It’s nearly impossible to talk about New Zealand trade issues without mentioning the name of Stephen Jacobi. A Chartered Member of the Institute of Directors, Stephen is a mainstay in the New Zealand international trade space. After working at the Department of Trade and Industry and the Ministry of Foreign Affairs and Trade for 25 years, he shifted to consulting and took on roles as head of major business councils. We spoke with Stephen and he shares with us his insights into the rapidly changing global trading environment and what this means for New Zealand.
I spent 25 years or so as a public servant with the Department of Trade and Industry and the Ministry of Foreign Affairs and Trade (MFAT) including postings in Paris and Ottawa and a stint as Private Secretary to the Trade Minister. I left MFAT initially as CEO of the Forest Industries Council and then I established Jacobi Consulting Ltd, providing advice to corporate and government clients on international trade, government relations and economic development. The NZ-US Council, the NZ International Business Forum, and the NZ China Council have all been clients of mine over the last 14 years. I have served as executive director of these three multi-sector organisations which bring together the country’s largest internationally-oriented businesses and develop strategies to grow New Zealand’s integration with key partners in the global economy.
I have also served on several not-for-profit boards over this time – as deputy chair of Fulbright NZ, chair of Napier Girls’ High School, chair of the St John’s College Trust Board — a major educational endowment of the Anglican Church with diverse asset holdings — as well as former chair and trustee of the Te Aute Trust Board, which is the proprietor of two iconic Māori Anglican boarding schools in Hawke’s Bay and two farming businesses. I have served as a director of Anglican Care which provides elder care and social services in the eastern part of the North Island.
My roles with the New Zealand US Council and the New Zealand China Council have involved some pretty complex and contentious public policy issues. Over time I have been accused as a neo-liberal in the pay of US multinationals and more recently as a mouthpiece of the Chinese Communist Party! Of course I am neither, I am motivated only by what New Zealand needs to do to achieve prosperity, security and sustainability at this time in our history. The Trans Pacific Partnership (TPP) was a particular challenge. The NZ-US Council was created to achieve an FTA with the United States and so naturally we were strong supporters of TPP. But TPP evoked strong reactions from parts of the community, sometimes without foundation, but often on the part of well-intentioned people. From this I learned that consistent engagement with public stakeholders is important. I think this applies to many organisations and requires leadership and advocacy from directors. Although organisations I have led have always been prepared to engage in public debate, government agencies for the longest time under-invested in explaining the rationale for trade agreements. Thankfully this has changed in more recent years.
A similar problem arises with the NZ China Council: How should New Zealand engage with a more economically powerful and politically assertive China? We have to make the case for this — engaging with the public on their concerns about over-reliance on China on the one hand and about China’s differing political values on the other. Public debates of this kind are only going to grow in coming years – organisations and directors will need to develop capacity to enter these debates more confidently.
Trade is changing rapidly particularly as digital becomes the norm and companies look to build value chains especially for New Zealand in the Asia Pacific region. These changes bring both opportunities and risks for New Zealand businesses. Our biggest challenge remains one of depth and scale. We have too few companies with the necessary capital structure and human resources to compete on a global level and we need to develop more sectors with a capacity to become world class. This is not to deny the extraordinary contribution of our small and medium sized enterprises – we need more of them and we need some of them to be bigger. Too few of our companies invest overseas where the consumers are but exporting remains confounded by tariffs and non-tariff barriers. The latter apply both to goods and services. Depth and scale count when confronted with challenges like the trade war or rising protectionism. Yet there are some stand-out examples of kiwi success on the world stage – we just need more of it!
Two things stand out for me. First, directors need to know and understand the markets their companies are trading into. A lot of boards of trading companies meet offshore – that is an excellent investment in my view and particularly important when it comes to complex markets like China. A lot of smaller companies are developing markets using e-commerce platforms which makes sense, but the platform is not the market – the market is the consumer of the end product. Knowing what makes consumers tick is important both for the marketing team and the board. The second thing is the global economic environment against which trade is done. Directors can worry themselves to death by looking at the situation for global trade today, but worse would be to ignore it completely. Understanding the risk posed to your business by the trade war and its fall-out or by the growing threats to the World Trade Organisation is not just a theoretical exercise: it could lead you to mitigate that risk by seeking new partners or by structuring your business in a different way.
In my view New Zealand exporters’ greatest strength is their flexibility and ability to react quickly to changing market circumstances. New Zealand companies often have the edge over competitors when they can demonstrate to their customers that they understand their needs and can quickly alter their offer to suit a changing demand. A major weakness is the lack of capital to invest in acquiring deep market knowledge. This is consequence of the depth and scale issue I mentioned earlier. Often New Zealand companies are dealing with customers many times their size. Finding the right partner is important but having the capacity and capability in-house with the right people to understand the market is often difficult.
Directors are often appointed for financial or business acumen but in addition, they need to maintain wide information networks in order to add value to discussion with the executive team. Asking the right questions of executives means knowing what to ask. Challenging them to do better means bringing awareness of other situations and industries. Directors also need to keep on top of the changing political environment in which the company is operating and be prepared to participate in engagement with stakeholders.
This is a challenge for me with a busy consulting practice. I try to keep on top of reading and I invest quite a bit of time in networking. My role brings me into constant contacts with business leaders both in New Zealand and offshore, particularly in my work as an Alternate Member of the APEC Business Advisory Council (ABAC). I’m a great believer in continuing education – the IoD Company Directors’ Course is a foundation requirement for any director role as is participation in branch activities. The IoD is at its best when it is providing insights you cannot get by yourself and there are lots of these on offer.
Having a healthy balance sheet helps! It’s a team effort but I think a director helps most when s/he ensures the company knows what business it is in, how it creates value and where it fits within the wider eco-system in which it operates. Directors need to be drawing on their wide experience and providing insights to help guide the executive team to achieve the value expected of them, without remaining focused on governance and getting involved in day-to-day management. I remember reading once (with all credit to whoever wrote this) that whereas good executive leaders can help you get through the jungle, good directors are the ones who shout out “wrong jungle!”
I like to read and travel. I am a linguist and languages have always been my passion – French, German, Spanish I can manage, with a good and growing dose of te reo Māori. I am a faltering beginner in Mandarin. Too few kiwis learn languages in my view. As a protest, and much to my family’s horror, I plan to take up my rusty Latin when I retire!
Spend time travelling in key markets, learn a language (even the basics help), network like crazy by participating in IoD events, and join ExportNZ and the relevant business council or trade association.