Selling SOEs to “moms and pops” could bite Governments in the bum. Warning signs from Aussie
BigCake used to think there was a missed opportunity during the privatisations of the late 1980s and 90s to create Kiwi “mom and pop” shareholding bases in companies like the Bank of New Zealand, Telecom and New Zealand Rail instead of selling to the Yanks and Aussies.
Now he’s not so sure. Current events in Australia where Telstra, with its 1.4 million “mom and pop” investors, is butting heads with the Government over the price of the national broadband network make him even more uncomfortable.
John Key and Bill English have suggested something along “mom and pop” lines for any eventual sales of Kiwibank and other state businesses.
But BigCake is highly dubious that this is the way to go, even if it has a lot of appeal on the basis of greater Kiwi ownership of NZ businesses is no bad thing.
The problem is the potential for the “mom and pops” to cause trouble down the line. What may be good for the company may not be good for the country and vice versa and politics and business get mixed up.
Mostly sales of state assets to “mom and pops” are offered as a sop to privatisation opponents (ie political reasons) rather than any sound business one.
Anyway Telecom, with only 22% Kiwi shareholding and with a large percentage indirectly held through funds, has managed to scare the sh!it of the last two Governments over moves (based on the overall good of the nation) that’d hurt its bottomline.
Imagine how hard it’d be to move against Telecom if the company’s shareholding register had been stacked with “mom and pops” who, incidentally, are also on the NZ voting register.
Off the top of my head similar issues could arise in transport policies regarding KiwiRail and climate change-related ones to do with power companies.
Across the Tasman, Telstra is negotiating with the Australian Government over the value of Telstra assets needed for the planned new A$43 billion national broadband network.
Telstra says it won’t do any deal that is not in the best interests of its shareholders (many who ummm also happen to be voters).
I suspect that most people think that your comment, “Mostly sales of state assets to “mom and pops” are offered as a sop to privatisation opponents (ie political reasons) rather than any sound business one.”, is the truth. And then the overseas interests quietly pick them up as the Moms and Pops sell them.
This could really bite them on the bum. Since the state power generators have money to spend on overseas power generation, maybe they should give the money to the government to invest in Kiwibank. That would be my preference.
Keith Mockett, May 27, 2010 at 9:34 am