Mini-grants bring mixed job success

SIMON COLLINS surveys 20 recipients of Jim Anderton's $96 million 'Jobs Machine' to gauge how much work is being created.

Labour's 1999 Pledge 1:
Create jobs through promoting New Zealand industries and better support for exporters and small businesses.

A year ago, a North Shore company making sunscreen covers for babies' prams was given $8671 of taxpayer money.

In the year since, its sales have more than doubled to more than $1 million, it provides jobs indirectly for 36 people and exports to Australia, Europe and Japan.

Not bad for a business that started when two new mothers met at a coffee morning 4 1/2 years ago.

It is even more impressive when you hear that the mothers, Eileen Hoey and Louise Dawson, still run the business - Baby Shade - from home and have two preschoolers each.

It is just the kind of success story Economic Development Minister Jim Anderton needs to show Alliance rebels and business sceptics the value of his "Jobs Machine" - $96 million of taxpayers' money that is going into industry and regional development this financial year.

Baby Shade's grant may have been tiny, but it was the biggest of 20 "enterprise awards" granted in the February 2001 funding round to recipients contacted by the Herald last month.

Up to January 31 this year, Anderton's baby, Industry New Zealand, granted 435 enterprise awards totalling $3.7 million - an average of $8586 each.

Can such minuscule grants, sprinkled so widely among new businesses (and voters), have had an impact on jobs?

And even if they have helped create jobs, how many might have been created anyway if that $96 million had instead been left in the pockets of high-earning taxpayers?

No one knows. No one in government or academia has done the research to find out.

So what can we learn from those who received enterprise awards?

Of the 20 grant recipients the Herald contacted, nine have created no new jobs at all. Two of the nine have gone nowhere.

An Inglewood company that makes excavator equipment said it was pushed by its accountant into applying before it was ready, and has not taken up its grant.

And John Butler, a Pukekohe engineer wanting to make motorised trikes, said his plan was "dead in the water".

"It's another Government flop," he said. "The whole thing was, you get mentors and all that bullshit.

"What we are getting is people who don't know a shit - schoolteachers, just talkers. I basically have to go it alone. They are no help at all."

Two other businesses used their enterprise awards to file for patents or trademark protection in overseas markets, but are still developing their products - a new kind of telescope and a chain of organic cafes.

Nautic Marine Design, of Mt Maunganui, spent its grant on a consultant to draw up a strategic plan, and has since moved into bigger premises with room to build three hand-crafted timber boats at once. But owner Arch McTainsh cannot get the staff to build them.

"We did have two apprentices, but they got to a certain stage and found out very quickly they could earn more money doing something else."

The other four businesses that have not yet created jobs are more optimistic.

An Auckland stormwater filter firm is about to double its staff from five to 10 as it expands into Australia, a Porirua wireless alarm maker is almost ready to "press the mass-production button", a Hastings power ladder designer is perfecting his design and a Wellington film producer is still seeking investors for an ambitious multinational TV series.

Three firms have created one new job each since receiving their awards.

Auckland swimming instructor Aaron Davis has employed someone in his new Swimsation chain of franchised swim schools and Wellington software consultant Karun Shenoy used his award to hire a developer to work on mobile internet access for workers remote from home base.

A Tauranga biotech start-up, co-founded by former NZ Dairy Group manager David Syme, also contracts out some of its research to the equivalent of one fulltime job.

It is developing several "natural-based products" starting with a medicine for animals that will replace antibiotics.

A former Auckland schoolteacher, Kristine McLaren, has increased her staff from four to six in the past year in Kmac for Kidz, which provides an integrated reading programme to 60 per cent of New Zealand primary schools and is using its enterprise award to investigate Singapore and Britain.

Paul Bryan, who runs the Rotorua Airport "super-shuttle", spent his award on an information desk inside the airport terminal, which has earned him enough extra tour business to take on the equivalent of about two fulltime drivers.

A Glenfield paint manufacturer, PaintPlus Colour Systems, is growing by 25 to 50 per cent a year and has increased staff from three to five in the past year.

But manager John Warman said applying for an enterprise award was a "distraction" and he did not take up his full $7400 award.

Another North Shore firm, NCB (New Channel for Builders), used its award to look into franchising its internet-based building supplies business, but is still busy with its seven-figure Auckland base which has increased staff from five to eight.

Double K Electronics, a Palmerston North firm, spent its $4516 enterprise award on patenting an instrument to detect mastitis in cows. Since then it has boosted staff from six to 10.

Dreamboat Partners, at Auckland's Westhaven Marina, got an enterprise award to plan franchising of its club, members of which share ownership of boats. It has had inquiries from Australia and North America as well as other local ports, and has taken on six new employees.

Finally, Drury accountant Peter Allen received two enterprise awards to develop a trademarked test for small business owners to assess their own businesses, which he administers in group courses.

He said the 25 "ma and pa type businesses" that have been through his courses had created 12 jobs in the past two years.

If you count Allen's 12 indirect jobs and 18 from doubling Baby Shade's sales in the past year, that makes 53 new jobs from the 20 firms in this survey which received enterprise awards totalling $92,167.

Scaling that up to total enterprise awards of $3.7 million suggests that companies which have received awards may have created around 2000 jobs. That is not counting the rest of the Government's $96 million.

But that would be nonsense, because most if not all of the 53 new jobs in this survey would have been created regardless of the trifling incentive of an enterprise award.

In many cases, the awards were a mere morale booster.

In one case, though, a $6435 enterprise award was enough to keep alive a business that may turn out to be a real winner, the Porirua wireless alarm maker Skycomm.

The enterprise award enabled founder John van Dinther to commission a study of Australia that gave him the confidence to proceed.

"When we press the mass-production button, I would feel comfortable with saying we will have the equivalent of quite easily a dozen fulltime-equivalents at start-up, and that could grow to 30 or 40, the bulk of it in Wellington," he said.

"If we couldn't have done that planning for the Australian market, we probably would have thrown it away."

Economist Brian Easton says that in principle, taxing high-income earners to invest in businesses such as Skycomm may boost investment and jobs, because the wealthy might otherwise spend much of the money on imports and overseas trips.

Even if they saved the money, only part of it would have gone into productive investment. Only 47 per cent of bank lending in January was to businesses. Another 45 per cent went to households (mainly for housing) and the rest to people overseas.

Using taxpayers' money to subsidise private investment could also be justified because society may be more willing to share risks than any individual entrepreneur or bank.

Individuals such as Arch McTainsh are reluctant to invest in training workers when those workers may take their skills across the road to their competitors.

In theory, therefore, subsidising private investment may potentially have produced more jobs.

Only real research will show whether the "Jobs Machine" has achieved that goal in practice.