RESERVES
Non-Trading Boards’ Reserves
59. The Meat and Wool Boards are the only non-trading boards that hold substantial reserves. At the end of 1997/98, the Wool Board held reserves of approximately $128 million on behalf of its producers, and the Meat Board $133 million.6 Per commercial farmer, this represents approximately $15,500.
60. The reserves were accumulated through a combination of trading revenue, levy income and return on investments. Growers own the reserves even though they are accumulated from a number of sources.
61. The accumulation of the reserves is more a result of historical accident than deliberate action on the part of the Boards. Boards have subsequently sought to assign a role for those reserves. Recent suggestions have included venture capital (Wool), and an insurance fund for industry-wide disasters (Meat).
Management and Use of Reserves
62. Producers do not have a direct say in how their reserves are used or what should happen to them (for example, being returned to levy payers). As with levy income, there are few effective limits on the uses to which the reserves are put.
63. For example, the Wool Board’s reserves have fallen from a high of $497 million in 1988 to $128 million in 1997/98. Many farmers have questioned whether the rundown of their reserves has generated any tangible benefits. There is a concern that reserves are being treated as ‘easy money’ and are able to be applied to high-risk activities with little accountability for the performance of those activities.
State of Play
64. Officials presented the following proposal to the Boards:
· the owners of the reserves should be able to withdraw their share; and
· it would be up to the Boards to decide whether to return the funds directly to farmers or to establish a company with the reserves from which farmers would then be able to sell their shares.
65. The Meat Board did not support this option. Instead, it wanted levy payers to decide collectively, rather than individually, what would happen to the reserves. Officials did not have an opportunity to enter into discussions with the Wool Board on the future of its reserves.
Options for Reserves
66. The main options available to the Government for dealing with the reserves are:
Option 1:
Provide for the Boards to hold a referendum of levy payers to decide what happens to the reserves.
· This option ranks highly in terms of collective decision making however the options put to levy payers in the referendum may not be the best options or be presented mean that producers who wish to use the money in alternative ways, such as many Maori producers, would not be able to do so.
Option 2:
Provide for the Boards to give individual levy payers the choice of withdrawing their share of the reserves from the Boards. Under this option, the Boards could, establish a company with tradable shares from the reserves.
· This option is more likely to meet the individual preferences of levy payers and to minimise the risk that the reserves will be treated as ‘free money’ and used inappropriately.
· Many farmers, however, do not think they are entitled to any direct share of the reserves. They consider the reserves belong to the “industry”. By contrast, the Federation of Maori Authorities (FOMA) fear that the Boards will waste the reserves. FOMA would like to see the reserves invested with investment income used to reduce levies.
6 Figures are for 1997/98, the latest year for which the Meat Board Annual Report is available.
| © MAF 1999 |  |
|
| MAFnet Help | Important Disclaimer |
Contact for Enquiries
MAF Information Services
Pastoral House
25 The Terrace
PO Box 2526
Wellington, NEW ZEALAND
Fax: +64 4 894 0721
Contact this person
