KEY POINTS:
The merger of Maori organisations is inevitable.
With many infrastructure assets and businesses already in offshore ownership, Maori trusts and incorporations, Maori Trust Boards and iwi organisations will inevitably start teaming up to become more forceful players in the domestic economy.
The move will help secure inter-generational ownership and control of resources, as well as achieve cost savings.
Just last week came news that Tainui Group Holdings and Ngai Tahu Holdings Corporation, who have agreed to invest collaboratively, have made their first major co-investment by buying a significant stake in listed company Ryman Healthcare.
Over time, numerous Maori organisations, not just the existing larger entities, could conceivably turn into a handful of wealthy, influential corporates. They would be able to wield considerable market power for the benefit of owners that may now control the same assets through smaller entities operating independently, with different and sometimes competing objectives.
What could a merged organisation look like? Take a number of related Maori corporate organisations generally operating under the radar - Parininihi Ki Waitotara Incorporation, Wakatu Incorporation, the Wellington Tenths Trust, and the Palmerston North Reserves Trust - whose owners all have have Taranaki genealogical links. A merger of these organisations could immediately produce a domestic corporate kaitiaki (guardian) with these characteristics:
* 24,000ha in freehold and leasehold land in Nelson, Marlborough, Wellington, Palmerston North, Taranaki and Australia.
* Commercial, farming, industrial, retail, and residential property investments.
* A $600 million diversified portfolio of investments in tourism, aged care, dairy, sheep/beef farming, horticulture, aquaculture, fisheries, real estate and equities.
* Owners passionate about local control of local resources but aware of global commercial realities.
* Increased ability to manage and balance the policy and practical implications of regulatory frameworks around climate change and natural resource allocation (for example, water).
* In-house legal, accounting and management teams.
* Over $500,000 of support annually to hospices, education, marae and other charities.
This does not even include potential sidecar investment from Taranaki-related iwi organisations who have recently settled historical Treaty grievances with the Crown.
The context for these mergers is almost upon us. With an increasingly urbanised Maori ownership base, territorialism will dissipate (albeit slowly for some) because of the lure of greater dividends and leverage from merged entities. The combination of collaborative leadership and experienced management will demand new directions. The upside of flying in formation will outweigh the benefits of flying solo.
Some iwi and Maori corporate groups have been co-investing for a long time. Since the fish quota regime was introduced, iwi satisfied with a passive role have consistently bargained quota with others more actively investing in the industry.
With the recent Ngai Tahu and Tainui investment, there are other examples. Gourmet Mokai is another co-investment arrangement whereby an amalgam of Maori corporates are working together with non-Maori in horticulture.
But there is sure to be more than just co-investing or working together in the future. The actual merger of ownership, governance and/or management of Maori bodies corporate is a logical next step.
Mergers will enable the diversification of investment portfolios to reduce risk - as good a reason as any to contemplate the idea. Many Maori organisations rely heavily on the three Fs - farming, forestry and fishing - and so are exposed to dollar and payout fluctuations, and the effects of government regulation such as liabilities associated with an emissions trading platform. Creating a more diversified investment portfolio, beyond the three Fs, should enable merged organisations to better ride out the shifting cycles in these primary sectors. It may also bring the benefits of broader access to governance and management talent.
Efficiencies and economies of scale in operations would also be a potential advantage. Some Maori organisations have started to build management and administrative expertise but many others still regularly engage external professional advisory services at considerable expense. Mergers should drive more efficient administration and provide wider opportunities for succession planning and capacity building.
The legal, business and political ramifications of these possibilities are far-reaching but there are major hurdles.
Most significant will be getting owner/member consent. How to market potentially controversial proposals with the knowledge that criticism awaits you at every marae and annual meeting is something that may daunt even a Fonterra director.
Many owners/members will find it outrageous that their connection to ancestral land could become more distant, with non-tribal governors telling them how local land will be managed.
Constitutional issues, including the allocation and weighting given to each ownership interest, will be hotly contested. Valuations of assets of each merging organisation must be made and an independent (maybe even judicial) assessment of these valuations must be undertaken.
The nature and tradeability of the ownership interests will almost certainly come into question. Currently, ownership interests in many Maori organisations can only be transferred under the auspices of the Te Ture Whenua Maori 1993. Restrictions in that legislation require ownership interests first be offered to priority classes of alienees and need Maori Land Court approval for transfer of ownership.
Would there be scope for a new tradeable class of shares for which Maori Land Court approval is not required? Or the possibility of merging some assets of two or more organisations in a joint venture, but not the land resource nor the ownership of the parent bodies?
And who will pilot the merged entity? There will probably need to be some guaranteed representation from some owner groups, while elections without reference to Ministerial confirmation, as is the case for some Maori organisations today, will probably be the only way to move forward. It may be prudent to have different classes of shares able to vote on specific governance positions.
These observations and conclusions could be wrong. Perhaps the political pressures against merging will prove too great. Perhaps current leaders are not ready for such change and the subsequent impact on their individual situations. Maybe current shareholders just won't want new and possibly unrelated individuals gaining shared ownership in their business. Maybe mergers will only happen at a subsidiary level and not at the iwi governance level. Such problems could be argued over for years.
But the rewards of a more collective approach for Maori corporate organisations are there for the taking. *
Tama Potaka is a solicitor with commercial law firm Bell Gully. He is also a member of the Committee of Management for Parininihi Ki Waitotara Incorporation and has roles with several Maori trusts. He is from Ngati Hauiti, Whanganui, Ngaruahine, Taranaki, Ngati Raukawa and Ngati Whitikaupeka.
