Are the loans concessionary or made at market rates? What companies, if any, have received suspensory loans, which are forgiven if certain criteria are met?
The Herald asked for loan details where the money is flowing to private companies, for the obvious reason that the benefits of the spending will be largely private.
But the Ministry of Business, Innovation and Employment (MBIE) insists that these details are commercially sensitive and that disclosing them would run contrary to the public interest, even after negotiations end.
Officials won’t even release the interest-rate threshold used by MBIE’s regional development unit, Kanoa, to determine whether a loan is considered market-rate.
Of course, the handy blanket of commercial sensitivities can be lifted by a minister, who may casually drop additional information.
Regional Development Minister Shane Jones has made it clear that regional airlines are getting $30 million in concessionary loans from the fund, but nobody has explained why this has not damaged the airlines’ commercial positions.
Is the extra detail warranted because the airlines fail to meet the fund criterion that the money be spent on “hard infrastructure” – planes and parts no more qualify than buses or bicycles?
But if that were the case, shouldn’t the public also know whether Wellington-based OpenStar Technologies is getting cut-rate interest terms? It’s set to get a loan of up to $35m, and there’s no way it meets the fund’s criteria; the RIF’s “single overarching purpose” is for regional economic development, which expressly excludes investments in Wellington, Auckland and Christchurch.
Perhaps some cunning decision matrix has shown that, in the unique instance of airlines, the likelihood of commercial prejudice should be swept aside in the name of transparency.
Jones, however, is not partial to decision matrices, or “lawyerism” as he’s previously dubbed them.
Which leaves us with Occam’s elegant preference for the simplest explanation where several compete. Jones blabbed, and also something more.
That he has done the airlines no real damage in letting slip their cheap-loan secret. Indeed, one of the carriers recently complained that its loan interest, though below market rates, is not cheap enough.
The implication is that Kanoa is overusing the justification (or is it an excuse?) of commercial prejudice to withhold loan terms.
Ironically, given its fixation with protecting commercial interests, Kanoa is a government agency whose sole purpose is to distort competition and pick and choose which businesses (and other entities) receive the advantage of taxpayer money. Perhaps it wants to limit criticism.
It would help Kanoa’s case for commercial prejudice if the companies receiving loans were competitive entities themselves.
As it happens, many of the RIF loans have gone to industrial water schemes: irrigation companies and dams up and down the country, owned mainly by dairy, sheep and beef farmers, and horticulturists.
If you’re an owner of, say, Manuherika River Ltd, which received a $2m loan for pre-construction work on replacing the Falls Dam near St Bathans, how exactly is it commercially sensitive if the public knows you’ve been cut a cheap loan (or not)?
The same question goes for Opuha Water (South Canterbury), approved for a $20.8m loan; Waimakariri Irrigation (Central Canterbury), approved for a $15.6m loan; and Amuri Irrigation Company (North Canterbury), approved for a $20m loan, to name just a few.
These are geographically bound companies and, in almost every instance, they’re the only large-scale, consented water provider in the area.
If they have any competition, it’s likely to be from the local council. Which means that just about the only thing they’re really competing for is public money.
So, it’s tough to see how their loan details would give rise to unreasonable commercial prejudice. (The Ombudsman says commercial prejudice must be unreasonable if it is to trump disclosure.)
And it’s also hard to see why Kanoa fails, in every instance, to release requested RIF loan details when elsewhere officialdom frequently finds that the public interest in transparency carries the day.
Earlier this year, ChargeNet and its majority owner, Meridian Energy, were awarded loans of $53m to boost the country’s EV charging network. The public was told that the loans -managed by Crown entity National Infrastructure Funding and Financing – were interest-free.
Air New Zealand’s 2020 Covid-era loan carried expected interest of between 7% and 8% on the first $600m and 9% on a further $300m.
The following year, the airline was provided with a second loan facility, with a top interest rate of 5.3%. The Treasury managed both the loan and the release of information.
No commercial positions were unduly harmed in telling the public the terms on which their money was loaned.
Finally, Kanoa’s justifications for withholding loan details also include protection of its own ability to carry out commercial activities without disadvantage. In this case, lending money.
But it’s not clear that Kanoa is engaged in commercial lending.
John Rae, chairman of Crown Regional Holdings, which holds the assets of Kanoa’s regional investment funds, has stressed that the very opposite is true.
In fact, he was so incensed by the Herald’s reporting on the losses and defaults related to regional development loans that he penned a response to it, emphasising heavily the loans’ non-commercial, social purposes.
Can the Government’s regional development bandwagoners really have it both ways: telling the public it’s buying public goods like jobs and prosperity with regional loans on one hand, and waving away scrutiny with commercial justifications on the other?
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