Iwi investments feel heat of tourism shutdown

Tuesday, 16 March 2021

Government ministers of the day enjoying happier times at a Ngāi Tahu tourism attraction.

Ngāti Whātua Ōrākei has often been criticised for not investing enough in tourism.

Its investments are entirely tied up in property, something it had planned to change last year with millions of dollars’ worth of tourism investments.

Tourism has been a big money-earner for iwi like Ngāi Tahu. Pre-Covid, many looked to tourism as a way of spreading their investment risk across more asset classes.

But now, a year of pandemic later, Ngāti Whātua Ōrākei, deputy chair, Ngārimu Blair is openly wondering if his iwi will ever want to add tourism to its portfolio.

“I’d say that if we did invest in tourism in the future we would certainly have even more emphasis on products and experiences that have light touches and limited or no impact on our special areas that we all love so much: our natural landscape.”

But has Covid left others regretting their exposure to that industry?

Ngārimu Blair says his iwi was all set to invest in tourism assets, then lockdown hit.

A TDB advisory group released in February pays particular attention to the situation of Ngāi Tahu, which recently posted its first negative return on assets in eight years.

The South Island iwi has received average returns of 8.8 per cent on their assets since 2013, but last year its return on assets declined to -2.1 per cent. Ten out of their eleven tourism businesses were mothballed and it initially cut 300 staff from its tourism businesses (although it later hired some after domestic tourism ramped up).

All iwi have taken a hit with Ngāti Whātua Ōrākei and Ngāti Pāhauwera the only iwi to achieve a return on assets last year that was above the TDB study’s benchmark portfolio of assets.

Those iwi who settled with the Crown largely decided to manage their settlement money by splitting their operations into investment and social welfare wings. The investment wing is supposed to grow the tribe’s asset base and generate a return for the social and cultural wings to use.

With dire economic predictions of double-digit unemployment, some iwi leaders realised they could take a financial hit just as their social and cultural wings needed the money.

A construction consortium led by Ngāi Tai ki Tāmaki iwi has been formed to deliver social/residential developments

But while iwi have experienced increased demands from their social wings over the past year many of the primary sector businesses they operate like agriculture, horticulture and fisheries were able to keep operating under Level 3. And there were continued demand for these products domestically and overseas.

Phil Barry co-wrote the TDB report and told Stuff Ngāi Tahu had taken some “harsh medicine” as a result of the pandemic, but it was not the only iwi to have suffered.

“Waikato-Tanui are invested quite heavily in hotels and retail property sectors. They own two hotels in Hamilton, the Auckland Airport hotel and 50 per cent of the big retail shopping centre in the Waikato just north of Hamilton: The Base.

“Those two sectors they were really hard hit with the lockdowns and obviously international tourism. So that’s some harsh lessons there I guess, but they’ll take a long-term view.”

Raukawa Iwi Development, director Jon Stokes says taking a long-term view is part of the job of being on an iwi board. They’re managing these assets not just for today but for several generations into the future.

The South Waikato-based iwi group is unusual amongst its peers in that it holds more financial assets than property. Stokes says the main reason behind this is diversification. It is easier to diversify risk using financial assets than it is through making large investments in things like property.

Waikato-Tainui have ambitious plans to build a major inland port in Hamilton.

Barry says iwi across the board have increasingly been trying to diversify their assets over time, including the ones they have an active controlling stake in.

Stokes says diversification is important for iwi like his own because of the pressure iwi members place on them to manage their assets in such a way that they’ll always deliver the 4 per cent per annum return needed to fund the iwi’s welfare activities.

Ngāti Porou and Ngāi Tūhoe are other notable outliers with financial assets forming the largest investment class they hold.

Stokes says the closer an iwi is to a large city the greater the share of land in their asset portfolios, but he notes land is a complicated investment asset for many iwi to hold.

Jon Stokes says land is a complicated investment for iwi, because they’re likely never selling it once they buy it.

“Most iwi are haunted by the loss of their land. So it becomes a very important asset.

“The main difference with iwi compared to most is generally when you buy land you’re never selling it again, and that is a major thing to consider when you’re trying to achieve the best financial results to fund other things.'

For example, if it bought a farm it is highly unlikely an iwi would ever sell it voluntarily. That changes how appealing farms are as an investment because capital gains on land are a big part of what makes farming profitable in the long-term.

Land and the repossession of it are front of centre for Blair’s iwi. Ngāti Whātua Ōrākei not only lost all of it land, but saw others make skyrocketing capital gains on it.

“Land is central to our identity. We have a saying: men die for women and land,” Blair says.

“For us here in Auckland we lost every acre of our land. We were landless by the 1950s so we have been driven to get back as much of our tribal estate into our ownership.'

This has led Ngāti Whātua Ōrākei to pour their money into the Auckland property market, and it’s also a reason why their iwi achieved the best financial returns within the last reported set of accounts.

Barry said Ngāti Whātua Ōrākei’s large investment in property was unusual, and it was more common for iwi to invest in about five different industries, but he says each iwi has its own appetite for risk and preference for certain types of assets.

Iwi tend not to invest in “intangible” technology assets, but some have plans to invest in clean energy and agritech.

Post-settlement iwi have also maintained very low debt-to-asset ratios with some carrying no debt.

Barry says they’ve also largely steered clear of “intangible” technology assets.

“If you look internationally the real growth in value has been in the high-tech sectors, the Amazons, the Apples, the Microsofts.

'That’s where the real wealth creation has happened in the last couple of years and that’s what’s been driving the S&P, it's not the traditional sectors of infrastructure or bricks and mortar. It’s those intangible assets.'

Stokes says this reluctance has generally been because these assets are higher risk.

However, Blair does see technology asset investment in his own iwi’s future.

Ideally he would want his iwi to be investing in clean energy technology and agricultural technologies which could reduce the impact of primary production on the land. Those are all investments which would be consistent with Māori values, too.

He also believes iwi will make greater investments in infrastructure by joining up with other iwi to make joint bids for projects.

The shape these potential consortia might take were seen during the Ports of Auckland debate. Ngāti Whātua Ōrākei announced it had entered into discussions with Ngāi Tahu, Waikato-Tainui and Tūaropaki to form a consortium to make a bid for POAL land and erect a new waterfront development on it.

Waikato-Tainui also has some ambitious plans for the future with a planned investment in a major inland port facility.

Barry says, on the whole, iwi investments have performed well. Their returns were only slightly below TDB’s benchmark figure for expected returns and exceeded it in three of the eight years examined.

Net assets per member across iwi have also grown every year except the last one, he says.

Toro Waaka says settlements can also be an excuse for iwi interests to be swiftly forgotten.

“They are major players, and I think they're only going to become more important in the future.'

Their success at investing has seen iwi assets grow substantially over the years from just under $2.6 billion worth of assets at settlement to $9.8b today.

That means iwi that haven’t settled yet are also missing out on years of capital gains from settlements.

The Government seems to be exploring a new way of addressing this issue. It has started a $150m Ngā Puhi Investment Fund while they’re still in negotiation with ngā hapū o Ngā Puhi. The theory is the fund’s managers will grow its assets as talks progress.

Yet settlements can also be an excuse for iwi interests to be swiftly forgotten after they’re made, according to Ngāti Pāhauwera Development Trust chairman Toro Waaka.

Waaka says this was clear during Covid-19 when organisations like his didn’t receive much Government support even though they were among the fastest to move in rural areas like the Hawke’s Bay.

“What people tend to forget is we are taxpayers, we're one of the biggest ratepayers in the area as well. So we should have equal consideration when money is delivered out into the community.

'Our settlement was about compensation it wasn’t about us being separated from the social systems of Government.'

Meanwhile, the amount of compensation doled out in the form of wage subsidies and targeted subsidies to tourism operators like AJ Hackett’s bungee sometimes dwarfed settlements Maori received for the loss of their own land, Waaka says.

“We do deliver social services, but that should be at our discretion about how we think we can help our community.

“As taxpayers and ratepayers we should get equal consideration in terms of housing issues, health issues, all those sorts of things that people in poverty are in need of.”