Mayor 'seething' over Development West Coast's lack of action

Friday, 7 September 2018

Mayor Tony Kokshoorn is 'seething' over a lack of DWC investment when the West Coast economy is 'really struggling'.

A $124 million trust set up to grow the West Coast economy has been slammed for squirrelling money away while businesses struggle to retain jobs.

Development West Coast (DWC) was set up in 2001 with $92m Government money to offset the impact of the end of native timber milling on the West Coast economy.

Its most recent annual report shows the fund has grown to $124m. However, last year it only gave out $2.66m in loans to nine businesses, down from $12m the year before while growing profits by $5.2m.

DWC also co-funded four feasibility studies, a GNS Science Geothermal Study, the Minerals Research Institute and allocated over $500k to Tourism West Coast's marketing initiatives.

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The region's business leaders say DWC lacks transparency, does not give clear information on what it funds and takes too long to process loan applications.

DWC has a number of failed investments including $3m on an unsuccessful cranberry farm and $13m into a struggling dairy farm. An $880,000 investment in Putake Honey sparked controversy because it processes honey in Blenheim, not on the West Coast.

It costs almost $7m to run the Greymouth-based operation including its subsidiaries.

Grey mayor Tony Kokshoorn, a businessman and former DWC trustee, said the DWC model and management of the fund was not working for the West Coast.

He said he had been 'seething' since DWC's annual report came out because $2.6m in loans was a 'drop in the bucket'.

'The last eight years have been the most difficult we have had on the West Coast since the coal mining industry collapsed. The economy is really struggling,' he said.

'Meanwhile, DWC is sitting on a substantial amount of money. Most Coasters think not enough is being done. DWC should be more proactive,' he said.

DWC needed a new direction and should tell Coasters how the money was being spent. DWC is not subject to the Official Information Act and does not reveal who it gives money to or how much, unless the company agrees.

'They say they are only accountable to the Minister of Finance as settlor. They say its for commercial sensitivity. Coasters don't accept that. We need more transparency.'

An $880,000 investment in Putake Honey sparked controversy because it processes honey in Blenheim, not on the West Coast.

DWC 'A WASTE OF TIME'

E-Quip Engineering director Peter Haddock, who is also a Grey district councillor, said he approached DWC for a $1m loan to buy a historic building in Greymouth which was in danger of being demolished.

'I waited nine months and got sick of waiting so I went to National Bank and within a week I had $1m approved. That's how silly it is. It's a waste of time,' he said.

He was also told it would take four months to process another application for a $50,000 loan to buy a new piece of equipment.

When he approached the bank, he had the loan approved the next day.

Haddock had previously received a $250,000 loan to buy two new machines for about nine per cent interest over five years. The loan allowed him to double the size of his workshop and employ three new staff. He never missed a payment but found monthly reporting 'onerous' and paid it back a year early.

'Something is drastically wrong. They should be helping. They shouldn't be looking at risky businesses that are struggling.

'They should be looking at established successful businesses and asking 'how can we help you grow?' I was an A1 customer and they have never asked me 'how can we help your business grow further?',' he said.

He believed DWC needed restructuring.

'I believe they have huge potential. We have got all that money. They have never been out to my business and I've never been back and never will go back,' he said.

DWC SUPPORT A 'GAME CHANGER'

Cranley Farms, the trust's largest investment, has never turned a profit since DWC invested.

Franz Josef Clay Target Shooting owner Vicky Whittington said DWC gave her a small loan to help set up the business last year.

'They put us through our paces but it was for our benefit. I don't think we would have got the same support from a bank. They provided more support for our future growth with a business mentor and it's going really well,' she said.

Reefton Powerhouse Charitable Trust chairman Greg Topp said DWC gave $670,000 towards a $5m project to restore the town's historic powerhouse into a visitor experience. He said the funding was a 'game changer' and allowed the trust to buy a critical piece of land.

'They made sure we dotted all the i's and crossed all the t's. While that felt like a lot of time, effort and scrutiny at the time, it was certainly worth the effort,' he said.

A Government-funded West Coast economic growth study found economic development on the Coast was fragmented and ad hoc because it was spread across councils, DWC, Tourism West Coast, community organisations and a regional economic development manager. It said a single entity should be set up or DWC could take the lead.

It found DWC did not clearly communicate its funding decisions and had a scatter-gun investment approach. It said almost all industry representatives spoken to had concerns about DWC including its investment strategy and the length of time it took to make decisions.

DWC chief executive Chris Mackenzie acknowledges the criticism and says a review is underway.

'Since I have been here I have tried, and working with the trustees, to refocus it more on an economic development agency. A lot of the criticisms on the growth study were justified. Criticism is valid of DWC and the way it has been operating. We are trying to change that,' he said.

There are seven trustees; three elected by the people of each district, and the rest are appointed by the three district councils, the Law Society, the Institute of Chartered Accountants and Tangata Whenua.

Mackenzie, who was 2IC in the Auckland Transition Agency, believed DWC could take on a similar role to Auckland Tourism, Events and Economic Development.

Mackenzie said DWC had just hired two business development managers to drive up and down the Coast visiting businesses. It already provided business mentoring and an education programme to help start-ups.

He said DWC often did not get enough credit for the $2.5m community distributions it gave to organisations like Coastguard and St John. It gives the three district councils money every year, including $2m in 2013 and $1m each in 2016.

Westland used its fund on upgrading community halls and the Grey district is using it towards dredging the port and building a new town square.

DWC chief executive Chris Mackenzie says criticism has been valid and the organisation is 'trying to change'.

He said DWC got fewer applications in the last year because Coasters had turned their focus on applying for Regional Economic Development Minister Shane Jones' $3bn Provincial Growth Fund. DWC was helping businesses and projects apply for funding, and every application had to be ticked off by DWC before it would be considered.

Out of 79 applications to DWC over last five years, 62 were approved and only 17 were either withdrawn or declined.

'THIS IS NOT PUBLIC MONEY'

Mackenzie said he did not believe that DWC should become subject to the Official Information Act.

'This is not public money in the way in which public service money is. It's money the Crown has given to the West Coast and a set of trustees to administer for the benefit of the West Coast. If it was subject to OIA I suspect even fewer people would apply,' he said.

He said DWC had not always put as many controls on funding as it should have.

INVESTMENTS TURN SOUR

It has invested $13m in Cranley Farms, making it the biggest investment in the trust's 17-year history. It now owns 82 per cent of the dairy farm, which employs up to 16 people. Cranley hasn't turned a profit since DWC invested. This year's loss was $305,000.

Mackenzie said if the Cranley Farm and Putake Honey applications were before the trust now it probably wouldn't have approved them.

'Some of our investments have turned sour. But that was expected when the trust was set up. It's just as important to spend money as it is to grow the fund.'

He said if Cranley Farm had two good years he would be recommending to trustees it be sold.

He hoped confidence in DWC would improve.

'There's no way we will turn around the negative attitude to DWC in 12 months, it's going to take longer. People are still going to say why haven't we put money into this that or the other thing.'