New Zealand Trade & Enterprise (NZTE)

Massey University business researcher Claire Massey stated in The Dominion Post that lifestyle and mum and dad firms are just as valuable to the economy as embryonic multinationals . For New Zealand Trade and Enterprise, supporting the mums and dads and more ambitious businesses is not an either/or – we have to do both.

New Zealand is a country of small businesses. We don't have enough big ones. From a national economic perspective it's misleading to present it as a competition and it creates a misunderstanding of NZTE's priorities and activities.

Which makes a bigger contribution towards increasing the wealth of all New Zealanders – a local shop selling to the local market or a similarly sized export business taking New Zealand products to world markets? From NZTE's point of view it's got to be the exporter, though that doesn't mean the needs of other businesses are ignored.

So, for local economies what Professor Massey says is true. But it's not clear that the activities she refers to will increase the wealth of the nation. The question for NZTE is: How do we quickly extract the biggest possible amount of economic growth out of our $180 million annual budget for the benefit of all New Zealanders? Professor Massey sets out one option – spread ourselves thinly and support as many small businesses as possible in what she calls a bottom-up approach.

Business size is not an overriding factor in our decisions on who to support. Ambition to expand matters a lot more.

All the same, a business with a turnover of $100,000 growing 10 per cent is not as valuable to the national economy as a $1 million business growing at the same pace. And a business wanting 50 per cent annual growth is potentially more valuable than a less aspirational one.

Also businesses that export help make the economic cake bigger in a way that domestically focused ones cannot by taking advantage of the much larger growth opportunities available on world markets. A critical element in export growth is the type of jobs they tend to generate.

For most New Zealand businesses, major international opportunities revolve around using technology and innovation to add value to their products and services. To do this they need skilful workers. Paying the minimum wage is not an option. These realities drive what NZTE does on the ground. It explains why we spend about 60 per cent of our operating budget overseas and about half our grant funding on international market development. The percentages devoted overseas are increasing.

When NZTE started in 2003, grant funding available to help businesses developing international markets was $7.6 million. Now it is more than $60 million. Most recipients of this support are small businesses. Last year we had 659 high growth clients on our books. Nearly half had turnover of less than $3 million.

Professor Massey also suggests NZTE is only interested in these businesses. A look at NZTE's activities shows this is not so. Last year 13,000 small businesses took part in NZTE training courses, there were 121,525 unique visitors to our biz.org.nz website and the Biz 0800 Contact Centre and our regional offices received 17,740 calls.

If you add in the companies benefiting from broad NZTE programmes such as the regional and sector initiatives and event support, it is clear that NZTE is helping a large percentage of New Zealand businesses. In 2006-07 NZTE spent $11.7 million on business training and capability building and $7.3 million on information and advice.

These services are available to all New Zealand businesses though they are often delivered through other organisations. Many businesses probably don't know the funding comes from NZTE – which may explain the 15 per cent figure reached by the Massey University researchers.

The balance between what NZTE does to support all New Zealand businesses and high growth ones and between our overseas and local work is a source of debate. But NZTE recognises it has to help ensure that there is a healthy and resilient base of companies in New Zealand. From this base will come the companies with the desire and ability to take advantage of opportunities for out-of-the- ordinary business growth – the embryonic multinationals.
# Tim Gibson is New Zealand Trade and Enterprise chief executive.

Government departments are elitist and ignorant when it comes to helping small firms, one of New Zealand's leading small business experts says.  Massey University professor Claire Massey has criticised the Ministry of Economic Development (MED) and New Zealand Trade and Enterprise (NZTE) for ignoring most of New Zealand's small businesses.

Massey targeted the Government organisations' definitions and the policies they used to interact with small and medium enterprise (SME).  "They are using a construct -- the business life cycle -- which comes from large firms. If that is the only framework you use to look at small businesses, it misses the point," she said.

SMEs made up 99 per cent of New Zealand's business community, yet NZTE only dealt with the top 4% -- firms with at least 20% growth over five years.  "We love to see David beat Goliath, to see Icebreaker, Weta and Trade Me take New Zealand to the world. But most New Zealand firms are not like this," she said.  "We have to stop griping about lifestyle businesses and mom and pop firms as if they were a bad thing. They are not all embryonic multinationals, but they are just as valuable to the economy," Massey said.

The focus also missed the real force behind eight out of 10 businesses -- that of the owner.  A 2005 survey by Massey University showed less than 15% of small firms had got any help from MED or NZTE, and many knew little about what was available.  "They don't seem to mind being treated like second-class citizens, while we run around looking for the next Sam Morgan," Massey said.  While NZTE had $180 million a year mostly devoted to businesses with up to 100 staff, they blamed budget constraints for the fact they only interacted with the top echelon of those, Massey said.

But if that attitude was adopted within other Government responsibilities, such as education, it would be intolerable, she said.  "That's like dealing only with A students. It is easy to make a success out of A students."  New Zealand was not alone; most countries had an ill- thought out approach to small business development, she said.  "Countries just say `What should we be doing, let's focus on high growth.' There's not much sophisticated thinking going on there."  Taiwan -- "one of the development miracles of the world" -- had a bottom-up approach to development, putting the majority of their resources into small business, acknowledging that was where the growth potential was.  "That completely woke me up, they are doing the exact opposite of what we are doing," Massey said.

A MED report last month on structure and dynamics in SMEs showed that firms with 20 or less employees accounted for nearly 60% of new jobs in New Zealand from 2001 to 2006.  The findings showed firms with up to five workers comprised 87% of New Zealand enterprises, contributed 30% more new jobs than firms with 500 or more staff and made twice as much real profit per employee than any other sized grouping.

Encouraging the owners of "low-growth" businesses would have a massive effect on the economy, because even a small change in productivity over the large grouping would have a big upside, Massey said.