Scott Morrison hits Australian farmers
01 May 2016 8:43 am
On April 19, cattle-ranch empire S. Kidman & Co., the largest landholder in Australia, agreed to a sale to a mostly Chinese consortium for A$370.7 million (US$289 million).
Then, 10 days later on Friday to be precise with an election looming Australian treasurer Scott Morrison blocked the deal, saying that because of the portfolio’s size and significance, its sale to foreign investors “may be contrary to the national interest.”
The Kidman portfolio boasts 10 cattle stations and associated properties sprawled over four states and territories. Stretching over 100,000 square kilometres (38,600 square miles), it makes up 1.3 per cent of Australia’s land mass, and 2.5 per cent of its agricultural land.
The consortium trying to buy it was led by China-based Dakang Australia Holdings, which would have taken 80 per cent of Kidman with the rest going to Sydney-based Australian Rural Capital. Dakang is controlled by Shanghai Pengxin Group, a private company owed by billionaire property developer Zhaobai Jiang.
The problem is Australia’s farmers and food producers need foreign investment to increase production and meet growing demand.
The bottom line is that agricultural and livestock producers on Earth need to tap smarter technology to keep up with feeding a growing Asian population whose tastes are becoming increasingly refined. And satisfying Asia’s fussy eaters requires an enormous investment in IT to take full advantage of the digital revolution that awaits farmers who will go "NBN-live" next year.
The Australian typical farm generates a return on capital of just 1.4 per cent, according to a government report. That deters investors.
A report by Port Jackson Partners says Australian agribusiness needs to attract $360 billion of capital from offshore by 2050 because of a shortfall at home.
“We can’t expect Australian food producers to go to China or Asia alone and succeed,” Doug Ferguson, a Sydney-based partner at KPMG who leads the firm’s Asia business group told Bloomberg. “They need a partner.”
The problem is Australia’s farmers are facing a protectionist backlash. A 2014 Lowy poll found that more than half the Australian population thinks the Australian government is: allowing too much investment from China.
Does it really matter whether the money is coming from China or for that matter the US? What’s important here is that the money leads to more milk, cheese and jobs being produced in places like Gippsland and Queensland rather than California or Inner Mongolia.
Surely that’s a concept that Australian business and the public can grasp. It’s not something grasped by our political leaders who have never really held proper jobs or run a business. They're too focused on making decisions based on populism, not evidence.