Minority ownership stakes in SOEs

National’s policy to consider allowing minority private sector investment in some SOEs has been public for months, so Bill English confirming it on Agenda is hardly anything new.  But it has allowed Clayton Cosgrove to predict the end of society etc etc.

First let us dispose of the nonsense about the Government needing the dividend stream from SOEs.  This overlooks that if the Govt sells say 10% of an SOE for $50 million, then that $50 million will generate a return either as it is invested into other things, or is used to retire debt.  Hell if one puts the proceeds of any sale into the Super Fund, you’d get a much better return.

The reason we have the Crown own certain SOEs is not just so that can make money out of it.  If that is the rationale, then the Crown would own every supermarket and every restaurant.

You have Crown ownership where it is  the most appropriate owner for that activity – usually because it is a monopoly also.  So the Crown owns Transpower because it is a monopoly.

Now allowing a minority private ownership means the Government still has overall control, and appoints the Board, but will give companies the ability to raise capital from private sources for investment etc, and the benefits of the discipline of being a publicly listed company.

One has to ask yourself, does the Crown need to own 100.0000% of:

• A company which supplies testing and QA systems  for agricultural products
• A company which provides food safety solutions
• A company which owns farms
• a coal mining company
• a forestry company
• a vehicle licensing company

If you say yes we must, then you should be prepared to argue for the state to own any garage in NZ, every forestry company, every source of power, every agricultural company.