Regional Economic Development Minister Shane Jones has one of the great jobs in modern NZ politics. He’s in charge of spending the $3bn Provincial Growth Fund, which NZ First extracted from Labour as part of its coalition negotiation.
Already $2bn has been committed, and the fund is expected to allocate the remaining $1bn before next year’s general election.
And the provinces, the theory goes, will be so grateful they will ensure NZ First gets back to Parliament to deliver a repeat dose post- 2020
Or will they?
Shane Jones has certainly generated a constant flow of headlines, but will the benefits to the provinces yield sustained economic development, and produce a renaissance in the provincial cities? Will the economic benefits be solid enough to filter down to the average resident in the supposedly deprived regions?
Investment guru Brian Gaynor reckons it is doubtful Jones and his public servants have sufficient time and expertise to assidously evaluate, manage and monitor the huge number of PGF projects.
Point of Order is not familiar with the team Jones has gathered round him, but a cursory glance at some of the projects which have been given grants suggests there is not a great deal of economic analysis undertaken before they are ticked off.
As Gaynor points out in his NZ Herald column, the Auditor-general, John Ryan, has noted the PGF needs careful scrutiny because
“ … the speed with which the fund was established and continues to be developed, the nature of many of the funding proposals and the high level of public interest, have meant that the processes and types of funding provided might be different from traditional public sector arrangements”.
Ryan indicated he will carry out
“ … additional work on the accounting treatment for the various contracts” and “ will also review the systems and controls in place to evaluate applications, disperse funds, manage contracts and monitor the outcomes achieved”.
Gaynor argues this is a welcome announcement because the $3bn expenditure must be assessed in terms of its effectiveness at delivering regional development goals.
As Point of Order sees it, there does not seem to be the rigorous economic analysis applied to PGF projects as to other government projects.
Are any Treasury reports sought on them? And what is the role of MBIE?
Senior officials are able to sign off on commitments of up to $1m while four government ministers are required to sign off applications between $1m and $10m.
Then there are sector investments, which are “high value economic opportunities with a greater commercial component”. These are projects greater than $10m and require full Cabinet approval.
A third category embraces infrastructure projects “enabling regions to be well-connected with other regions and within regions”.
Gaynor contends the fund continues to make commitments at breakneck speed but hasn’t met the objective of
“ … proactively releasing information about the PGF, and funding decisions” and “ as careful stewards of public money, we recognise the importance of keeping you informed and engaged about the work we do”.
He says it is extremely difficult to assess the larger projects, never mind the 180 projects allocated $1m or less.
“How does the fund monitor the $56m allocated to these 180 projects?
Does it or some other government agency have the capability to ensure this money isn’t squandered or spent on unproductive projects?
Gaynor questions the $15m allocated to Geo40 to build a silica extraction plant near Taupo. He asks how many of the PGF’s commitments are in the form of loans and equity investments and why is it providing pre-listing funding to a company that plans to list on the ASX, when the private sector normally provides this facility?
Three of Geo40”s directors live in Australia.
The fund has also revealed Eco Gas Ltd Partnership will receive a $7m loan from the fund to build a demonstration biogas plant near Reporoa.
In an earlier era, the economics of biogas were investigated and found to be so uncompetitive that no project was ever advanced.
So, as Point of Order sees it, the Audit Office should be on the job smartly, perhaps even assigning a special team of auditors to it.