Bernard Hickey: Crafar has lessons for us all

The Crafar Farms tragedy is a microcosm of many of the things wrong about our business and investment culture.

We believe small businesses are fairer and more productive for owners, workers and customers. We are generalists who love to do everything ourselves. We believe some "number 8 wire" and hard work will solve most problems. We believe corporate functions such as financial controllers, employment policies, and business planning are for bureaucrats and bludgers. Paperwork is done between dinner and bedtime.

We believe land is the best investment always. We are happy to load up with debt, even if it means we make losses. That's because it means we can avoid paying tax and will make the money back through capital gains, which are not taxed.

We believe business owners have the right to run their businesses as they see fit to grow the economy. We believe the Government's role is to make it easy for businesses to grow and employ more people, not to hunt down and prosecute wrongdoers.

The story of the growth of Crafar Farms over the last 15 years includes all these symptoms of a national malaise. Allan Crafar, his brother Frank, Allan's wife Beth, and three of their children (Robert, Glen and Lyn) have built up one family farm over that period into New Zealand's largest family-owned dairy farming group with 22 farms, 200 staff and 30,000 stock. It was all done with debt. Crafar has said his strategy was to "double down with debt" to keep growing the family's wealth.

The problem is he believed he could keep running this empire like a family business. I spent 45 minutes talking to him and he repeatedly said he needed to be on more of his farms more of the time, giving guidance to his staff and managers. His solution was: "They don't get enough of me." He said he had just finished a 37-hour road trip to check on the farms spread from the Waikato through the central Plateau to Taranaki. His main complaint was that he lost one hour in the day because of daylight saving.

He believes he can do it all. However he said he was exhausted and had suffered from depression at times because of the sheer workload, a factor he cited in one case of animal neglect by an unsupervised manager of a large dairy farm near Napier in 2006.

He told another journalist recently his business planning consisted of noting things down on a wall calendar and tearing off and throwing away the page every month.

He complained of being overwhelmed by paperwork. He should not be running Crafar Farms anymore.

He is a danger to himself, his staff, his animals and to the $200 million of debt with the banks. From a national point of view, he is a danger to our 100 per cent Pure reputation.

MAF and Crafar's banks are now in discussions about how to extricate him from this mess without hurting staff or animals any more. It will be tricky.

There are serious questions to be answered by MAF, Fonterra and the banks about why they let Crafar Farms grow so large, why Crafar was given so much debt and why he was given so many second chances after multiple convictions for environmental lapses and animal neglect.

But there should be a lesson for us in this. Debt-driven growth in land is not a solution to New Zealand's economic problems. It stores up risks for our financial futures and the nation's reputation.