Flying sheep endanger McCully

It’s the little things that get them in the end.

For Helen Clark, it was politically correct lightbulbs and showerheads. For Jenny Shipley, it was dissembling over what she and Murray McCully had discussed with Kevin Roberts about the tourism-marketing contract and National’s election campaign.

For John Key, it may be how Mr McCully has dealt with Hmood Al-Khalaf over $7.45 million in taxpayers’ funding for what Steven Joyce’s New Zealand Trade and Enterprise (NZTE) calls an “agrihub” in Saudi Arabia. Mr Key’s nervous “yup,” when asked if he had confidence in his foreign minister, betrayed concern over where the story may head.

Two weeks ago, I outlined here Mr Al-Khalaf’s efforts to thwart New Zealand’s free-trade agreement (FTA) with the Gulf States. My information was five years old, from when my company pitched unsuccessfully to assist Mr Al-Khalaf in resolving the live sheep issue that had made him so angry. It was left to NBR’s Jamie Ball and TVNZ’s Heather du Plessis-Allan to discover what had happened since.

Bold and courageous

It turns out that Mr McCully appointed a close confidante, Alex Matheson, to negotiate with Mr Al-Khalaf and the Saudis to resolve the live-sheep affair. Mr Matheson’s quasi-official status means the details are murky and may forever remain outside the Official Information Act.

Nevertheless, we’ve learned that Mr Al-Khalaf owns a property at Um Alerrad, between Riyadh and Dammam, charitably described as a “farm”. Based on the co-ordinates provided by NZTE, it’s desert land.

A deal was struck that NZTE would establish the $6 million “agrihub” at the “farm” and fly over 900 ovine “capital stock” last October to get it going. Using Singapore Airlines, this cost the taxpayer another $1.45 million, or $1611 per sheep. Mr McCully personally removed rules about what would happen to the sheep following disembarkation.

NZTE advises that the Um Alerrad “agrihub” is the only one it has set up anywhere in the world. No others are planned. It’s “bold and courageous” and “uncharted waters,” says NZTE’s Quentin Quin. It’s certainly a strange location. New Zealand’s competitive advantage is in pastoral farming and there is no pasture to be found at the “agrihub.”

On the face of it, the whole idea is implausible. Saudi Arabia has a religious duty to supply at least two million live sheep every year for the Hajj. Were it possible to farm sheep in Saudi Arabia, the question of live sheep imports wouldn’t even have arisen. Mr Al-Khalaf wouldn’t have spent $110 million investing in the Hawke’s Bay, working with AgResearch on a new sheep breed and refitting a live-sheep vessel.Instead, some of Saudi Arabia’s enormous oil wealth would have been applied to establish a local industry.This, after all, is a desert kingdom that wants to be self sufficient in ski slopes.

A private farm is also an odd place for a New Zealand “agrihub”. Mr Al-Khalaf will become the owner of all the $6 million of farm equipment and will be able to determine access to his property. That assumes anyone would have known about it in the first place: NZTE advises it has no marketing plan for the “agrihub.”

Equally unusual is how the “agrihub” contract was let. A request for proposal generated at least three bidders: Deloitte’s international agricultural consultancy; NZX-listed PGG Wrightson; and the Brownrigg brothers, Mr Al-Khalaf’s business partners in Hawke’s Bay. With shades of the SkyCity deal, it seems Mr Al-Khalaf was consulted through the tender process whereas Deloitte and PGG Wrightson were not. The Brownriggs won the contract. Mr Al-Khalaf has a 24.9% shareholding in their company.

According to NZTE, the Brownriggs then formed a “consortium” of New Zealand agriculture businesses to showcase at the “agrihub”. It’s not clear how the “consortium” was selected or what its role will be but it consists of all the usual fencing, gating, tagging, breeding, shearing and veterinary providers, with a bias towards Hawke’s Bay.

Denver Stock Feeds is also on the list, presumably because the sheep will need to be kept and fed indoors given the lack of pasture at Um Alerrad and summer temperatures that peak above 50°C.

Compensation

If you were cynical, you’d think it’s not really a “consortium” at all, but just those the Brownriggs or any farmer would buy kit from to set up a new property or improve an existing one.

A bit unusual too that the 900 “capital stock” arrived in Saudi Arabia last October, the same month as the Hajj and well before the “agrihub” was ready – let alone what will need to be one of the world’s most elaborate irrigation systems.

If you were cynical, you might ask how many were slaughtered or perished soon after arrival.You might even wonder if there is an “agrihub” at all, or whether the whole thing is just an elaborate ploy to kit out Mr Al-Khalaf’s property to stop him opposing the FTA.

Mr Al-Khalaf’s business partner, George Assaf, describes what has happened as “compensation” and Mr Key confirms Mr Al-Khalaf isn’t “kicking up any issues anymore.” It sounds awfully like baksheesh with taxpayers’ money.

Still, it’s only a little thing. At $7.45 million, it’s less than half the $15 million Mr Joyce’s corporate welfare machine has pumped into 100% US-owned RocketLab to try to launch satellites into space from Great Mercury Island.

If the Saudis deliver on the FTA, it will be money well spent – although unfortunately there is no sign they intend to deliver on their side of the bargain. The one thing worse than paying a bribe with taxpayers’ money is paying it to no effect.

New Zealand journalists are looking forward to the promised opening of the “agrihub” next month. Mr McCully will be hoping there really is an “agrihub” on a “farm” in the desert between Riyadh and Dammam; that there really is $6 million of “demonstration” equipment sitting there ready for display; that potential buyers of New Zealand farming technology are really able to go and view it; and that at least a fair proportion of the 900 “capital stock” are still alive.

If not, people might start comparing Mr McCully’s dealings with Mr Al-Khalaf with those with Mr Roberts 15 years ago. For which Mrs Shipley sacked him.