More financial support needed for rural sector to boost economic recovery
08 Jul 2020
Hot on the heels of the Government unveiling its 10-year roadmap to accelerate the economic potential of the primary sector, a report released today reveals where added focus is needed to create the optimum business environment to drive rural sector success.
The MYOB Rural Report, based on a survey of more than 320 primary sector and rurally-based businesses, has revealed that as we approached a nationwide lockdown, those operating in the fisheries, farming, agriculture and rural sectors suspected they were not immune to the impacts of the Coronavirus crisis.
While there are high hopes for their role in supporting our economy as it seeks to recover, 41% of primary industry businesses and 43% of businesses in rural New Zealand were forecasting a fall in revenue over the next 12 months.1
MYOB New Zealand Country Manager, Ingrid Cronin-Knight, says as New Zealand’s largest export earner, the success and health of businesses operating in the rural sector is vital to our economy.
“It’s clear that demand for their products – both locally and internationally – has continued to hold up despite the impacts of the pandemic,” she says. “However, there’s more that can be done to create a better business environment for our agri-businesses.
“The MYOB Business Monitor research which informed our Rural Report, highlights that our agricultural sector has felt constrained by a lack of investment, with owners and operators often needing better access to financial advice and support.”
The ideal environment for agri-business
According to agri-business operators, access to financial advice (62%), business support (51%) and clear government policy and practices (43%), as well as access to accounting services (42%), are essential to creating the ideal environment for businesses in the sector to thrive.
However, a key issue facing the operators in the sector both in the start-up phase and as businesses become more established, has been their access to finance.
A lack of personal finance was recorded as the leading concern for agri-business operators starting out (38%), while a third of operators (33%) of all ages in the agricultural sector said they have struggled to access finance. This may have a range of impacts on their business – from constraining the ability to invest in growth and pursue new opportunities, to lacking the finance for basic operational necessities.
“Passion, rather than money, is what motivates most agri-business owners starting out, with almost half saying they started their business because they are passionate about what they do, compared to around a third of all SMEs,” says Ingrid Cronin-Knight.
“Despite the passion and dedication from these business owners, without the finance and support they need, this valuable industry will struggle to achieve everything it can in a highly competitive international market. In a low interest market, this could be an area for review.”
Technology helping transform the sector
As the lockdown emphasised, technology has had an increasing impact on the operations of local businesses and over the next five years, operators in the rural sector expect to experience:
- automation and AI providing faster and more efficient processes (29%)
- better access to overseas markets (18%)
- greater visibility of key business information through more access to data (17%).
More than one in 10 agri-business operators (12%) also expected to see technology reduce their reliance on hard-to-find skilled workers, compared to the SME average (9%).
RH Innovation CEO, Rahat Hasan, believes that increased use of new technology will allow farmers a level of efficiency that they haven’t previously been able to achieve.
“Better access to technology will free up cashflow for the rural sector, particularly farmers,” says Hasan.
“Currently, the industry is lacking technology which will allow them to make more informed use of their resources and therefore provide financial savings.”
“For example, if you consider moisture content in soil, farmers could be spending significantly more than needed if their moisture sensor isn’t able to factor in the mineral content of their soil. The latest technology helps to identify key patterns from the soil which will allow farmers to evaluate how frequently they need to water it, potentially resulting in significant savings long-term,” he explains.
Support to succeed
The latest Government roadmap has demonstrated a clear ambition to provide an ample boost to the primary sector and progress on this pathway has already begun as evidenced by this year’s Budget – for example, the welcome investment in the rural sector through targeted operational support, investment in biosecurity and broader environmental initiatives, as well as wider financial support for SMEs.
However, in addition to this investment, there is a greater need to build on these efforts to create an environment where this valuable industry is better practically connected, supported and enabled.
“A focus on access to finance, business advice and support, as well as clear Government policy, is essential as our economy becomes increasingly reliant on the success of our agri-businesses,” says Ingrid Cronin-Knight.
“This includes investment in key digital infrastructure which will be vital for rural New Zealand to ensure these businesses are given every opportunity to succeed in the global economy.”
Rahat Hasan of RH Innovation agrees, saying that for rural sectors to take advantage of technology advancements, they must have access to better digital connectivity.
“Key data captured by a lot of farming tools is stored in the cloud, so to be able to transfer and analyse this data, it’s imperative rural business owners are connected to quality internet.”
1The MYOB Business Monitor surveyed 1,000 SME operators from across the country of which more than 320 were primary sector and rurally-based businesses. The survey was conducted from the end of February to 24th March 2020.
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MYOB is a leading business platform with a core purpose of helping more businesses in New Zealand and Australia start, survive and succeed. At the heart of MYOB is a customer base of 1.2 million businesses and a network of more than 40,000 accountants, bookkeepers and consultants, for whom MYOB delivers end-to-end business and accounting solutions. MYOB operates across four key segments: Small and Medium Enterprises (SME), Enterprise, Financial Services and Practice. For more information visit myob.com or follow @MYOB on Twitter.
About the MYOB Business Monitor
The MYOB Business Monitor is a national survey of 1,000+ New Zealand small and medium business owners and managers, from sole traders to mid-sized companies, representing the major industry sectors. It has run since 2009, commissioned to independent market research firm Colmar Brunton. This most recent survey ran in March 2020. The Monitor researches business performance and attitudes in areas such as profitability, cash flow, pipeline, technology usage and the government. The weighting of respondents by both geographical location and sector is based on overall market proportions as established by Statistics New Zealand and is drawn from an independent survey group, which includes both MYOB clients and non-clients.