Despite the recommendation from the Overseas Investment Office that it be approved, the $88 million sale of New Zealand’s 13,800 hectare Lochinver Station to Pure 100 Farm Ltd, a subsidiary of Shanghai Pengxin, was vetoed by the government of New Zealand on the basis that the ‘substantial and identifiable’ benefits of the deal were not of a scale to warrant the sale of a property that is 35 times bigger than an average New Zealand farm.

 

“I’m in favor of overseas investment, I think it benefits New Zealand hugely most of the time,” said Associate Minister of Finance, Paula Bennett, “I just had to take into consideration what I’m going to say is 35 times bigger than your average farm, so that a big piece of land, and to turn around and think potentially one job and a couple of contractors – is that an identifiable and substantial benefit to New Zealand?”

 

Federated Farmers President, Dr. William Rolleston is in agreement,stating that the decision by the ministers to block the deal demonstrates the key rule changes made by the Overseas Investment Office in recent years in action. Admitting that foreign investment is needed by New Zealand, Dr. Rolleston adds that the parties involved in large agricultural land deals must demonstrate benefits to not only local, but the national economy, such as the securing of new overseas markets or the development of new technologies – benefits not demonstrated by the Lochinver deal.

 

The Overseas Investment Commission (OIC) stated that overall, the deal met the criteria for the public interest, but minister saw it otherwise. Overall, the majority of OIC land sale applications are approved, and just this week, New Zealand’s ministers backed the sale a 50% stake in meat processor, Silver Fern Farms to China’s Bright Food Group for US$197 million.

 

Since settlement, Shanghai Pengxin has invested more than $18 million to improve the productivity of its existing Crafar Farms to new highs, and was ‘surprised and extremely disappointed’ upon hearing the government’s verdict. The group’s original plans included selling its New Zealand farm assets, including Crafar Farms into an offshore partially owned by the listed Chinese company, Hunan Dakang, which would sell those assets to Chinese retail investor, thereby gaining capital for Shanghai Pengxin, which is interested in further investments in New Zealand’s beef sector and property development.

 

The Lochinver Station, which employs 22 people, has been owned by the engineering, quarrying, and mining company, Stevenson Group for more than half a century and is valued at more than $70 million. And although the sale to Shanghai Pengxin would not have generated employment at that site, Stevenson Group planned to use the funds from the sale to invest in its quarrying operation at Drury with the expectation of generating 8,000 over the life of the 15 year project.

 

Stevenson Group chief executive, Mark Franklin is also disappointed in the outcome.
“We are concerned that this process has taken 14 months with the end result that we have been deprived of our property rights to sell to the highest value bidder for some vague national benefit which has not been defined,” he said, adding, “Beyond this transaction, this decision will have significant economic ramifications for the New Zealand economy, particularly in the areas of international relations, uncertainty of foreign investment and rural land prices.”

 

Some upset by the blocking of the sale are claiming that the criteria for approval is vague and left open to interpretation by ministers, while others are claiming that the only reason this particular deal was blocked was because of the media attention it has garnered. As has been seen in Australia, the sale of large agricultural interests in Oceania is a highly divisive topic, and one that is increasingly at the forefront of international agricultural investment.