This is the year of delivery by the government she leads, Prime Minister Jacinda Ardern has said – the year in which NZ will be transformed.
After 18 months in office there have been precious few signs of that transformation getting under way. Even one of Labour’s priorities — the provision of affordable housing — is lagging, with Housing Minister Phil Twyford at risk of making himself a laughing stock.
Even less of a laughing matter is the absence of any green shoots from government-initiated programmes in lifting the country’s absymal rate of productivity.
But Research, Science and Innovation Minister Megan Woods did allow herself a small smile of congratulation in the House on Tuesday when she quoted the Statistics NZ report which showed that total R & D spending grew by $758m to $3.9bn since the last survey, in 2016.
She added the government has set a goal of reaching 2% of GDP as R & D by 2027. The survey shows an increase from 1.23% to 1.37%. and she conceded that while this is certainly encouraging progress, there is still plenty to do.
Even at this level NZ is still near the bottom of the OECD rankings when it comes to R & D spending. Woods said:
“That’s why this Government is introducing the R & D tax incentive on 1 April. This will mean even more companies will be able to access R & D support, which will help them lift their spend on science and innovation. High levels of R & D spend are linked to higher levels of productivity. New Zealand has struggled with how to increase our productivity for a long time. Introducing the tax incentive will help alleviate this issue by helping more businesses invest in R & D”.
All very laudable, though there are sceptics who believe that a tax incentive of the kind the government is introducing will be captured by businesses whose tax accountants are skilled in the art of reclassifying development spending.
Still, technology offers a path to higher productivity and anything that encourages new start-ups in the sector is to be welcomed.
Just last week a NZ-listed company ERoad, which has pioneered innovative commercial and regulatory services for motor carriers in New Zealand, Australia, and the USA, announced one of the largest privately owned fleets in North America has become ERoad’s largest US- based customer. It said it had entered into a master supply agreement in the US for around 4,900 EHUBO 2 units.
The decision to switch to the user-friendly, accurate and reliable EHUBO 2 was made after a successful pilot programme. The customer’s full fleet operates out of hundreds of branches located within most States, forming one of the largest privately-owned fleets in the USA.
ERoad is now the highest-rating in-cab Electronic Logging Device (ELD) following an upgrading from the independent http://www.eldratings.com and it remains the only independently certified ELD device in the market. ERoad’s business in North America has been built on a solid foundation of small to medium (SME) customers, and this rating will provide additional confidence to both SME and enterprise customers that EROAD has a best-in-class product.
The Auckland-based company reports in the second half of FY19 it invested in expanding its R&D team to support a growing product portfolio, to enable continued innovation and product development in existing markets. R&D investment was also required to expand the product offering for ERoad’s market re-launch into the Australian market.
As a result, a higher level of R&D continues to be spent rather than capitalised in the second half of FY19. The percentage of total R&D that is capitalised is expected to increase over FY20.
EROAD has proactively invested on leadership, product development and scalable operational systems, in order to underwrite and accelerate medium-term revenue growth. Part of this investment was the establishment of a repeatable product design and delivery model, capable of commercialising regulatory products across its markets.
The NZ business continues to be robust and new unit growth is tracking in line with expectations. The light vehicle and asset tracking markets continue to grow as companies expand their health and safety programmes and recognise the commercial benefits of telematics.
NZ sales have grown solidly both with new SME fleets and with additional units in existing customers. This has been aided with new products launched earlier in FY19, the ETrack Wired asset tracker and proof of service.
The company says 2019 has been a year of transition as the business geared up for the next stage of growth. It considers there is a stronger than previously anticipated growth opportunity across its offshore markets and that is why it has invested in talent and systems to enable this next level of growth and service an increasing customer base.
During the year, the business has continued to experience strong revenue growth and improved underlying profitability in its key markets. The North American business will grow by over 30% this year and is now operating cash flow positive on a monthly basis.
As ERoad nears the end of its financial year, the business is larger, more robust and better positioned for future growth than it was a year earlier.
It’s this kind of story which the government will be hoping its R&D programme will repeat many times over. The country certainly needs a new generation of technology entrepreneurs like those who created the ERoad business.
Point of Order 