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Recent key developments in MAKE│NZ
• And now for something completely different – a glance at one of our members:
Towbar Express started with a mobile business wanting a better-quality product, so started making its own.
The first towbar was made in 2002 and 200,000 + have been made since.
What distinguished us from the opposition was sending towbars away with fitting and wiring instructions.
The higher level of service built the foundation for the company to grow. The companies name held the open secret, TOWBAR EXPRESS. We were able to receive a phone call from an agent at as late as 2pm in the afternoon in Christchurch and it was delivered on the first courier run in Auckland the next day.
We now stock at three sites and have spent 20 years developing substantial software systems for easy identification of towbars for our agents to use. Making it easier for our agents remains the focus.
– Clyde McCready, Director of Towbar Express
• Those of you on the mailing list for our Fireside Chat events will have received the invitation to our next meeting on September 30th. MAKE│NZ organises networking events for manufacturing leaders at different levels, and our Fireside Chats primarily target senior leaders – Managing Directors, CEOs and General Managers. If you are at that level and would like to participate, please send me an email: dieter@makenz.org
• The theme for the event on the 30th will be the macro-economics and micro-economics of manufacturing in New Zealand. Sharon Zollner, ANZ Chief Economist, will kick off with her views on where the New Zealand economy is at, and where it’s heading. Then two of our local manufacturing leaders will tell us how they have managed to innovate processes and grow their business, and where the capital for that has come from. One of the key aims of the evening is to illustrate for Sharon, who is quite influential in her position, the challenges of funding growth and innovation in our manufacturing businesses
• The proposals for (yet another) reform of our Vocational Education and Training [VET] system, put up for consultation of the Minister for Tertiary Education on August 1, are attracting a lot of interest from manufacturers. Reflecting probably more the importance of this area than the quality of what is being proposed, which is essentially a roll-back of the reforms introduced by the previous Labour government. We shall make a submission on these proposals through the Manufacturing Alliance we are part of. The over-arching impression one gets is that the main thrust of this reform is to reshape the Polytech system to reduce its drain on the government’s coffers, rather than focus on improved training outcomes. Of particular concern are the suggested changes for work-based learning (apprenticeships), which is the most important part of the VET system for most of us. The structures and processes proposed here are vague in detail, making it hard to assess and comment on their ability to make a change for the better. One thing that is stated clearly is the intent to reduce funding support for work-based learning and put more money into the Polytech system – something we shall certainly object to. If you have a particular point you would like us to include or emphasise in our submission, please get in touch with me: dieter@makenz.org
Recent key developments in New Zealand
• Can’t find (younger) people to fill your vacancies for jobs with higher skills requirements? How about upskilling the ones you’ve got already?
• As is the case in most other OECD countries, our workforce is ageing – there are more older, and fewer younger workers. A result of lower birth rates, but also increasing life expectancy – living with better health for longer – allowing more and more people to work beyond retirement age. Some, because they want to, many, because they have to for financial reasons.
The trendline looks almost linear, but do we expect it to level off at some stage (soon)? Medical research to improve longevity is attracting hundreds of millions of dollars of investment, among others from tech billionaires like Mark Zuckerberg and Jeff Bezos, with the aim to raise life expectancy well beyond 100 years.
The graph below shows how many more New Zealanders are working beyond the age of 60 today, compared to 36 years ago:
• Educational level and income have an impact on the probability of employment beyond retirement. People working beyond retirement age have significantly higher levels of educational achievement and income than those who don’t. And, not surprisingly, among those that decide – or are forced to – continue to work, in spite of having lower levels of education and income, financial pressures are the predominant reason to do so.
• In other words, and as an employer, if we want to hold on to valuable workers, we are more likely to succeed if they a better trained and have a higher income. Unfortunately, and mostly for historical reasons, older workers tend to have lower levels of formal educational achievement than younger ones:
• For years now, we have found that it is hard to fill vacancies, especially for jobs at higher skills levels. And we know that even in a less tight labour market that will often still be a problem. Today, some of this may still be due to post-COVID effects, but in the longer term, changes in demographics will have to be the main concern, and the problem is not just a local one. You’ll find an excellent in-depth analysis of global trends here: https://www.mckinsey.com/mgi/our-research/help-wanted-charting-the-challenge-of-tight-labor-markets-in-advanced-economies#/
• So, you have skills gaps that are hard to fill in the labour market on one hand, and on the other older workers you want to hold on to, but their lack of skills around modern (digital) technologies means they are at risk of no longer being able to contribute fully.
To change this, you could invest (more) in the development of your existing (older) workforce, starting with a more formal assessment of existing skills and prior learning, find out who wants to and is able to be upskilled in what in relation to what we need, and put together a training programme to suit. Doing so will not fill any gaps you have right now, but can set you up for a future with increasing labour and skills shortages.
Recent key developments in the World
• The little country that could … people sometimes compare New Zealand’s economy to that of Denmark. Roughly same population size (6m vs. NZ 5.2m), but otherwise not many similarities? After all, Denmark sits close to the centre of Europe, is a member of the EU, and thus has direct access to a huge market, and still has strong trade ties to the UK.
Denmark’s share of land used for agriculture at 65% is higher than New Zealand (just over 50%), but food and agricultural products exports account for only 11% to the total Danish exports (in 2021), with Germany, Sweden, the UK, and China as the main markets and pork, fish, and dairy as the main products. The figure for New Zealand is 54% – more than half of our total exports are in the form of food and other primary industry products.
In total, Danish exports in 2021 were worth USD 218bn, compared to USD 55bn in New Zealand. In other words, Denmark exports about four times as much in value than we do. Correspondingly, its GDP per capita at USD 68.9k is 64% higher than New Zealand’s at USD 41.9k.
• Where do these differences come from? Two names matter here – Novo Nordisk, and Maersk. Novo Nordisk is the world’s second-largest pharmaceutical company by market capitalisation (behind Eli Lilly) and Europe’s most valuable company – the total value of its shares was greater than Denmark’s GDP in 2023.
Novo Nordisk’s annual revenue grew steadily from USD 22.4bn in 2020 to USD 37.4bn in 2024, mostly due to the recent success of its Wegovy and Ozempic weight loss drugs. It started as and still is the world’s largest producer of insulin, but now manufactures a range of pharmaceutical products.
• Maersk is the world’s second-largest shipping company (behind MSC), with an average revenue of USD 56.6bn over the past five years; shipping lines’ revenue and profit figures have been fluctuating quite a bit recently.
The company is positioning itself as a world leader in reducing carbon emissions from shipping and are about to launch their second large container ship powered by methanol.
Altogether, ‘green tech’ makes up an important part of Denmark’s manufacturing (exports). Vestas, with a revenue of USD 16.5bn in 2024, used to be the world’s largest manufacturer of wind turbines until 2022, but has since been overtaken by Goldwing (China) and Envision from India. Major manufacturers like Danfoss (Euro 5bn of sales in the first six months of 2024) and Grundfos (Euro 4.6bn revenue in 2023) are also heavily investing to future-proof their products for markets where wider sustainability issues will increasingly drive purchasing discussions.
So, are the Danes better off than we are? From a purely economic perspective, it would seem so, judging by the latest OECD Country Report (https://www.oecd.org/en/topics/sub-issues/economic-surveys/denmark-economic-snapshot.html ).
However, the economy is quite dependent on how well the two ‘juggernauts’ will fare in the future. Pharmaceutical companies’ sales can vary quite dramatically if their sales figures are dominated by a narrow range of products. Its weight loss products Ozempic and Wegovy have accounted for about half of Novo Nordisk’s revenue recently, and their moment in the sun may soon be dimmed somewhat by competing products; Ely Lilly’s recently released mounjaro promises even better weight loss performance. And shipping companies have only recently (since COVID) provided solid earnings after a decade of poor financial performance – more about that in next week’s edition.
Lessons for New Zealand? In comparison, the 2023 revenue figures for New Zealand’s top two companies by revenue, Fonterra and EBOS Group, were USD 9.1bn and USD 7.9bn, respectively. One is a company that has recently signalled its intent to focus more on its commodity products, and the other one is a marketer, wholesaler and distributor of healthcare, medical, and pharmaceutical products listed in Australia and New Zealand.
It’s not about reducing the role of the primary sector in our economy, and our exports. Denmark still has agriculture and food products as a large part of its economy, and exports; Arla Foods is a major competitor of Fonterra in some markets. It’s about growing our high-value manufacturing sector – that is one of the areas where Denmark is way ahead of us!
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