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Insights 18: 20 May 2016
Jason Krupp talks to Paul Henry about abolishing city limits to fix the housing crisis
Deadly Heritage
Thursday 14 July - Dinner Lecture with Stephen Jennings - Auckland

The greatest business opportunity of the 21st century
Dr Oliver Hartwich | Executive Director |
Stereotypes are long-lasting. Think of Africa and images of poverty, hunger and violence come to mind.

The narrative of Africa as a crisis-prone economic backwater has a long history. But it no longer matches its present. And it will not be the continent’s future.

This is the firm conviction of New Zealand businessman Stephen Jennings.

Following an early career at the Treasury and in New Zealand investment banking, Jennings got involved in Russia in the early 1990s. He played an important role in the transformation from Soviet communism and pioneered capital markets in Central and Eastern Europe.

Over his business life, Jennings has been responsible for over US$200 billion of investment. Working in the most challenging environments, he became one of New Zealand’s richest people. If anyone has a sense for business opportunities, it is him.

Which makes it all the more remarkable that a few years ago, Jennings exited Moscow and relocated his business focus to Africa. Why Africa? In his own words, “Russia was a once-in-a-lifetime opportunity, sub-Saharan Africa is a second once-in-a-lifetime opportunity.”

The company he founded in Kenya, Rendeavour, is spearheading huge urban development projects. “Quite simply, we are building Africa’s urban future,” Jennings says.

There are some key figures that underpin his optimism. By the middle of the century, a quarter of the world’s population will be African. Twelve of the 25 fastest-growing economies in the world are in Africa. And Africa already has 52 cities with populations of more than a million people (which is the same number as in Europe).

According to Jennings, African business opportunities are greater than anywhere else in the world. This is because Africa the potential for catch-up and convergence is greater – and is likely to be fulfilled more rapidly.

If that is the case, then we need to change our thinking on Africa. We need to overcome those stereotypes that have built up since colonial times. And New Zealand businesses should get engaged in Africa’s rise.

The New Zealand Initiative is proud to host Stephen Jennings for a dinner lecture on ‘The Market Path to Prosperity’, in Auckland on 14 July.

Don’t miss this rare opportunity to hear one of New Zealand’s most successful businesspeople on the power of markets and entrepreneurship in emerging economies – and how New Zealand can benefit from Africa’s rise.

Register now to reserve a table or buy tickets.

Easy to love but hard to own
Dr Eric Crampton | Head of Research |
Heritage buildings help make New Zealand’s cities and towns beautiful. While foreign visitors might snicker that an eighty-year-old building has heritage value, the art deco styles in our small towns are jewels. And so too are the facades along many of our city streets.

But there are trade-offs. Preserving historical authenticity during mandatory earthquake strengthening is not cheap. And when the building’s cash-flow cannot cover those costs, owners can be left in a difficult position.

Many owners of heritage buildings bought them because they treasure them, and want to preserve their value. But when it is the broader public that benefits from preserving heritage buildings, should the costs fall solely on those owners?

Wellington has the country’s worst urban earthquake risk and Wellington Council started thinking about building strengthening well before others. It is ahead of the game.

But there is much yet to do.

This week, The Initiative and our member Deloitte jointly released a short research note on the state of heritage preservation in Wellington. Over a hundred and thirty Wellington buildings are both heritage listed and earthquake-prone. Figuring out which kinds of repairs are allowed for heritage buildings can be tough. And Council has no system tracking which kinds of quake-prone, heritage-listed buildings are able to navigate through the hurdles, and which are falling behind. In short, too little is spread too thinly across too many listed buildings.

We recommend that councils reduce the number of buildings listed in district plans, potentially with central government caps on the proportion of a city’s stock of buildings that could be listed. Any heritage building found to be earthquake-prone should automatically have its listing re-evaluated. Doing so would allow councils to focus scarce funding on those buildings of greatest historical value. A council-employed engineer helping building owners get started and navigate through the strengthening process could go a long way.

Consenting for strengthening of heritage earthquake-prone buildings should allow more sensible balancing of cost considerations against heritage value. In Christchurch, strengthening of the Trinity Congressional Church was blocked because it would have damaged some wooden shutters; for want of that strengthening, the tower came down in the earthquakes.

It is far too easy to make the best the enemy of the good. And we cannot afford to do that, either in preserving heritage, or in saving lives.

Gardening regulations to improve Aucklanders' well-being?
Roger Partridge | Chairman |
With regulations in Auckland controlling the minimum size of new apartments and requiring all newly built apartments to have balconies, is it time to move outside to the gardens?
When more and more junk food is thrust upon us each day, it has never been so important for tenants and home owners alike to have access to fresh fruit and vegetables.
In Auckland, many homes enjoy ready access to sources of free Vitamin C through easy-care citrus fruit. And unlike the proverbial, this literally does grow on trees. Unfortunately, this opportunity is not available to all.
We could fix this with new Gardening Regulations. These could require all rental properties and all newly built houses and apartments in Auckland to have at least two of a lemon, orange, mandarin or grapefruit tree, and a dedicated irrigated space for growing vegetables of no less than, say, four square metres per bedroom. New apartment buildings with no backyards could be fitted with rooftop gardens.
These regulations would not only improve the physical and mental health of residents of New Zealand's most crowded city, but the greenspaces they created would also make it more liveable.
If you are concerned the new regulations might have some impact on the cost of new houses and apartments in Auckland, rest assured that these are likely to be far less than the estimated $40,000 - $70,000 cost of requiring all apartments in Auckland to have balconies. And also less than the proposed minimum parking requirements in the Auckland Unitary Plan of either one or two off-street parking spaces per residential unit (at a cost of the same order of magnitude).
They say an economist knows the cost of everything and the value of nothing. Perhaps, then, urban planners know the value of everything and the cost of nothing.
Either way, if what we really want is affordable housing, instead of balconies, carparks and gardens, maybe prospective Auckland apartment dwellers should be allowed to manage with parks and buses - and the local fruit and vege shop.

On The Record
All Things Considered
  • Graph of the week: Global connectivity by airport connections - the world's top 20 cities.
  • I do: Does where you live determine what age you'll marry?
  • Economists weigh in: How dating should work vs. how dating does work.
  • Cycling in safety: How Maryland's cyclists can map out a stress-free ride.
  • 1950s to now: Check out the rental price trends in San Francisco
  • Worth a read: Our very own Dr Eric Crampton's blog 'Offsetting behaviour' rated in the 2016 Top 100 Economics blogs.
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