The Government has decided to press ahead with its (partial) asset sale programme. So be it. But, I continue to ask myself the question: why sell assets? I ask, because despite the rhetoric, sloganeering, and fear-mongering from all and sundry, the argument over any sale of assets is pretty clear and simple.
Whether you are an individual, family, chess club, sports club, whanau, hapu, iwi, not-for-profit enterprise, for-profit business, corporate body, local council, or government, there are only two clear reasons why you would sell any of your assets.
(1) The asset is not earning its keep. That is, the income you are getting from the asset is not enough to look after (i.e. maintain) the asset. Or, alternatively, the income you are getting from the asset is less than what you could get from another asset. In either of these situations, the decision is clear – offload the asset, fast.
(2) The asset is no longer relevant to you or your groups’ role or function in life, or your raison d’être. For those comfortable with management lingo, this means ownership of the asset is no longer required for your ‘core business’, or is not consistent with your ‘strategic direction’.
All other reasons are just smoke and mirrors designed to fog the issue and divert attention.
Yes, some might argue that you need to sell assets to pay off debt. If that is the reason provided, then that is just an abject admission of defeat and an indication that you don’t intend to survive (in business or in life) much longer. For we all (should) know that assets are the bedrock of our income-earning ability (that is why they are called ‘assets’) – and selling (i.e. reducing your income-earning ability) is a clear indication that you are bereft of any plan or strategy for your future.
If you do need cash to pay off debt, the real reason you have to sell the assets will still fall under either reason (1) or reason (2). It would be reason (1), because this (i.e. asset not earning its keep) is probably why you find yourself in a debt re-structuring position in the first place. Or, it would be reason (2), because the asset sale is part of the plan/strategy that you have formulated to improve the performance or operations of your organisation.
From this foundation come my principal objections to the current government’s (partial) asset sale programme. In particular, there is absolutely no evidence to suggest reason (1) underpins the decision. Indeed, not even the cheerleaders of the programme are suggesting a lack of income-earning is the case. If you believe them, many are busily queuing up to buy into these organisations – a clear indication that the income-earning performance of the assets is not an issue.
That leaves reason (2). And I can find no strategy/plan that indicates that energy-assets are no longer a core business function for the government of a small open economy. In fact, I find no strategy/plan full-stop, but that is another argument altogether. However, I argue that the real reason behind the Government’s decision to pursue (partial) asset sales does indeed lie within the scope of reason (2). It is a political decision based on the ideological beliefs or philosophical perspective of the many in the current government that proscribes a role for government in the economy. That is, the argument that the ‘core business’ of Government with respect to the economy is to do as little as possible. While I don’t agree with this argument, I have no problems with it being argued. It is a valid proposition to put in front of New Zealanders, and if that is what we vote for then so be it.
Unfortunately, this has not been put to us as the reason for the Government’s decision. This is not surprising, as the current government wishes to distance itself from previous incarnations (e.g. the early 1990s) that similarly espoused “small is good” as far as government in the economy is concerned.
Hence we have the smoke and mirrors over debt and deficits. Unfortunately, there remains an absence of any strategy/plan that is the necessary complement for reason (2) to be a robust decision.
Thus, whether they be individuals, chess clubs, sports clubs, whanau, hapu, iwi, not-for-profit enterprises, for-profit businesses, corporate bodies, local councils, or indeed the government itself, I fear we will be much the poorer following this ill-considered decision.
This is by Dr Ganesh Nana and is reprinted from the BERL website