How we made decisions

The Kānoa – Regional Economic Development & Investment Unit (Kānoa – RDU) assessed applications to best match them with the Provincial Growth Fund (PGF), Te Ara Mahi (TAM) Whenua Māori, or Regional Apprenticeships Initiative (RAI). This included making sure the applications met the individual funds’ criteria and investment principles. Where appropriate, Kānoa – RDU worked with other government agencies to assess applications.

Provincial Growth Fund proposals were required to:

• create jobs, leading to sustainable economic growth
• increase social inclusion and participation
• enable Māori to realise aspirations in all aspects of the economy
• encourage environmental sustainability and help New Zealand meet climate change commitments while allowing the productive use of land, water and other resources
• improve resilience, particularly of critical infrastructure, and diversify our economy
• lift the productivity of a region or regions
• create additional value and avoid duplicating existing efforts
• have a link to a region’s economic priorities and be supported by stakeholders
• be well managed, well-governed and have appropriate trade-offs between risk and reward.

Whenua Māori proposals were required to:

• involve Māori freehold land or general title land owned by Māori.
• come from small to medium Māori landholdings requiring investment of financial capital to unlock and realise their latent potential. PGF loans may look for alternative security rather than requiring applicants to offer their land as collateral.
• be valued below $10 million.

Kānoa – RDU worked with the Ministry for Primary Industries and Te Puni Kōkiri to support Māori landowners develop investment ready applications. 

Te Ara Mahi proposals were required to:

• focus on any aspect of the pathway to employment for people in the regions. This included tailored support so they could become work-ready then gain and sustain employment.  It also supported the underemployed able to improve their skills.
• focus on employers who may need support, coordination or connections to hire local people for local jobs.
• focus on any age group within the working age population. Projects focussing solely on 15-24 year olds were redirected to consider He Poutama Rangatahi funding.
• target any regions except the Auckland, Wellington and Christchurch metropolitan areas.

The Regional Apprenticeships Initiative didn't cover: 

• pre-trades training
• Level Two and Three qualifications
• Level Four qualifications not equivalent to an apprenticeship, i.e., less than 120 credits
• existing apprentices
• employers based in Auckland, Wellington or Christchurch

Priority was given to people working in the primary, construction, manufacturing, engineering and wood processing sectors, as well as: 

• people who lost work due to COVID-19 
• Māori and Pasifika, including existing employees, who wanted to transition into an apprenticeship 
• people who undertook pre-trade training and were unable to progress into an apprenticeship
• others who would benefit from undertaking an apprenticeship.

Once each proposal was assessed, it was presented to meetings of relevant decision makers to make a final decision.  Feedback on each individual application was recorded in the meetings’ minutes and the coversheets presented for each project were individually signed.

• Cabinet had oversight of the Provincial Growth Fund and made decisions about investments of $20 million or more.
• Regional economic development (RED) Ministers were those whose portfolio related to Kānoa – RDU’s goals. They made decisions about investments between $1 million and $20 million. Other ministers were consulted when a decision related to their portfolio. Executives from relevant ministries and government agencies also attended the meetings. The wider group was made up of the ministers for Finance, Regional Economic Development, Economic Development, Transport and Trade and Export Growth.
• Senior regional officials (SROs) made decisions about investments of below $1 million. The SRO model plays a vital role in regional economic development, helping ensure investments are strategic, region-led and take a strong partnership approach.
• The Independent Advisory Panel (IAP) provided independent advice to Ministers on Provincial Growth Fund investment proposals and supported Kānoa – RDU’s work to build a balanced and coherent portfolio of investments. Panel members had skills in commercial, industry, public policy, as well as sector-specific knowledge where relevant. They provide feedback on applications for large sector projects, lend their commercial expertise to help assess business cases and offer advice on the overall investment portfolio. Media release: Inaugural meeting of Independent Advisory Panel, 13 February 2018
• The Head of Kānoa – RDU who had delegation to decline proposals which clearly didn’t meet the criteria of the PGF.

Kānoa – RDU publishes papers from meetings of decision-makers to the MBIE document library. 

Funding was offered primarily as grants, loans or equity deals, depending on whether a project was commercial or non-commercial and its likely outcomes.

Deciding which type of funding was best for a project was made against these criteria;

• Grants - non-commercial projects in general were funded through grants. Feasibility studies to help define and scope future, larger projects are also likely to be funded via grants.
• Loans - Loans were the preferred method of funding commercial projects, although  there may be some extra caveats for transport projects. Loans were made available to projects on suitable and agreed terms.
• Equity - In some circumstances, we were able to take an equity position allowing part-ownership of a project. Usually, this occurred where the project could not support further debt, or where there was sufficient extra return from the project which the Government should benefit from.

Why does the PGF give businesses loans?

• The PGF aimed to unlock the economic potential in regional New Zealand and businesses are a key source of such economic growth.
• We assessed the merits of every application.  Importantly, we also considered a range of public benefits, which commercial banks typically don’t need to.
• Public benefits included the contribution to regional economic growth, job creation, skills development, and the improvement of cultural and social indicators. 
• We worked with applicants and their commercial lenders, particularly where we could help accelerate a project, or bring a long-planned project to fruition.

What interest is charged on PGF loans?

• The terms of the loans, including interest rate and tenure, were arranged between the successful applicant and the Crown.
• Interest rates on loans, much like home mortgage terms, varied throughout the term and also therefore, between projects depending on the industry, value and estimated length of the project.

Will details of loans be publicly released?

• Kānoa - RDU works with the Office of the Ombudsman to ensure that our approach to releasing information is timely and appropriate.  
• Withholding commercially sensitive information during negotiations is standard practice. It is important to protect the Crown’s negotiating position to ensure public money is being spent wisely.
• Once contracts are executed and sensitivity around commercial details has reduced, we will proactively release more information. Specific loan terms however will be deemed commercially sensitive and will not be released.

Will the loans be repaid back to the Provincial Growth Fund?

Yes, loans are structured so interest and principal are repaid to the PGF.