Risk of foreign ownership too great with South Canterbury Finance collapse

Whatever the outcome of troubled finance company South Canterbury Finance, the Government must move quickly to stop its prime South Island farmland from falling into foreign ownership, the Green Party said today.

“South Canterbury Finance owns a significant chunk of prime South Island farmland. John Key’s Government needs to move quickly to ensure this does not all fall into the hands of foreign owners,” said Green Party Co-leader Dr Russel Norman.

“The Government appears to have two stark choices to prevent this farmland falling into foreign ownership: It can tighten the overseas investment laws to restrict foreign ownership of large parcels of farmland. Or it can move to rescue the company itself, and in the process take a large equity stake in South Canterbury.

“The Greens would support any moves to tighten foreign ownership rules on farm land, but National and Labour are reluctant to move, due in part to the free trade deals tying their hands.

“The second option of taking a direct equity stake in South Canterbury would be expensive but cheaper than the cost of the Government’s retail deposit guarantee if South Canterbury falls over.”

Under the Government’s retail deposit guarantee scheme, the Crown faces a potential total liability of $1.55 billion dollars. However, any private bail-out scheme is likely to require significant Government support as well.

“The sad reality is that the taxpayer is already footing the bill for any potential bail-out of South Canterbury.

“The best option would see the Government take an equity stake in the finance company retaining control of the fate of the farmland and enabling an orderly restructuring of the company. This is much like how the financial crisis has been managed abroad, where governments took equity stakes in failing banks.

“This is a situation of picking the best of a number of very bad alternatives. The worst option would be to support a foreign owner taking control of South Canterbury Finance,” said Dr Norman.

“Given the strategic importance of the assets involved, the Government needs to ensure from the outset that prime South Island farmland will remain in New Zealand ownership.”