rest of the New Zealand economy. We expect that $40b of acceleration capital will help increase the Māori economy with an increase to $62b of GDP (Note: Acceleration capital is additional to BAU investments), and total Māori economy assets are expected to exceed $250b by 2040.
A sum of $40b is small relative to the scale of the opportunities.
Māori land and agrifood production has been identified as an industry where Māori have an advantage and should start the acceleration. There is an estimated 180,000ha of Māori land that can be improved or converted to higher value land uses. More than $2.5b of investment is required to drive the transformation. The impact of capital to accelerate the changes is over $400m in annual revenue, 1700 jobs and $100m of wages. This kicks off a virtuous cycle that feeds wellbeing.
The BUT – and there are BUTS – is that co-ordinated effort and integrated investment solutions are necessary for this uplift and clearly capital, execution and measuring performance are the key.
Agile planning and paradigm shifting are necessary in this fast-paced, volatile, uncertain and complex environment we now operate.
Scaling up success is how we need to execute.
AND we collectively have to start the acceleration NOW.
*Ngao Tu, Ngao Pae was commissioned by Rauawa Trust Limited from MHSA – Simon Hunter.
