Part 2: About the Primary Growth Partnership
2.1
In this Part, we discuss:
- the purpose of PGP;
- earlier attempts to support innovation in primary industries;
- how PGP was intended to operate;
- conditions and criteria for assessing programmes;
- a summary of the funding committed to programmes; and
- examples of results achieved so far from the programmes we reviewed.
Summary of findings
2.2
The purpose of PGP is to increase the sustainability and economic growth of the primary and food industries by creating partnerships between the Government and industry that promote and increase private investment in innovation in primary industries.
2.3
Cabinet approved the setting up of PGP in 2009, and provided guidance about the governance of PGP programmes and how PGP was intended to operate. Cabinet also defined the conditions and criteria that were to be used to assess proposals and business plans.
2.4
As at 30 November 2014, the Crown and industry partners together had committed $680 million to PGP programmes. The Crown had committed $322 million to 18 multi-year programmes, $129.5 million of which had been spent up to 30 November 2014.
2.5
Even when all programmes have been completed, and assuming that all of the programmes' goals will be achieved, it will take time for the long-term benefits of the programmes to affect the economy. However, the programmes we reviewed have started to achieve results that indicate progress towards long-term goals.
The purpose of the Primary Growth Partnership
2.6
The purpose of PGP is to increase the sustainability and economic growth of the primary and food industries by creating partnerships between the Government and industry that promote and increase private investment in innovation in primary industries. Programmes are intended to be led by the market and demand, with complementary benefits for the partners.
2.7
The industry partner must equal or exceed government investment in programmes. The combined investment should cover the whole value chain1 including research, developing products and services, identifying new markets, and commercialisation.
2.8
The Ministry is responsible for introducing, managing, and monitoring PGP. The Ministry considers PGP to be an important way of achieving its goal in June 2012 of doubling the value of primary industry exports by 2025. This goal is part of the Government's Business Growth agenda. The Ministry also wants to encourage more private investment in research and development in New Zealand.
Earlier attempts to support innovation in primary industries
2.9
In 2007, the Organisation for Economic Co-operation and Development reviewed New Zealand's innovation policy and found that, because of the private sector's lack of contributions to research, New Zealand did not invest enough in research, science, and technology.
2.10
Also in 2007, the Primary Industries 20/20 Summit identified that public and private investment was needed to improve the environmental and economic performance of New Zealand's primary industries. The New Zealand Fast Forward initiative (Fast Forward) was developed as a response to this need for investment.
2.11
Fast Forward was a government-industry partnership initiative aimed at transforming the sustainability and productivity of the pastoral and food industries. Fast Forward focused on improving innovation throughout the value chain, such as identifying new markets and responding to consumer trends and opportunities in global markets. It was intended that the pastoral and food industries would be more agile and able to respond more quickly and adapt to demand-driven research and development priorities.
2.12
An up-front government investment of $700 million was to be spent over 10 to 15 years. Some primary industry entities agreed to match this investment over the same time, resulting in an estimated combined investment of between $1.5 billion and $2 billion. The Government and industry would work together through a jointly configured governance body, which would agree on priorities and make strategic investment decisions. Fast Forward was expected to be in place by 1 July 2008. On 3 July 2008, the Crown and six main investor groups signed a heads of agreement.
2.13
In November 2008, the Government changed. The Treasury advised the new Government that, although Fast Forward seemed "unwieldy", it had got industry buy-in and the industry had pledged significant funding.2 The Treasury recommended retaining Fast Forward or, alternatively, funding innovation in primary industries through annual appropriations. The Treasury recommended that, if Fast Forward were dismantled, the Government work with industry to retain their commitment to pastoral and food innovation.
2.14
The new Government discontinued Fast Forward in February 2009 and developed a new innovation initiative for primary industries. The May 2009 Budget announced that PGP was a new government-industry partnership initiative.
How Cabinet intended the Primary Growth Partnership to work
2.15
In this section, we describe what Cabinet approved for how PGP would be set up and operated. There were some differences in putting PGP into practice. In Part 3, we assess what was done in practice.
2.16
In 2009, Cabinet approved setting up PGP. It assigned the following roles:
- An Investment Advisory Panel (IAP) assesses proposals and business plans.3 The IAP recommends to the Director-General of the (then) Ministry of Agriculture and Forestry whether to invest government funds.4
- Programme Steering Groups (PSGs) are made up of representatives from the Government and the industry co-investor. Every programme has a PSG. PSGs were to develop the programme's business plan and are responsible for overseeing programmes.
- The Director-General of the Ministry of Agriculture and Forestry (Director-General)5 approves government investment and is a point of contact for relationships between industry partners and the Crown.
2.17
The process for applying for and allocating PGP funding set out in the Cabinet minute was:
- The IAP calls for expressions of interest for programmes and considers all PGP proposals received. The IAP assesses proposals and determines which proposals will move forward to the business plan stage.
- PSGs were to be formed to develop proposals into business plans for the IAP to consider further.
- The IAP assesses business plans and recommends whether the Director-General should approve government investment in them.
- The Director-General decides whether to approve government investment and, if so, the subsequent contracting of programmes commences.
- When business plans are approved, the PSGs were to arrange for contracts to be entered into and become responsible for overseeing the programme.
2.18
The Ministry received the role of secretariat. Its role was to ensure that processes and documentation are of the highest quality, which would support the IAP to make recommendations to the Director-General with confidence.
Primary Growth Partnership conditions and criteria
2.19
When Cabinet approved PGP, it agreed to the following conditions for investment programmes:
- Industry and government investment is to be in line with, but in addition to, existing initiatives and work programmes. Programmes are expected to be "beyond business as usual".
- Programmes will contain complementary and mutually supporting projects targeted at a range of points along the value chain.
- There will be an overall "matched investment" from industry and the Government for each programme.
- Partners will come to a binding agreement about securing government and private investment during the programme.
2.20
Cabinet also agreed the following criteria that business plans were required to show:
- how the activity would result in economic growth and increased sustainability;
- how the proposal fits with the sector's overall strategic direction and activities;
- the new activities that must take place throughout the value chain, from research to commercialisation;
- key performance indicators (KPIs) that can be used to measure outcomes;
- the likely beneficiaries and their contributions; and
- why the Crown needs to invest in this activity or aligned activity – the public good aspects of the proposal.
2.21
Cabinet stated that the IAP would assess programme proposals against those conditions and criteria. Cabinet also stated that, in determining "additionality" of investment, acceptance of in-kind contributions will be at the discretion of the IAP.
Summary of committed funding and results
Summary of funding committed to industries and programmes
2.22
As at 30 November 2014, the Crown and industry partners had invested in 18 programmes in nine primary industries. Two programmes were completed6 and 16 were under way. Figure 2 shows the number of programmes and the funding that the Crown and the industry partners together had committed as at 30 November 2014 to each primary industry.
Figure 2
The number of Primary Growth Partnership programmes and funding committed to each primary industry, as at 30 November 2014
| Sector | Number of programmes | Budget $million |
|---|---|---|
| Wool | 1 | 30.3 |
| Dairy | 2 | 173.7 |
| Fishing and aquaculture | 2 | 74.1 |
| Meat | 4 | 315.8 |
| Pastoral | 3 | 44.5 |
| Beekeeping | 1 | 2.9 |
| Forestry | 3 | 12.8 |
| Viticulture | 1 | 17.0 |
| Horticulture | 1 | 8.6 |
| Total | 18 | 679.7 |
Source: Ministry for Primary Industries.
2.23
Figure 3 shows the Crown, industry, and combined commitment to each of the programmes we reviewed as part of our audit.
Figure 3
Crown, industry, and combined commitment over time to the six Primary Growth Partnership programmes we reviewed, as at 30 November 2014
| Programme | Crown commitment $million | Industry commitment $million | Total $million |
|---|---|---|---|
|
FarmIQ |
59.3 |
91.3 |
150.6 |
|
NZSTX |
15.15 |
15.15 |
30.3 |
|
Dairy Value Chain |
84.6 |
85.7 |
170.3 |
|
PSH |
24.0 |
24.0 |
48.0 |
|
FoodPlus |
38.7 |
38.7 |
77.4 |
|
Seeds |
7.15 |
7.48 |
14.63 |
| Total | 228.9 | 262.33 | 491.23 |
Source: Ministry for Primary Industries.
Examples of results
2.24
Although the intended long-term benefits of the programmes have not yet been realised, the results indicate progress towards achieving them. Figure 4 lists some examples of recent results of the six programmes that we reviewed. This is not an exhaustive list of all results achieved within these programmes.
Figure 4
Examples of results achieved by the six Primary Growth Partnership programmes we reviewed
| Programme funded | Examples of results achieved | ||||
|---|---|---|---|---|---|
| FarmIQ | An end-to-end integrated value chain for beef is now operational, with market launches of cuts backed by the Beef Eating Quality System, and premium payments and information being fed back to supplying farmers. Ten new, premium, fast-moving, consumer-good retail products and four hotel and restaurant-focused brands have been launched. Electronic tracking systems have been installed through participating plants, enabling the capture of quality and yield information for cattle, deer, and sheep. Farm Management System launched commercially as "FarmIQ System" in August 2014. All Landcorp farms went live on the FarmIQ System in May 2014 and are providing positive feedback. Eleven IQ Farms are acting as exemplars for the programme and sharing knowledge and experience with other farmers in their region. 10,000 individual sheep have been genotyped and predictions developed for several meat quality traits. |
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| NZSTX | Enhanced direct supply contracts are in place with market partners from New Zealand, the United States, the United Kingdom, China, Japan, Germany, and Italy for fine and mid-micron wool. Uptake by fine-wool ram breeders, who provide about 75% of fine-wool rams sold in New Zealand, of the tools required to generate estimated breeding values. Forage trials have identified legume options for increasing fine-wool sheep production in difficult high-country farming areas. The establishment of SILERE alpine merino as a branded programme for merino meat, with supply contracts with farmers to support the programme. Progress in the development of breeding for resistance to footrot in merino sheep. |
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| Dairy Value Chain | Improved production and resilience of cows within the national dairy herd. On-farm technologies and information systems provide information to farm managers to improve their practices. Training, certification, and accreditation programmes have been developed and are operating for farmers and rural professionals to strengthen industry skills in nutrient, effluent, animal welfare, people, and farm system management. New prototype statistical tools are in use in Fonterra factories to improve control of product quality. Science outputs from the programme being used in new product development projects are expected to lead to commercialisation of new mozzarella and cream products. |
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| PSH | Prototype nets and new trawling techniques are performing well against the objective of delivering low-fatigue, low-damage, and high-value fish. The first trawl prototype net has been tested under commercial conditions. |
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| FoodPlus | Prototype food products have been produced. Six new products have moved from development within the programme to acceptance by ANZCO Foods Limited for commercialisation. Prototype products are being evaluated for stability, microbiology, and storage/shelf life. This is an important step in determining the viability of new products. Functionality of protein from a variety of sources has also been investigated for using in novel food products. |
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| Seeds | Increased the production from seed trials under conditions of high drought and disease stress. The first seed crop containing a fungus with improved bioactivity. Demonstration of the improved water-use efficiency of a particular plant species (Hybrid Brassica). |
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1: A value chain is the sequential set of primary and secondary activities that an enterprise performs to turn inputs into value-added outputs for its external customers.
2: The Treasury (2008), Briefing to the incoming Minister of Finance 2008, Wellington, page 22.
3: In this Part, we refer to "business plans" because this reflects the language used in the Cabinet minute that approved the establishment of PGP. In all other Parts, we refer to "business cases" because this reflects the Ministry's preferred terminology.
4: In 2012, a restructure involving the Ministry of Agriculture and Forestry led to the creation of the Ministry for Primary Industries. Since then, the Director-General of the Ministry for Primary Industries has accountability for PGP. In this report, we refer to both ministries as "the Ministry".
5: In this report, "Director-General" refers to both the Director-General of the Ministry of Agriculture and Forestry and the Director-General of the Ministry for Primary Industries.
6: The two completed programmes are Stakeholders in Methyl Bromide Reduction Incorporated (STIMBR) and Stump to Pump – forest waste to liquid fuels. These programmes were not part of our six selected programmes. For further details of these programmes, see the Ministry's website, www.mpi.govt.nz.