Risk good reason for sale

Opponents of the government’s programme for the partial sale of a few state owned assets are seizing on the risks to investors.

They purport to be worried that people who buy shares in Mighty River Power might lose money.

Their concern is no more than crocodile tears because they also complain that only the wealthy will be able to afford the shares.

But in raising fears of potential losses, they appear not to understand that if no shares are sold the government carries all that risk.

The risk of investment in non-core assets is not a reason for continued state ownership. It’s a very good reason the state should divest itself of them.

The government ought to ensure every cent of public money is put to best use.

There is potential gain in any business but there is also a potential for loss and that’s not a risk the state should be taking when there are far better uses for its very scarce resources.

While we’re on the subject of risk, Landcorp has told Shanghai Pengxin, which took over the former Crafar farms from receivers, that its investment will make a loss this year.

Chief executive Chris Kelly said the drought has had significant affect on revenue. Extra capital expenditure by Shanghai Pengxin has also been required.

People opposing land sales to foreigners are concerned about profits going overseas. At least this year, the owners will be losing money.

The risk the state takes in owning non-core assets is also illustrated by Landcorp’s half-year report:

At the time this report went to the printer, an operating result of around$6 million to $8 million for the full year 2012/13 was expected. Since then,Landcorp has experienced the worst widespread drought in many years. As a result, it is unlikely that the Company will report an operating profit for the year and consequently it is not likely to pay a full year dividend.
Around $1.6 billion in assets and no dividend. There are far better, and less risky, uses for public money than that.

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: