Richard Downs-Honey had two choices when he contemplated studying for an engineering degree. He could go to Canterbury University if he liked skiing or Auckland University if he liked sailing. He chose Auckland. A couple of decades later, Downs-Honey is managing director of High Modulus, the world leader in developing composite materials for boat building of the type that make America’s Cup yachts so light and strong. The Albany-based company has, Downs-Honey says proudly, the largest team of engineers focused on marine composites outside the US Navy.

Around 70% of revenue comes from importing fibreglass composite materials and selling them to New Zealand boat builders. The remaining 30% of revenue is earned offshore in US dollars. But most of the materials sold in New Zealand also end up in projects which are sold offshore, says Downs-Honey.

“So we see ourselves as in the export sector both in direct material and consultancy sales, and because we’re in a sector which is so heavily into export.”

And High Modulus is embarking on a joint venture in China, using its high-tech know-how in materials and cheap Chinese production.

In short, it’s the kind of company — smart, ambitious and outward looking — that Auckland needs more of. It also embodies business in Auckland in other not-so-happy ways. Power surges, for example, were a constant curse in its old Albany building. “We went through around 24 PCs in six months,” says Downs-Honey. “Ït was a huge constraint on the business.”

And a mere mention of telecommunications prompts an outburst. “We hate the telecommunications infrastructure,” says Downs-Honey. “A week wouldn’t go by when we just can’t get access to our server because of something out of our control. It’s bullshit. And I’m on broadband at home in Whangaparaoa and when I go home and try and communicate with our UK office, it’s slow as hell. The telecoms infrastructure and companies and culture are just horrible. No one takes any responsibility.”

On the other side of the Harbour Bridge in south Auckland is Pumpkin Patch chairman Greg Muir. A glance at his CV confirms his Auckland connections. In addition to his Pumpkin Patch role, he is chairman of the Blues Super 15 franchise; a director of the South Auckland Health Foundation and the Auckland Rugby Union; a member of the Eden Park Board of Control; and a board member of AucklandPlus, the Auckland Regional Council offshoot responsible for promoting investment opportunities in Auckland.

Ask him if Pumpkin Patch has explored a move offshore and Muir says he and his colleagues wouldn’t dream of it. They like living in Auckland and it’s just fine as a city to do business in although it can be painful for visitors to Pumpkin Patch who have to brave the slow snaking queues of the Southern Motorway on a weekday afternoon. Can you put a price on that? Probably not but it’s tempting to say that — in a nutshell — is the problem with Auckland. Nice place, shame about the traffic.

But it’s more than just the traffic, or the hot, humid summers, or the supposed hubris which Aucklanders wear like a cloak only visible to those who live south of the Bombay hills.

Auckland is a nice place to live. The Mercer quality of life survey, which ranks cities around the globe, puts Auckland in fifth place worldwide behind Zurich, Geneva, Vancouver and Vienna for quality of living, up three places from the previous Mercer survey and ahead of Sydney, which is ranked ninth. And that quality of life helps companies like High Modulus attract skilled staff from all over the world, says Downs-Honey, especially given Auckland’s sailing conditions.

What’s more, Auckland is the fastest growing city in Australasia. It contributes 35% of New Zealand’s GDP. As the home of more than half of the country’s creative industries and half of the ICT sector, it’s leading the charge into the 21st century. It’s home to two-thirds of the country’s top 200 companies.

And it’s not a burden on the rest of the country, a point emphasised in a report prepared for the Committee for Auckland by NZIER, which estimated the Auckland region contributed $3.8 billion towards the government’s $6.2 billion operating surplus in 2005.

That exceeds the expectations of the report’s authors who say they would expect the Auckland region to contribute at least $2.1 billion or 34% of the surplus because the Auckland region makes up around 34% of the country’s population. They say ‘at least’ because cities tend to have higher productivity than the national average due to increased competition and economy of scale. Auckland’s productivity, for example, is estimated to be around 20% higher than the national average.

Why did the committee feel the report was necessary? Was there a need to prove to the rest of the country that the Auckland region wasn’t just a flashy freeloader bludging off the rest of the country? Well yes, although Sir Ron Carter, chairman of the Committee for Auckland, doesn’t put it in those terms.

“Generally speaking, other cities around the world have found there is a lack of realisation that cities are the prime element driving countries,” he says. “It’s important that you get the foundation clear, that the public realises that cities are the primary drivers of GDP. The majority of the population live here and we have the highest proportion of population living in a city compared to any country we have studied. It follows that it is hugely important that Auckland is a very successful place.”

Is that enough? The Metro Project Action Plan, released in October, lays out the facts. Auckland performs well in international quality of life surveys like Mercer but in real per-capita income, it ranks 21st among the OECD’s 30 member countries. Productivity is slightly higher than the New Zealand average, but we lag behind the OECD average.

The economy relies far too much on domestic growth with average exports accounting for just 20% of total national exports, despite the fact that one-third of the country’s workforce and companies are in the region.

There’s a skills shortage, the bottom 20% of secondary schools are among the worst in the OECD, and Maori and Pacific communities show disproportionately low educational achievement and employment rates. And until recently, the Auckland region has been all but ignored by central government and plagued by an inability to get consensus in local government.

There is a growing conviction that Auckland is a region killing time, crippled by decades of growth without matching expenditure on infrastructure. It’s not so much that the Auckland region is failing. More that it isn’t reaching its potential, a point finally realised by the government (at least in its speeches). It wants to make Auckland an “internationally competitive city” as a key plank of its economic transformation agenda.

In Unlimited’s October 2002 issue, business commentator Rod Oram took a close look at the Auckland region and didn’t like what he found. Auckland’s role had shrunk because as a region it relied too much on earning a living from the domestic economy and Aucklanders lacked ambition and leadership, he said.

What’s changed? The region’s economy is still far too dependent on growth through serving the domestic market, Oram says. The real problem is one identified by Competitive Auckland back in 2001, which showed that Auckland companies serving only the regional market were growing far faster than local companies which were exporting. “My hunch is that that hasn’t changed at all. The problem is that the Auckland market is not a very interesting market, so much of that activity is just serving consumer needs rather than focusing on a higher value of economic activity and wealth creation,” Oram says.

In other words, there aren’t enough innovative companies looking out to the world to fuel growth.
Other comparable cities have got their act together and moved on while Auckland has kept on growing but hasn’t put the necessary long-term planning in place to deal with that growth, says Oram.
Companies here still lack ambition, and there is far too much emphasis on creating structure rather than debating what shape Auckland should take as a world-class city.

“It’s still a very modest ambition, something awful like a waterfront stadium, and there’s no articulation of what it means to be a world-class city. It’s defined in terms of amenities like a stadium, an art gallery, a university or two. It’s not defined in terms of what is the economic activity which gives the city its life. We’re still not having that discussion. What actually do we do from Auckland out to the world and how do we do more of it, bigger, better than we’ve ever done before?”

Night owls

Auckland’s roading congestion has forced transport company Tapper Transport to conduct a lot of its business at night. By Fiona Rotherham

If you head to most businesses at around 5pm they’ll be starting to wind down the day’s activities. But after five at Tapper Transport is when the action really gets going. The transport company, which runs the country’s biggest container unpacking operation, earns 75% of its $22 million annual revenue at night. Most of its business is delivering export containers to the wharves and picking up import containers to deliver elsewhere.

“Our whole business erupts into activity after everyone else goes to bed,” says director Simon Tapper.
Why? Blame Auckland’s roading congestion. The 28km round trip to pick up containers from the Ports of Auckland wharves in the central city to Tapper’s Penrose warehouse takes two hours during peak daytime traffic; the same trip takes just 45 minutes at night. That daytime trip takes about 40% longer than it did five years ago.

And while it’s harder to recruit night-time drivers (the company recently upped night drivers’ wages by $4 an hour, on top of the $18 they earn during the day) the productivity gains are worth it. “If I couldn’t do that, I’d be broke,” Tapper says. “I’d have to own 40% more trucks than I currently own.”

Tapper Transport was started in 1984 by Tapper, his brother Chris, and Andrew Scott. In 1993 it moved into container handling and has invested in a $1 million forklift to shift the fully loaded containers.
Faced with ever-increasing delays during the day and stressed-out drivers who are leaving the industry in droves, the company moved to picking up containers from the wharves during the night when traffic is lightest. Other transport companies have since followed suit.

The drivers drop off what containers they can enroute but most businesses won’t allow night-time deliveries, Tapper says. Instead, the bulk of the containers are held overnight at the Penrose depot. Some 17 forklifts race around unpacking up to 90 containers a night. The goods are delivered on the last leg of their journey the next day during normal office hours. Some 75% of Auckland’s imports and exports go to and come from south Auckland so it means only short-haul trips for the drivers from the warehouse during peak traffic congestion. And Tapper’s despatch office ensures the daytime drivers make the longest trips during school hours when the roads are quieter. Up to 400 containers are also stored out the back, as some of the bigger importers — such as Farmers or Progressive Enterprises — don’t want them delivered immediately.

Roading congestion is only one of the extra costs Tapper Transport bears by doing business in Auckland. Others include around 10% higher wages than in provincial areas, 30% to 40% higher rental for leasing the 8,547m2 warehouse, and increased absenteeism caused by the stress of the job. It all adds up to making Auckland a hard place to do business, but — and it’s a big but — it’s where the business is. Some 62% of the country’s total import containers by value are handled by Ports of Auckland and Auckland Airport and 31% of export containers by value.

Tapper says roading congestion is a difficult issue because although it directly impacts the company’s bottom line, it’s not easy to convince customers that it is a tangible cost in the same way you can with diesel price rises or inflation.

And it’s only going to get worse.

A report commissioned by the Road Transport Forum estimates the amount of freight being moved around New Zealand will double in the next 20 years. Rail will pick up some of that growth but it accounts for only 11% of the mix. The rest is transported by trucks so that means we’re likely to see twice as many trucks on the roads in future.

“Road construction is not going to keep up with it if car growth parallels that,” Tapper says.

So what’s the answer? Transporting the containers at night is a cunning solution but you come up against social barriers, such as Orakei residents upset at noisy trucks thundering past their windows at 2am. Tapper says the company is also doing what it can to make driving during the day easier, such as making all new trucks automatic. He’s hoping that will attract more women drivers who don’t want the challenge of an 18-speed gearbox.

Unsurprisingly, Tapper says Auckand has to get more cars off the road. Trucks have no alternative than to use the roads to deliver goods consumers require but car users have options around taking public transport or driving outside peak hours, he says.

“You only have to look at the school holidays when traffic is lighter. Our productivity leaps by 25%.”

The transport industry may also consider charging a premium for delivering during times of peak traffic and Tapper’s also a fan of both tolls on new roads and charging more to drive on congested routes.
“The truth is Auckland can’t afford a trillion dollar highway system. We have to look at other ways.”