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Govt Agrees To Kiwifruit Restructuring Plan

(replacing earlier version.)

Office of the Hon John Luxton, Minister for Food and Fibre

Office of the Rt Hon Sir William Birch, Minister of Finance

12 JULY 1999


Cabinet today agreed in principle to kiwifruit industry corporatisation plans for greater grower control to improve sector performance in the 21st century. Food and Fibre Minister John Luxton and Finance Minister Sir William Birch announced Cabinet's decision this afternoon.

They said the package would give kiwifruit growers the opportunity to become shareholders in Zespri, which would hold all of the Board's commercial assets.

The proposal resulted from a constructive process of consultation between kiwifruit industry leaders and Ministers since the industry put its initial plan to the Government late last year.

Industry leaders would now put the proposal to growers at 10 meetings in all the major growing regions this week, aiming to have the new structure operating by the start of the next financial year on 1 April 2000.

To facilitate that objective, the Government had prepared legislation for introduction into Parliament on Tuesday next week. The aim was to pass the bill by early September, and promulgate the necessary new regulations during October, they said.

Mr Doug Voss, chairman of Kiwifruit New Zealand, in a letter to growers, says: "We are presenting you with a simple and commercially robust solution. It follows the momentum already set in commercialising the industry.

"Now it is time for us to unite under one corporate banner, and move on into the future, to grow wealth and prosperity for shareholders and for New Zealand. I look forward to working with you to build this industry to new heights and new successes."

The Ministers said that, under the proposal, Kiwifruit New Zealand, the industry's board, would be re-established to undertake the regulatory, oversight and monitoring roles.

Grower Shareholding

>From 1 April, 2000, Zespri would own all industry assets and brands. Zespri, as the commercial business, would have a normal company structure. Shares would be issued to all kiwifruit growers, and would be freely tradeable among growers.

Its functions would include export marketing, acquisition, grading, quality, pricing and commercial research. The Board would monitor Zespri, and approve other players to do collaborative marketing with Zespri.

The purchase of fruit would be governed by commercial contracts with growers. Payments to growers would be "unbundled" to separate the price paid for fruit from the payment of dividends resulting from the other commercial activities of Zespri.

The Ministers said that industry leaders and the Government both regarded it as a fundamental step forward for the industry that growers would now own and control the business, hold shares in it, and be able to trade them freely with other growers.

Some compromise had been required of both the Government and the industry to reach an agreement acceptable to both parties. The Government had, for example, conceded a continuation without a sunset clause of a single kiwifruit marketing desk.

At the same time, however, the greatly improved organisation of the industry, the company structure of Zespri and direct shareholding by growers as the owners and controllers of the company would produce much better commercial results, they said.

Diversification by Zespri into non-core business would be prohibited by the incoming regulations. Kiwifruit International Ltd would be the mechanism used by separate ventures such as 12 month supply from core business activities. Shareholding in that company would be voluntary.

"I strongly encourage all kiwifruit growers to attend the grower forums which the industry will hold in their regions this week. This is a very strong package which needs grower understanding, and deserves grower support."

The Ministers said the proposed legislation involved a short bill of about 25 clauses to empower the restructuring plan and provide regulation-making powers. The legislation would be referred to a Select Committee for hearings during August.

"The main changes will be implemented by regulations which are now in preparation. The single-desk will for example, continue to be embodied in regulations," they said.

"It is important for the Board to understand and take account of the views of Maori stakeholders. I intend, with Maori Affairs Minister Tau Henare, to meet Maori stakeholders for the same purpose as soon as possible.

"From the Government's point of view, our overriding objective is to promote enhanced economic performance in the sector, and ensure that resources are used as efficiently as possible. This package provides a strong platform for the future."


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