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1、 Hawkes Bay Horticultural Sector:Economic recovery following Cyclone Gabrielle Summary of findings and recommendations May 2023 2 Context of this report Hawkes Bay recently suffered from the effects of Cyclone Gabrielle,the worst storm to hit New Zealand(NZ)this century.The cyclone triggered a natio

2、nal state of emergency for only the third time in NZs history and caused loss of life,damage to key infrastructure and significant impact to several sectors in the region,including the c.$1.2 billion horticultural industry.1 Boston Consulting Group(BCG)undertook this social impact project to rapidly

3、 develop the evidence base and recommendations for the horticulture industry to support discussions with government and private sector stakeholders(e.g.,banks,insurers).These materials sit separate to but support more specific proposals for government assistance,focusing on BCGs initial assessment o

4、f the cyclones economic impact on the Hawkes Bay horticultural sector,and the possible policy and funding levers to support a long-term target state vision to“grow back better”.This report synthesises BCGs findings and recommendations following this six-week engagement with the sponsorship of Rockit

5、 Global Limited(Rockit)and the support of a wide range of industry stakeholders.The information presented in this report is based on data collected until March 31,2023.The report reflects findings up to this specific date only.This report has six sections:Executive Summary The contributions of Hawke

6、s Bay horticulture to the national economy and the associated economic impact of Cyclone Gabrielle The key challenges for the sector in recovering without assistance,and the case for additional support or interventions The aspirational vision for Hawkes Bay horticulture by 2030 The suite of potentia

7、l solutions to realise the Grow Back Better vision 1 Stats NZ,Horticulture NZ,Ministry for Primary Industries.Analysis used MPI National Horticulture export revenue forecast from 2004 2024;assumes exports account for c.90%of total economic value for most fruit types(remaining c.10%is domestic sales)

8、;calculated Hawkes Bay share of economic value using share of horticulture land in Hawkes Bay 3 Section 1.Executive Summary The Hawkes Bay horticulture sector contributes c.$1.2 billion annually to the economy and directly employs c.6,700 people in permanent roles(8%of the total regional workforce),

9、plus several thousand more in related sectors.This has meaningful flow on effects for the region,including creating ancillary jobs and supporting social infrastructure.Cyclone Gabrielle is understood to have impacted c.35%of local crop production value,with an estimated$920 million+critical response

10、 and replanting(like-for-like replacement)costs plus$500 million in economic losses in FY23.Growers will be disproportionately impacted by the cyclone,as they have already incurred the majority of costs for the harvest year.The sector has been rocked by this crisis.After two challenging growing seas

11、ons in 20222023 with unseasonably high rainfalls,it is in a highly fragile state.Many growers have low capital reserves and lack the ability to fund clean-up and replanting,and given the extreme nature of Cyclone Gabrielle,many of the losses,including crop yields and growing infrastructure on land(e

12、.g.,posts,wires)are not covered by traditional insurance.As a result,in the absence of interventions,the sector is not expected to fully rebuild.Without interventions it is estimated to lose$3.5 billion in cumulative value over 2024-2030,as investment into the sector is reduced and land is not regen

13、erated or is put to lower value uses(e.g.,cropping,sheep farming)which have lower capital outlay.With targeted support from private and public sector stakeholders,there is opportunity to support the sector to grow back better restoring and protecting industry participants in the short-term,and creat

14、ing a higher value,more resilient and innovative sector in the medium-long-term.The Grow Back Better plan aims to achieve a target-state aspiration that would enable the sector to grow around 20%above pre-cyclone 2030 forecasts,based on economic value.This growth may lead towards a projected Hawkes

15、Bay horticulture industry worth$2.5 billion in 2030.To deliver the solutions outlined in the Grow Back Better plan,growers in the sector require c.$650-960 million of government funding support to address the constraints on recovery and maintain downstream volume capacity and in-market demand.Assumi

16、ng constraints are addressed(and long-term investments are made for resilience activities),the plan could add$2.4 billion3.6 billion cumulatively above base case between 20242030.These solutions require policy and funding decisions to be made collaboratively between central and regional government,i

17、wi,and private sector stakeholders.The key areas of action are:Critical response activities(requiring$230$340 million government support)including immediate clean-up programs as well as schemes to ensure production reinstatement,including employment sustainability Short-term reestablishment activiti

18、es(requiring$420$620 million government support)including a replanting program incentivizing optimal land use,including higher value crops where appropriate,urgent clarity on land and water use changes,as well as short-term risk mitigation schemes Additionally,long-term resilience activities for inf

19、rastructure,innovation and disaster planning may deliver$600 million$1000 million cumulative value in 20242030 4 Section 2.The contributions of Hawkes Bay horticulture to the national economy and the associated economic impact of Cyclone Gabrielle The Hawkes Bay horticulture sector contributes c.$1.

20、2 billion to New Zealands economy,with significant ancillary social and economic value Before the cyclone,the horticulture sector in Hawkes Bay contributed c.$1.2 billion to the NZ economy in 2022,with a growth rate of 9%per annum(pre-COVID).The region represents 15%of horticultural land in New Zeal

21、and.2 Horticulture in Hawkes Bay is a core sector for the region and directly employs 6,700 people in permanent roles(8%of the total regional workforce),plus several thousand more in processing facilities and the wider supply chain.The sector is a significant employer of Mori and Recognised Seasonal

22、 Employer(RSE)workers,often from the Pacific Islands.This has meaningful flow on effects for the region,including creating ancillary jobs and supporting social infrastructure.3 Hawkes Bay has become an important contributor to New Zealands horticulture export market(c.$1.1 billion of$7 billion per y

23、ear),particularly through its reputation for premium products,including Dazzle,Envy,and Rockit apples,Marron dOr squash,and Syrah and Bordeaux-style wines.4 The region is a leader in growing techniques,such as 2D canopies in apples.It supports New Zealands role as a horticultural innovation centre t

24、hrough viticulture expertise at the Eastern Institute of Technology(EIT)and research and development(R&D)strength in bio-protection,regenerative agriculture,and food innovation.2 Stats NZ,Horticulture New Zealand,see footnote 1 for methodology 3 Statistics New Zealand,Horticulture New Zealand 4 BCG

25、analysis,Hawkes Bay Horticulture Sector Stakeholder interviews,Statistics NZ 5 Cyclone Gabrielle is understood to have impacted a significant number of local crops,with an estimated$920m+critical response and replanting costs plus$500m economic losses in FY23 The negative economic impact of Cyclone

26、Gabrielle in 2023 on the Hawkes Bay horticulture industry is estimated to be over$1.4 billion in 2023.In the short term,these costs will be incurred through critical response efforts,replanting and reinstating lost and damaged crops,and direct economic losses.5$370 million+in critical response costs

27、 to remove silt,slash and other debris from farms,vineyards and orchards and evacuate contaminated crops that pose health risks-Costs for critical response activities range from$10,000 to$100,000+per hectare depending on the type of crop and extent of damage.The breakdown of critical response costs

28、by sector is shown in Figure 1.$550 million+in replanting and reinstatement costs for growers to reset all the crops that are damaged,submerged or permanently lost with like-for-like replacements.There is potential for additional costs if more plants are lost due to a delay in cleanup efforts.$500 m

29、illion in direct economic losses to the industry,reducing the economic value of the Hawkes Bay Horticulture Industry to$0.9 billion in 2023(its expected value was$1.4 billion).This is shown in Figure 2:-Growers will be disproportionately impacted by the cyclone,as they have already incurred non-harv

30、est costs for the year,resulting in a significant reduction in net profit(approximately$130 million).The extent of the impact will vary across growers,with some likely to become unviable without additional support o Wine producers will also be impacted by reduced tonnage and yield-Demand for harvest

31、ing labour will also decrease by c.35%due to the loss in yield,resulting in$40 million in economic losses to employment.This may be potentially offset by clean-up activity-$120 million will be lost due to the reduction in post-harvest activity(e.g.,packing,cool storage)-$100 million of the economic

32、impact will be felt by the players across the supply chain(e.g.,platforms,distributors,retailers,exporters).Reduction in yields will directly impact bottom line,assuming significant portion of costs are fixed and working expenses will continue to be paid to maintain in-market demand and infrastructu

33、re capacity for future volumes-There will be a$110 million reduction in tax revenue for the government associated with reduced income at all stages of the value chain 5 BCG analysis of data collected from Hawkes Bay Horticulture stakeholder interviews,industry body surveys and reports,and a BCG prim

34、ary survey of Hawkes Bay growers 6 Figure 1-Costs of critical response and crop replanting&reinstatement Figure 2-Economic value of Hawkes Bay Horticulture Industry Preliminary estimate of$370m+in critical response costs to growers2793212552Critical Response37945113222047Replanting1&Reinstatement255

35、3with a further$550m+for crop replanting and reinstatementType of cropAvg.10K per hectare to respond to needs of affected land(c.300 ha)Avg.74K per hectare to respond to needs of affected land(c.3400 ha2)Cost assumptions1Avg.10K per hectare to respond to needs of affected land(c.2500 ha)Apples&Pears

36、ViticultureSquash&OnionsOthers(e.g.,processed veges and summerfruit)Avg.16Kper hectare to respond to needs of affected land(c.3300 ha)Type of crop70K per ha for replant(c.140 ha);13K per ha for reinstatement(c.300 ha)200K per ha for replant(c.1600ha);37K per ha for reinstatement(c.400 ha)Cost assump

37、tions31K per hectare to replant&reinstate onions(c.160 ha),15K per ha for squash(c.1040 ha)Apples&PearsViticultureSquash&OnionsAvg.20K per ha to replant&reinstate other vegetables(c.1400 ha);170K per ha to replant other fruit(c.40ha);31K per ha to reinstate other fruit(c.260 ha)1.Critical response c

38、osts calculated based on average clean-up costs by crop type provided by and validated with industry bodies as of March 31,20232.Planted land only.An additional 10%cost included for unplanted pipfruit land clean-upSource:NZAPI,NZ Wine,HortNZ,Summerfruit NZ,Industry expert interviews,BCG analysisAvg.

39、110K per hectare to respond to needs of affected land(c.170 ha)Kiwifruit280K per ha for replant(c.40 ha);62K per ha for reinstatement(c.170 ha)KiwifruitOthers(e.g.,processed veges and summerfruit)1.Replanting includes the cost of trees/seeds(in the case of vegetables)and infrastructure,2.Reinstateme

40、nt is equivalent to one years production costs for damaged and replanted cropsPreliminary estimates indicate c.$500m in direct economic losses in 20230.00.51.01.50.30.70.10.00.220200.30.60.10.10.220210.30.70.10.10.220220.20.80.10.00.22023E0.20.50.30.50.00.00.12023PC0.60.10.020180.30.60.10.00.20.41.1

41、1.21.31.21.21.41.42019+9%-6%+3%1.Methodology:Used MPI National Horticulture export revenue forecast from 2004 2024;assumes exports account for 85-90%of total economic value,except other fresh fruit and vegetables(exports account for c.40%of total value);Calculated Hawkes Bay share of economic value

42、using share of horticulture land:c.12%of wine,67%of Apple&Pear,60%of squash,c.16%of onions,c.2%of kiwifruit,c.12%of other fresh and processed vegetables,are produced in Hawkes Bay.2.e.g.,processed vegetables and summerfruitSources:MPI,NZAPI,Stats NZ,Hort NZ,NZ Wine,Summerfruit NZ,Productivity.govt.n

43、z,Onionsnz,Freshfacts,Industry expert interview,BCG analysis Economic value of Hawkes Bay Horticulture Industry(exports and domestic),NZD B1Loss in valueViticultureApple&PearSquash&OnionsKiwifruitOthers2Initial assessment indicate c.35%of value were lost due to the cycloneOriginal forecast for 2023

44、based off MPI export dataSector was growing at 9%CAGR pre-covidReduction in growth rate due to covid 7 This economic impact will also have socio-economic impacts on the broader region:Reduced economic activity:Each dollar generated by the horticulture sector has a 1.9X effect on regional economic co

45、ntribution,meaning the direct economic impact is likely to be felt across multiple industries in the Hawkes Bay.SMEs are particularly vulnerable to this impact and may be potentially forced to downsize or close due to reduced demand for their products and services6 Reduced regional development:Fundi

46、ng intended for regional development will be diverted to re-building core infrastructure;potential investors could become less inclined to fund new businesses in the region Increased unemployment and welfare7:Cyclone Gabrielle will affect income negatively in both the short and long-term.The decline

47、 in revenue for the industry may lead to 600-1500 permanent horticulture jobs lost in the short-term.The decrease in yield associated with Cyclone Gabrielle may have a continuing impact on unemployment in the long-term and could result in 2,5003,500 fewer people employed in permanent horticulture jo

48、bs in Hawkes Bay in 2030 vs.pre-cyclone forecasts.The reduction in employment will lead to wider social challenges including up to c.$15-40m in welfare cost to the government in 2023(in addition to loss of income tax revenue from these workers)Increased social costs:Based on past natural disasters,i

49、t is likely that communities affected by a natural disaster face difficult social issues for years.As an example,the estimated lifetime cost of mental health issues,alcohol consumption and domestic violence following the 2010 floods in Queensland,Australia exceeded$6 billion.The floods themselves ca

50、used$6 billion in direct damages.8 Stagnant innovation:Investors will be increasingly reluctant to invest in horticulture across NZ,due to lack of certainty.This limits investment in supply chain capacity and brand reputation required to support long-term economic sustainability.Funding intended for

51、 innovation and R&D may now need to be funneled into recovery efforts.6 BCG analysis,IBR report on Kiwifruit industry used as a proxy for wider horticulture sector 7 Permanent jobs:Assumes reduction in economic value of industry correlates to the decrease in permanent jobs.Assumes 11,000 perm jobs r

52、equired in 2030 based on pre cyclone forecast of$2.1bn industry in 2030,6,700 jobs now in a$1.2bn industry;likely industry value is$1.5bn in 2030 post cyclone implying 8,000 jobs only which is 3,000 less than pre-cyclone forecast.Assumes welfare payment of$500 per week(Single jobseeker 25+incl accom

53、modation supplement)8 Australian Business Roundtable:The Economic Cost of the Social Impact of Natural Disasters.March 2016 Report.8 Section 3.The key challenges for the sector in recovering without assistance,and the case for additional support or interventions Without targeted interventions,the se

54、ctor is not expected to fully recover by 2030 The impact of this crisis on the horticulture sector cannot be understated.The sector is already in a highly fragile state following two challenging growing seasons in 20222023 with unseasonably high rainfalls.It has also faced 23 years of tough economic

55、 conditions,including increased export costs,limited labour availability,more erratic weather,and reduced demand for apples from Europe(following restriction on sale of Apples into Russia creating saturated supply in Europe from local growers).9 These conditions have created volatile financial resul

56、ts for many Hawkes Bay horticultural businesses and have led to less favourable access to bank loans and other sources of capital particularly with tightening capital reserve requirements in New Zealand.This access will now be further challenged by reduced revenues following Cyclone Gabrielle and th

57、e resulting impact on growers gearing ratios.Many growers have low capital reserves and will not be able to fund clean-up and replanting.Many losses,including crop yields and infrastructure on land(e.g.,posts,wires)are not covered by traditional insurance products.10 In the absence of interventions,

58、the sector is not expected to fully rebuild.As a base case,it will suffer from$3.5 billion in cumulative losses over 2024-2030 as land is not replanted or is put to lower value uses(e.g.,cropping or sheep farming)with lower capital outlay,and investment into the sector reduces.11 Losses may be highe

59、r if the sector recovery rate is below base case assumptions.Without recovery support,the industry may lose up to$610 million+per year against pre-cyclone forward projections along with a slowdown in industry growth rate.This is shown in Figure 3.Hawkes Bay as a region will suffer from c.$3.8 billio

60、n in direct and indirect losses:$2 billion or 60%of the$3.5 billion are losses that would usually have been spent locally in other Hawkes Bay sectors.The other 40%is usually spent outside of the Hawkes Bay.This$2 billion loss is expected to have a 1.9x12 multiplier effect on the regional economy res

61、ulting in a further c.$1.8 billion in cumulative losses from 20242030 The extent of the recovery depends upon the sectors ability to address constraints to the economic recovery 13:Funding for land availability/clean-up:Following the Cyclone,some crops remain inaccessible and are at risk of sufferin

62、g long-term damage if not accessed promptly.With 9 BCG analysis,Hawkes Bay Horticulture Sector interviews,Desktop Research 10 BCG analysis,Hawkes Bay Horticulture Sector interviews,BCG survey of growers 11 BCG analysis of data collected from MPI,Statistics NZ,Horticulture NZ,Productivity NZ,industry

63、 interviews,New Zealand Winegrowers 12 Taken from the IBR Report on Kiwifruit Industry as a proxy 13 Synthesis of Hawkes Bay Horticulture Sector interviews and BCG survey of growers 9 current level of government support,a large proportion of growers will not be able to meet the costs required for cr

64、itical response and crop replanting Nursery plant supply:Current apple nursery stock is only enough to replant a small proportion of the permanently damaged crops in 2023/2024 and there are lengthy lead-times for apple and grape nursery plants(2+years)Farming technology:Low adoption of new technolog

65、ies may result in not capturing the full potential yield rates on plants Planning and infrastructure:There are challenges for the sector to maintain a continued growth rate despite the potential occurrence of future natural disasters,emphasising the need for explicit disaster planning and infrastruc

66、ture defenses to minimise the impact of such disasters Risk management:Hawkes Bay horticulture businesses will face difficulty in obtaining appropriate insurance coverage and capital due to their elevated risk profile given recent economic conditions and Cyclone Gabrielle Human capability:Some worke

67、rs and business owners may be considering relocating from the Hawkes Bay following Cyclone Gabrielle,but it is important to retain a sufficient workforce to support the clean-up,replanting,and future growth of the industry Innovative capital investment:There is likely to be a funding gap between tot

68、al cost of recovery and grower,government and insurance contributions for critical response and crop replanting activities Figure 3-Projected Economic value of Hawkes Bay Horticulture Industry On-going economic impact|$3.5B+in cumulative economic losses from 2024-30 due to constraints in land,plant

69、supply and technology2022202320242025202620272028202920300.00.51.01.52.02.5NZD(B)1.Base case assumes that only 50%of the sector will be able to recover without additional government assistance (impact will vary across growers,with some growers likely becoming unviable without additional support,and

70、others who can recovery with minimal additional assistance)Source:MPI,NZAPI,Stats NZ,Hort NZ,NZ Wine,Summerfruit NZ,Productivity.govt.nz,Onionsnz,Freshfacts,Industry expert interview,BCG analysis Cumulative losses vs.pre-cyclone forecast($B)$(0.4)$(0.9)$(1.3)$(1.8)$(2.4)$(2.9)$(3.5+)Pre-cyclone fore

71、castCurrent case(base case)1Farming technologyLack of financing for new,higher productivity systems and technologies(e.g.,2D systems)will result in stagnant yield and maturation rates for plants OtherIncreased climate risk,infrastructure deficits,loss of workers and reduced industry investment will

72、result in a decrease in the underlying growth rateFunding for land availability/clean-upFunding constraint for significant proportion of growers who do not have the means to clear up land for recovery and replantingNursery plant supplySupply constraint of apple nursery plants;of the c.4m trees requi

73、red(2.5K per ha),only c.400K available in 2024,and c.1m available annually thereafter2 year wait to source new grape vinesConstraints to the economic recoveryNew trees planted in 2025/6,wont start fruiting until 2028/29Reduction in CAGR(by 40 60%)due to reduced investments Partially damaged/annual c

74、rop start to return in 2024Projected economic value of Hawkes Bay Horticulture Industry(exports and domestic),NZD BPre-cyclone,sector was expected to have a strong recovery post-covid,as premium crops start to matureLong-term CAGR of c.6%(slightly below pre-covid levels as fewer crop were planted in

75、 2021 2022)$3.5B+Economic loss 24-30 Nb:losses may be higher if sector recovery rate is below 50%base case assumption 10 Section 4.The aspirational vision for Hawkes Bay horticulture by 2030 The sector can grow back better with collaboration between govern-ment and private sector With targeted suppo

76、rt from private and public sector stakeholders,the sector can grow back better,restoring and protecting industry participants in the short-term,and creating a higher value,more resilient,and innovative sector in the medium-long-term.The vision to grow back better provides a target state for short-te

77、rm recovery and long-term resilience,and has three milestones of growth for the Hawkes Bay horticulture sector:1.In 20232024,the sector maximises yields from existing crops,assists affected land and business owners with short-term viability challenges(through labour and financial support),and suppor

78、ts regional employment and job security for impacted workers 2.By 20252026,the sector replants more crops with higher productivity systems and has planted 100%of the land available before Cyclone Gabrielle.500 additional permanent jobs are created(vs.2022 levels)3.By 2030,the sector has grown 20%abo

79、ve pre-cyclone 2030 forecasts based on economic value to$2.5 billion(i.e.,$1.3 billion additional economic value vs.2022).2,000 permanent jobs above pre-cyclone forecasts,(6,000 jobs above 2022 levels)11 These milestones and underpinning objectives are shown in Figure 4.The underpinning objectives s

80、ummarise the target state across several dimensions.Four important dimensions are listed below:Employment:The region needs to rapidly bolster its workforce to support efficient industry recovery.Currently,6,700 people are employed in permanent growing roles and many more jobs are supported by the se

81、ctor,including 4,000 RSE workers.14 Ongoing employment for these people relies on quick,sustained,and sufficient supply of labour to undertake clean-up,rebuilding and replanting activities.Longer term,the workforce will become larger and more highly skilled,with potentially 70%of the workforce engag

82、ed in skilled roles such as tech-enabled farming,horticulture science and data analytics.15 Value:A significant portion of land has been damaged by Cyclone Gabrielle and requires replanting.When selecting crops for this damaged land,the sector must consider factors such as soil type,owners experienc

83、e and skills,water use,and time to full productivity to determine the highest-value crops that are most optimal for that land:16-Premium apples(e.g.,Envy)have higher value per hectare than other crops(2x viticulture,4x onions,10 x squash),but can take 4-6 years to reach full maturity -Viticulture ha

84、s optimal value uplift considering water constraints but require differentiated land management,skills,and equipment-Vegetables such as onions and squash reduce value earnt per/hectare($10,000$60,000/ha)but have quicker time to maturity(less than a year)Partnership:The Hawkes Bay horticulture sector

85、 benefits greatly from the contributions of Mori,who make up a significant proportion of landowners,and its workforce(4,000 employed).17 Local iwi will continue to play a crucial role.In particular,there is significant potential to increase productivity on Mori freehold land that has traditionally b

86、een held back by barriers like restricted access to capital.These obstacles can be overcome by partnering with horticultural players,insurers,and banks.The accelerated development of high-value crops will have numerous benefits for local iwi,including land improvement,increased income,employment opp

87、ortunities,and upskilling prospects.At the same time,this will also contribute valuable land to the sectors rebuilding efforts.18 Innovation and leadership:Hawkes Bay growers have a reputation as leaders of the NZ horticulture industry in key segments using innovative and high-tech practices.This wi

88、ll continue following Cyclone Gabrielle,with growers expanding the roll-out of technologies that uplift yield,increase light use,reduce labour costs,and reduce water use.These technologies include analytical monitoring of crops(soil condition,rainfall etc.),and automated harvest activities such as r

89、obotic picking,irrigation drones and autonomous picking carts.14 Horticulture NZ 15 Estimate based on National Apples and Pears Industry Transformation Plan additional permanent jobs for 2030 projections and NZ census data on Level of qualification amongst work force 16 National Crop Estimate Report

90、 2023;Stats NZ 17 Stats NZ 18 Hawkes Bay Horticultural Sector Stakeholder interviews 12 Figure 4-Target state objectives 2023 to 2030 for sector recovery UNDERPINNING OBJECTIVES2023-24Businesses supported with short term viability challenges100%of unaffected crops successfully harvested2025-2650%of

91、damaged land replanted with higher productivity crops&systems2100%recovery in hectares planted3500 addl permanent jobs(vs.2022 levels)2030Economic contribution 20%+above pre-cyclone forecasts1$1.3B above 20222000 permanent jobs above pre-cyclone forecasts,6000 jobs above 2022Grow back better seeks t

92、o outline a potential target state aspiration for short-term recovery and longer-term resilience in the Hawkes Bay region1.2030 forecast based on extrapolation of 2017-2022 sector growth 2.For applicable crop types 3.Includes land that has been clear up,and awaiting nursery plants that have been ord

93、ered for plantingResilience&risk managementIncreased diversity,and access to insurance schemes,to ensure cost of capital remains within pre-cyclone thresholdsRegional brand&infrastructureStrong local brand,and resilient supporting infrastructure for Hawkes Bay region,to enable efficient exports for

94、growers Environmental stabilityRegrowth in line with best-practice regenerative farming and biodiversity,for long-term sustainability of sectorInnovation and leadershipHawkes Bay remains a hub and leader in key horticultural segments,with focus on innovation/high-value practices;contributing 3%GDPVa

95、lueImpediments to optimal land and water use removed;with highest value crops for each soil type planted,and water mobility to support,across the regionEmploymentIndustry retains a strong workforce to support rebuild;longer term,the workforce shifts to support a greater number of high value,skilled

96、jobs by 2030Social mobilityIndustry supports SME operators and local landowners,with significant ongoing portion of land remaining under small business grower operationPartnershipActive development of whenua Mori into the sector;iwi participation in planning and allocation;increase in high-skilled j

97、obs for Mori in sector by 2030Domestic food supplyThe region continues to be a key part of NZs domestic food supply with 150K+tonnes of fresh and processed vegetables and 100K+tonnes of apples 13 Section 5.The suite of potential solutions to realise the Grow Back Better vision for Hawkes Bay Impleme

98、nting potential solutions for consideration in line with this aspirational vision may enable the economic value of the sector to grow toward$2.5 billion by 2030.This growth generates an additional$2.4 3.6 billion in cumulative value to 2030,compared to the scenario where the sector recovers without

99、assistance The suite of potential solutions to help the sector grow back better,delivered in collaboration with central and regional government,iwi,and private sector stakeholders,outline a plan to rebuild the horticulture sector in the Hawkes Bay.This Grow Back Better plan could help the regions ho

100、rticultural industry reach 20%above pre-cyclone economic value forecasts for 2030 contributing$2.5 billion to the economy annually by 2030.As shown in Figure 5,this would imply growth of the economic value of the industry by$1.3 billion from 2022 value;adding$2.4 billion$3.6 billion in cumulative va

101、lue to 2030 than if it were to recover without interventions from government and stakeholders(base case).Under this scenario,the horticulture sector would likely employ 14,000 people in permanent roles by 2030 implying 6000 additional permanent jobs above the base case.The workforce would be supplem

102、ented by about 20,000 seasonal workers;8,000 roles more than base case.19 The Grow Back Better plan will require funding from multiple sources.The New Zealand Government,through the Ministry of Primary Industries,has already committed$51 million in recovery funding across the agriculture and horticu

103、lture sectors up to a maximum of$40,000 per business.This funding is intended for critical response activities such as water infrastructure repairs and removing silt from trees and vines.20 19 BCG analysis of data collected from MPI,Statistics NZ,Horticulture NZ,Productivity NZ,industry interviews,N

104、ew Zealand Winegrowers.Assumes jobs grow at the same rate as economic value;6700 perm jobs in 2022,c.10K temp jobs in 2022 20 Ministry of Primary Industries media release:Cyclone Gabrielle farmer and grower recovery support Embargoed until 10am on Tuesday the 9th of May,2023 14 Despite these funding

105、 commitments and indications,a large proportion of growers do not have sufficient capital reserves or insurance settlements to meet the costs of recovery and be forced to exit the industry,having additional impacts on lost jobs for their employees.It is believed the amount of government support requ

106、ired to support these growers and meet the proposed Grow Back Better solutions is c.$650 million$960 million21 It is critical to note that failure to implement these solutions would jeopardise the cumulative value of$2.4 billion-$3.6 billion that these measures may generate by 2030.This would result

107、 in the Hawkes Bay horticulture sector being valued at only$1.5 billion in 2030,instead of the projected$2.5 billion under the proposed plan.Figure 5-Projected economic value of Hawkes Bay Horticulture Industry 21 Assumes only 50%of the sector will be able to recover without additional government as

108、sistance(impact will vary with some growers likely becoming unviable without additional support,and others who can recovery with minimal additional assistance)Source:BCG analysis,Hawkes Bay horticulture sector stakeholder interviews,and BCG primary survey of Hawkes Bay growers Target state|Unlocking

109、 constraints could help the regions horticultural industry reach 20%above pre-cyclone forecasts by 20301.Assumes jobs grow at the same rate as economic value;6700 perm jobs in 2022,c.10K temp jobs(including 4000 RSEs)in 2022 2.Depends on level of technology adoption e.g.,automatic harvestingSource:M

110、PI,NZAPI,NZ Wine,Statistics New Zealand,Horticulture New Zealand,Productivity.govt.nz,industry interviews,Freshfacts,Productivity.govt.nz,Onionsnz,Industry expert interviews,BCG analysis2022202320242025202620272028202920300.01.02.03.0NZD(B)Target casePre-cyclone forecastCurrent case(base case)Immedi

111、ate support to clean up land and retain workers to reduce 2023 economic losses to horticulture playersBuild resilience through investment in infrastructure,innovation and disaster planning to increase the underlying growth rate of the sectorAA$2.5B direct annual value by 2030($1.3B annually above 20

112、22)Additional$1.4B indirect annual value for the Hawkes Bay economy by 2030BB$2.4 3.6B cumulative additional economic value vs.current case from 2024-2030Economic value createdJobs created16K additional permanent jobs vs.current case2K additional permanent jobs vs.pre-cyclone forecast8K additional t

113、emp workers2vs.current case3K additional temp workers2vs.pre-cyclone forecastInvest in higher value crops and tech systems to increase productivity and enable industry to grow back,better than pre-cyclone forecastsProjected economic value of Hawkes Bay Horticulture Industry(exports and domestic),NZD

114、 B 15 These solutions allow the horticulture sector to remain a thriving,resilient and skilled industry,and a crucial pillar of the Hawkes Bay economy that supports multiple communities and whnau.They fall under the 3 categories outlined below and in Figure 6,with the underlying government support r

115、equired outlined below and in Figure 7.1.Critical response solutions aim to restore access to crops and mitigate the financial and social impact of flooding on crops and uninsured infrastructure.To complete these solutions,an additional$230 million-$340 million of government support is required.Solu

116、tions include:A government funded clean-up program to re-instate critical access to crops for salvage and protection,replace core machinery,evacuate contaminated crops which pose long-term harm to soil health,and remediate the soil to maintain future capacity.-Government support required to complete

117、 this solution:Funding support required is estimated at$150 million-$230 million.-How it could be implemented:The Ministry of Primary Industries could extend the current agriculture and horticulture recovery fund.Production reinstatement schemes aim to ensure Hawkes Bay horticulture businesses can r

118、emain viable and employers can retain their staff to support clean-up and crop reinstatement activities,limiting the consequences of the cyclone on employees and their whnau.Longer term,there is potential to extend the scheme to support the growth of higher productivity roles(e.g.,tech-enabled farmi

119、ng,horticulture science).-Government support required to complete this solution:Funding support required is estimated at$80 million-$110 million for production reimbursement22 and possible targeted employee retention programs given the asymmetric impact of the cyclone -How it could be implemented:Go

120、vernment could align with previous production reimbursement schemes which followed natural disasters such as:Funding provided for crop reestablishment up to 90%of cost of damage&rural assistance payments provided to affected farmers up to 75%of unemployment benefits following the 2004 Manawatu Flood

121、s 22 Equivalent to one years production cost for damaged and replanted crops 16 Back up|Key assumptions for government support and target stateCategory Government support required to reach target state(from base case)Total support required($)Assumptions for target state2024-30 cumulative value above

122、 base case($)Clean up Support required for clean-up:c.$190m150 230mAll c.10K ha of impacted land will be cleaned 1800 2600mProduction reinstatementSupport required for production cost Pipfruit:c.63mKiwifruit:c.6mVegetables:c.16mWine grapes:c.2mSummerfruit:c.4m80 110mAll damaged plants will be nurtur

123、ed back to healthc.1800 ha of pipfruitc.130 ha of kiwifruitc.160 ha of wine grapesc.220 ha of summerfruitTotal permanent workers:c.6700%of workers impacted:c.35%Subsidy for permanent workers:c.$1190/wk for 12 weeksTotal:c.$30 40 mTotal temp workers:c.10K%of workers impacted:c.35%Subsidy for temp wor

124、kers:c.$590/wk for 12 weeksTotal:c.$20 30m ReplantSupport required to replant with same crops:c.190m Higher value cropsUpfront capital cost for higher value crop1:$100K/haLand that will be replanted with higher value crops:c.800 haTotal:100K*800=c.$80m TechnologyCost of higher productivity planting

125、practices(e.g.,2D growing system):$50K2/ha additional Land that can use higher productivity infrastructure:c.1600 ha Total:50K*1600=c.$80mSupport needed to maintain downstream volume capacity and in-market demandRemaining revenue value loss to non-growers as industry waits for new plants to mature:c

126、.450M Fixed costs and expenses(e.g.,marketing,leases)as a%of revenue:c.70%Support required:450M*70%*50%(assuming 50%recovery for non-growers):160m420 620mc.1600 ha of apple land:160 ha will be replanted in 2024,400 ha replanted in 2025,600 ha replanted in 2026,600 ha replanted in 2027(assuming innov

127、ation and planning increase supply of trees)c.2600 ha of annual crops replanted immediately after clean-upc.220 ha of permanently damaged grape vines,kiwifruit and summer fruit replanted in 2025 c.800 ha will be replanted with higher value crops that generate 2x valuec.1600 ha will use higher produc

128、tivity infrastructure that generates 2x yieldUnderlying growth rate increases to 4-5%due to signaling of government support Innovation,Infrastructure&Disaster PlanningIndirect cost of infrastructure rebuild(c.13B3),innovation,and disaster planningIndirectUnderlying growth rate returns to pre-cyclone

129、 levels:c.6%600 1000mTotal additional government support required vs.base case$650 960m42024 2030 Cumulative value above base case$2.4 3.6B801.Premium apple crop varieties Envy,Rockit and Dazzle have been used as a proxy,but can also include other premium crop varieties such as change to Kiwifruit G

130、old3,blueberries,or grape type 2.Additional cost vs.traditional spindle system used as proxy;2D costs 250K per ha,which is 50K more than spindle(200K)3.Estimated cost of infrastructure rebuild(before housing)for the Hawkes Bay region 4.Excludes indirect resilience costsFigure 6 Suite of potential so

131、lutions Figure 7-Key assumptions to calculate cost and impact of solutions c.$650-960m required to unlock constraints and reach target stateGov.support required$150 230m1$80-110m2$420 620m4EnablerEnablerPrograms to support the immediate clean up efforts in the Hawkes Bay region Clean up Targeted sch

132、emes to ensure business viability and continuing entrepreneurship within the horticulture industry,including production reimbursement and employee retention schemesProduction reinstatementInnovative capital investment across the entire value chain to enable replanting of higher value crops,updated s

133、ustainable farming systems and technologies,plus the infrastructure to support future volumeReplantInfrastructure:government funded scheme to rebuild resilient infrastructure inc.flood protection systems/spillwaysPotential levers:Updated regs,direct fundingInnovation:initiatives dedicated to increas

134、ing wider value chain and go-to-market economic and environmental resiliency Potential levers:Grants,stakeholder collaboration Disaster planning:national plans and policies that consider increasing climate related risksPotential levers:updated climate risk policy,national disaster funding Short-term

135、 government backed schemes to mitigate heightened costs of recovery for growers during period of infrastructure rebuildShort-term risk mitigation Critical responseShort-term reestablishmentLong-term resilienceIncreased flexibility of policies to support land use change in high flood zones and priori

136、tisation of water use to support efficient,low emission land uses on high productivity land Land&water use What were solvingPotential leversSolution action/policy options Direct funding Suspension of BAU compliance regs Direct funding Concessional loans Wage subsidies3Direct fundingConcessional loan

137、s Tax incentives Relax regs for capital sources Updated flood zoning Updated Regional Plan for water useGuarantees for affordable insurance options in short-term infra deficits1.Incremental from base case,based on average clean-up costs by crop type provided by and validated with industry bodies as

138、of March 31,2023 2.Incremental from base case,equivalent to one years production cost for damaged and replanted crops 3.A tailored approach is required to wage subsidies as Cyclone Gabrielle has had an asymmetric impact to growers in the region 4.Incremental from base case,includes cost of trees/see

139、ds,infrastructure and addl costs of higher value crops and higher productivity growing systems where applicable,and support required for non-growers to maintain capacity and in market demand*Costs may be higher if non-assisted recovery is below base case Solutions to be implemented as one holistic s

140、trategy due to interdependencies;support for individual growers varies due to asymmetry of cyclone impactTOTAL:c.$650 960m*17 2.Short-term reestablishment solutions aim to return impacted land to productive capacity,improve water infrastructure,and provide business continuity support.To complete the

141、se solutions,an additional$420 million-$620 million is required.Solutions include:Innovative capital investment across the entire value chain to enable replanting of higher value crops,updated sustainable farming systems,technologies,and tools,plus the infrastructure to support future volumes.Invest

142、ment will also help cover uninsured losses,rebuild on-farm infrastructure;replant and develop appropriate freehold land(including whenua Mori)to produce higher-value crops.-Government support required to complete this solution:Funding support required is estimated at$420 million$620 million for the

143、cost of trees/seeds,infrastructure,additional costs associated with higher value crops and higher value productivity systems where applicable,and cost of maintaining downstream volume capacity and in-market demand.-How it could be implemented:Potential for government to implement grants,subsidies,an

144、d innovative financial solutions such as tax incentives or concessional loans to growers and downstream providers to support investment in the sector.Consideration could be given to relax overseas investment regulations for Hawkes Bay businesses.o A government subsidy program could be based on the A

145、gricultural Recovery Program offered following the 2004 Manawatu Floods where subsidies of up to 90%of costs were offered to growers to complete re-instatement activities.Similar programs existed following the Queensland and Victoria floods.23 23 Government sites,Newspaper articles 18 o A concession

146、al loan program could be similar to the Small Business Administration disaster loans in the USA which allow businesses affected by natural disasters(e.g.,Hurricane Ida)to cover uninsured losses and business opex that could have been met had the disaster not occurred.These loans are to a maximum of$2

147、 million(dependent on extent of damages),have a maximum interest rate of 4%p.a.and are issued by a private bank but backed by the federal government.24 Increased flexibility of policies that support land use change in high flood zones and the prioritisation of water use enabling efficient,low emissi

148、on land use on high productivity land.-Government support required to complete this solution:There is no direct funding support required for this solution,but government and the horticulture sector will need to make rapid land and water use with corresponding flexibility in policies to allow the ind

149、ustry to move forward with confidence-How it could be implemented:Following the 2002 Elbe flood the German government introduced a Flood Control Act which restricted new development in designated flood prone areas and developed appropriate land use ordinances to reduce flood damage25 Short-term gove

150、rnment backed schemes to mitigate heightened costs of recovery for growers during period of infrastructure rebuild.This will provide growers protection from uninsured losses occurring because of natural disasters.-Government support required to complete this solution:No direct funding support is req

151、uired for this solution,but it will likely require collaboration between government and private insurers.The scheme will provide growers confidence to embark on their clean-up and replanting programs while protective infrastructure is being rebuilt.-How it could be implemented:The scheme could be bu

152、ilt on partnerships between government and private insurers such as the National Flood Insurance Program in the USA.A network of c.50 insurance companies and the Federal Emergency management Agency provide affordable flood insurance to property owners,and businesses in high-risk areas.The average co

153、st of a FEMA flood insurance policy is$1000 annually and c.20,000 communities in the USA participate in the scheme.26 3.Long-term resilience building solutions enable the sector to move forward with crops planted on appropriate land with required supporting infrastructure.They have a potential cumul

154、ative benefit of up to$600 million$1000 million by 2030.A government fund to rebuild resilient infrastructure(e.g.,high quality stopbanks)-Government support required to complete this solution:As major infrastructure projects,these will likely be funded through direct grants or funding packages.The

155、total cost for all Hawkes Bay infrastructure is estimated at over$13 billion.27-How it could be implemented:Following the 2011 Queensland floods(Cyclone Yasi)the Australian Government invested in rapidly improving disaster resilience and infrastructure improvement.$6.8 billion AUD was invested and b

156、y end of year 96%of 24 Small Business Administration web pages 25 Government sites,Newspaper articles 26 FEMA,A and N mortgage web page on Advantages of national flood insurance program 27 BCG analysis,Stakeholder interviews,Desktop Research 19 affected roads(9,000km)and 92%of affected railways(4,50

157、0km)were rebuilt,and best practice stormwater management was integrated into rebuilt communities 28 Initiatives dedicated to innovation through physical and operational investment in value chain and go-to-market structure,allowing the horticultural sector to improve economic and environmental resili

158、ency(e.g.,through geographic diversification,professionalisation where appropriate,increased sales and marketing investment)-Government support required to complete this solution:Investment required from downstream platform providers to improve resiliency and innovation of the sector(e.g.,enabling a

159、nd supporting the piloting and adaptation of automation technology,investing in IP varieties and GTM innovation,and considering geographic diversification for infrastructure).This is likely enabled through grants,subsidies and innovative financial solutions backed by government.-How it could be impl

160、emented:Grant generating bodies can help wider value chain players maintain investment in the current market and provide forward-focused capacity for a resilient supply chain.Government programs include examples such as the New Zealand Trade&Enterprise Innovation Grant Fund,the Provincial Growth Fun

161、d,the Callaghan Innovation agency,and the Sustainable Food and Fibre Futures.Adjusting the eligibility categories for these grant funding schemes,such as Callaghan Institute stating that businesses who received government R&D funding greater than$5k since 2019 are ineligible for their R&D grant,will

162、 increase the accessibility of these initiatives to wider value chain players post-Cyclone Gabrielle.29 Implement national plans and policies that consider increasing climate-related risks -Government support required to complete this solution:Regional and national government to lead risk mitigation

163、 and strategic planning following Cyclone Gabrielle.Plans and policies should consider the whole disaster life cycle preparation,mobilisation,respond and recovery.-How it could be implemented:These plans would follow other jurisdictions who have faced recent natural disasters such as the Victorian C

164、limate Adaptation Action Plan following the 2022 floods.This identified key climate risks and outlined a series of strategies to mitigate these risks across infrastructure,land use and governance.30 The Grow Back Better Plan outlined in this report offers a comprehensive blueprint that can guide the

165、 Hawkes Bay horticulture sector in its discussions with government and other stakeholders.By implementing these solutions,the sector can not only recover from the impacts of Cyclone Gabrielle but also build resilience for the future.This plan can also serve as a model for other industries and communities affected by natural disasters,providing a framework for effective recovery and sustainable growth.28 Coast Adapt Fact Sheet on Cyclone Yasi 29 Grant fund web pages,MBIE 30 Victoria Government web pages:Victorian Climate Adaptation Action Plan 20