FREEZING WORKS PROBLEM

Evening Star, Issue 19787, 10 February 1928, Page 7

FREEZING WORKS PROBLEM

DEPRECIATION DF ASSETS THE POSITION AT BALGLUTHA MR JAMES BEGG’S STATEMENT. At the meeting of the Otago Provincial Executive of the New Zealand Farmers’ Union yesterday morning Mr Adam Hamilton, M.P., a member of the Meat Board, addressed those present on the policy of the board. The meeting was then adjourned until the afternoon, when Mr Janies Begg gave an address, in which he explained the position of the South Otago Freezing Company. Mr Begg stated that while ho believed with Mr Hamilton that the board had done useful work in one direction, the effects of its policy in another direction were becoming apparent in a way that proved they were inimical to the interests of farmers, both directly and indirectly. The policy of the board was expressed in the resolution adopted by i' -namely, “The board is unanimously of opinion that it is not in the interests of the meat producers that overseas concerns should acquire any further interest in New Zealand freezing works, or that new works he erected by other than New Zealand interests.” That policy had no qualification. Mr Hamilton said it was qualified by the words “ without the permission of the Meat Board,” but there was no qualification of any kind, and Mr Hamilton could not show there was any. Mr Hamilton said the resolution was adopted some tir.io ago, and no exception had been taken to it. Perhaps the board itself did not know all the complications that must follow such n. resolution. At any rate, the hoard had departed from it several times. It was departed from in the case of the Poverty' Bay works, which were transferred to Vestey’s. There were special reasons for that, perhaps, and it might have been the right thing to do. The hoard adhered to its policy in connection with, the Wellington Meat Company and the Waingawn Company. He was sorry to hoar Mr Hamilton try to make a little political caiptal with a remark as to sympathy with the Bank of New Zealand. Mr Hamilton : No.

Mr Begg said, in a case like the present; let them keep down to tin tacks. Mr Hamilton had said the board had not turned down any offer in connection with the Waingawa works. That was true, no doubt, but the position was that the people who were prepared to buy would not make a public offer until they were sure they would get a transfer, and the fact was that people would not make an offer if they were liable to be made a football of by the board. Then the board had again departed from its policy, as shown in a letter written to him on November 18, after he had made representations to the board as to the difficulty some companies had in financing, owing to the fact tliat_ a bank had been landed with a security that it could not sell. For that reason the hank was chary of making advances on other securities of the same kind. This was the letter, signed by the chairman (Mr D. Jones) of the hoard: “ With reference to your interview of yesterday, when you met the board, and stated that the bankers for tbo South Otago Freezing Company, Ltd., will not advance money to the company because the bank says that the works are not saleable on account of this board’s policy. I have to advise that this matter was afterwards yerv fully discussed at the board meeting, and I now beg to inform yon that in the event of the South Otago Freezing Company, Ltd., desiring to sell its works at Balclutha, this board would recommend to tbo Government the transfer of the license.” That letter followed the lines of a statement made by the chairman of the board that there were a number of works in New Zealand with regard to which the hoard would not be justified in refusing a transfer to anyone. He (Mr Begg) would like to know which works those were, li there were such works, tho board should state which they were. Why not ho straightforward and tell them which works they would allow to be sold and which they would not? Ho would show the result of this ’procedure. On December 20 the manager of the Bank of New Zealand at Bnlclutha wrote to the Smith Otago Freezing Company this letter:

“ Referring to your company's request to reconsider the application for a limit of £60,000, we hand yon herewith copy of a letter from our head office advising that the application has to be declined. Tho letter fully explains the position.

Bank of New Zealand. Head Office, Wellington, December 5, 1027.

SOFTU OTAGO FREEZING COMPANY, LTD.

“This application has been, reconsidered by tho board, and it is regret led that, it has to ho declined.

“ Tho elt ter from the chairman of the Meat Coni ml Board to Mr Begg stating that in tho event of tho South Otago Freezing Company, Ltd., desiring to sell its work*?; at Balclntiia, the hoard would recommend to tho Government tho transfer of the relative license, does not materially alter tho general position of l.ho security value of freezing works. The board of tho hank considers that tho letter of tho chairman of the Meat Control Board is in direct contravention of (he general policy adopted by his hoard relative to tho sale or disposition of freezing works. In August last his board expressed, in effort,, its opinion that it could not consider a question relative to the sale of freezing works which, was not supported by an offer of a prospective buyer—and in support of its attitude drew attention to a Press communique issued by the board in 1923 r,s definitive cf its policy. In this communique the board stated that it was unanimously of opinion that it was not in the best interests of the moat producers of the dominion that overseas concerns should acquire any further interests in New Zealand freezing works, or that new works bo erected by other than New Zealand interests.

Tho Meat Board now attempts to vary its expressed general policy by making a special concession to the South Otago works, but even in so doing it is couched in such general terms that very little reliance can be placed upon it.

The final decision rests with the Minister of Agriculture, who has definitely slated to the hank that he is guided by the policy of the Moat Board as above expressed. Wo see no difference between tho cases of the Waingawa works and tb« Balclutha works, and until the Meat Board and tho Minister of Agriculture abandon the above policy and remove all restrictions on the transfers of meat freezing works’ licenses we are not prepared to make advances to the South Otago Freezing Company on the security of its works. In view of this letter, how could Sir Hamilton say that tho value, of securities was not destroyed or depreciated!'' Then, on December 12, 1927, he (Mr Begg) wrote to tho Minister of Agriculture, on behalf of the South Otago Freezing Company, as follows; “ J enclose copy of letter which 1 received from the Meat Producers’ Board relative to the position of the South Otago Freezing Company. Also please find enclosed copy of letter from the Bank of New Zealand to the South Otago Freezing Company, in reply to an application for the necessary finance to carry on the present season’s operations. “ The position is an impossible one for the company, which cannot open

its works unless finance is forthcoming. The company has a property, free of encumbrance, which could not possibly be replaced for £150,000. Yet apparently, owipg to the policy of the Meat Board, it will bo unable to finance its business this year. This position has arisen entirely through tho action of the Meat Board and the Government. I ask that immediate steps be taken to remedy the damage that has been done. The matter is extremely urgent, as tho time for opening the works is only a few weeks away. There are, I suggest, two alternatives: —

“ (1) That the Meat Board should alter its methods or policy. “ (2) That the Moat Board (or tho Government) should take over the freezing works affected, at valuation, or compensate the companies for tho damage done to their properties by the actions of the Meat Board, which have been approved and confirmed by the Government. “Immediate action is necessary if grave injustice and serious losses arc to be avoided.” That letter, he submitted, was couched in courteous terms—he asked for urgent and immediate attention—yet a reply was not forwarded hy the Minister until February 6, 1928, as follows :

“1 am in receipt of your letter of December 12 touching on the position of the South Otago Freezing Company s works at Balclutha, and enclosing copies of correspondence with the Meat Producers’ Board and the Bank of New Zealand on the same subject. “ I do not agree with your contention that the action of the Meat Producers’ Board has rendered the Balclutha works unsaleable, or that the board’s action lias depreciated the value of the works as security for loans from the bank. As a matter of fact, if the board did not exist and if the Government had taken no action at all the same position would have arisen, probably in the sarae_ degree. There are too many works in New Zealand, and therefore only a few of the more favorably situated ones aro saleable. The action of the Government in restricting the number and size of the works must ultimately operate in favor of the works already existing. The only ■ persons who would be open to buy any works under present circumstances are th i overseas companies, and I understand you do not favor any extension of these companies’ works or the buying by them of existing works.

“ If any of the works is not paying, then the hank will not lend on its security, and in in.v opinion it would not make the slightest difference to the bank’s policy if every restriction on the sale of the majority of the meat works in New Zealand were removed to-morrow.” He would like to draw attention to a paragraph in that letter: “The only persons who would be open to buy any works under present circumstances are the overseas companies.” As a matter of fact, the Minister had killed the only buyer, and at the same time Mr Hamilton told them the value of the assets had not depreciated. If there was only one buyer and a company was not allowed to sell to him, was the asset depreciated or not? The Meat Board by its policy had destroyed the assets as a, security. Of course, it might he right in the interests of the country that that should be done, but he was not discussing that point. But if certain assets of value to a. company were destroyed someone would have to compensate the company. He had said the Meat Board was an irresponsible body, and he now said that by its action it destroyed assets of value, and could not _bo got at and made responsible, and in that sense the Meat Board was an irresponsible body in every sense of the word. The bank had said that until all the restrictions were removed it would jjot make advances to the South Otago Company. Mr Hamilton: What are the restrictions?

Mr Begg: That we cannot sell, Mr Hamilton; Whose fault is that? Mr Begg: It is the Meat Board's policy. Sir Hamilton: The board says you can sell if you like. Mr Begg; The Minister is guided by the policy of the .board, not by exceptions to its policy, (lontinuing, Mr Begg said the whole position ought to bo altered. The board, no doubt, acted in the best of faith when it laid down its policy, but that policy, it was now apparent, was going to bring about a monopoly by a lew powerful companies quicker than it could be done by any other means. The board’s policy prevented other overseas companies or people from coming here, thus giving a monopoly to those hero already. By reducing the value of companies’ assets and making impossible the sale of companies in a had financial position, and of some that were not, the board was actually making a present of businesses to a few powerful companies, so that in a short time these companies would he in command of all the freezing works in the dominion. When (hat time came the companies would give the farmer just what they pleased for his stocky The fact was that the board was raising a Frankenstein that ii. would not be able to put. down; it would not be able to stop its progress, and its policy was hastening the time of the coming of a most undesirable stale of affairs.

Was the Meat Board going to fake, steps to undo the damage it had already done, or was it not? asked Mr Bcgg. Ho concluded by saying that no amount of talk could get, away from the concrete fact that freezing work's had been destroyed as an asset by the action of the board. Mr Hamilton briefly replied in several points raised by Mr Begg. He said it would not be right lo publish the names of the companies the sale of which the board would agree to, as by so doing some companies’ assets might be destroyed. Mr Begg: What are you going lo do about the damage you have done? Mr Hamilton: We disclaim any damage. I will put the other side, jf wo reverse the policy and allow freedom of contract everywhere, would that suit you? Mr Begg: ft would suit the companies better than the present policy. Mr Hamilton; Would it get you out of your difficulty, if you have one? Mr Begg: 1 think - it would. We would immediately get financial accommodation from the bank. EXECUTIVE’S RESOLUTION. The subject as presented by the two speakers was later discussed by the meeting. Mr A. C. Leary moved tho following motion: — “ That this meeting set up a committee, consisting of Messrs Waite, Revie, and tho mover, to draft'’a resolution expressing tho feeling of the executive and farmers generally in this respect.” Mr Revie said ho doubted very much the wisdom of such a course. The meat industry to-day was full of anomalies that should not exist. There were too many works in Xcw Zealand, and the management of them was not what it should be. He was firmly of tho opinion that a commission should be set up to investigate the whole industry. It was a great pity that the Government did noli follow np tho suggestion of the farmers of Now Zealand in this respect. Tilings were unsatisfactory in every way. He would move an amendment to tho effect that it should be a recommendation to the board to set up a commission. Mr Preston said he was heartily in agreement with Mr Revie. The South Otago Company’s problem was a mere bagatelle, in comparison with those that confronted the industry as a whole. The financial position of individual companies was not the most important consideration. A disinterested commission alone could come to an unbiased decision. Farmers could not expect the Meat Board to depart from a policy in winch it honestly believed. However,

it was essential that something should be done to relieve the. impossible position in which farmers’ freezing companies were to-day. He would second the amendment. Mr Leary said he would like to see the amendment made a separate motion. When a vole was taken Mr Leary*! motion was rejected by a heavy majority. -Mr Kinney then suggested that sfij Hamilton’s proposal in of aj public meeting of fanners to review the position should be given effect to. This proposal was put forward as an amendment to Mr Rcvie’s motion. A discussion between a representative gathering oT farmers and members of the Meat Board would do a great deal of good,' he claimed. The amendment, however,; on being put to the vote, was lost. It was finally decided that Mr Revie’s motion suggesting the setting up of a committee should be given effect to, the recommendation to lie forwarded to the Dominion Executive of tho Farmers’ Union.