Small businesses boosted by DFC

Press, 25 July 1985, Page 22

Small businesses boosted by DFC

PA Wellington Development Finance Corporation made a record number of new business approvals last year, but the total value fell slightly, according to its annual report.

The 1469 new investment approvals in the year to March 31 was an increase of 19 per cent over the previous year. The value of projects was $223.4 million ($238.4 million). In his last annual report before retiring after nine years as DFC chairman, Sir John Mowbray says 90 per cent of the projects approved were for small businesses, amounting to $127 million or 57 per cent of the total finance approved. He says New Zealand’s economy has embarked on a process of diversification and structural change with the objective of establishing a sound, long-term basis for development, employment growth and prosperity. “The pace of this trend has quickened dramatically following the July 1984 election,” says Sir John. “Rapid changes in the style and policy of New Zealand’s economic management are creating opportunities for many businesses and industries, but are bringing difficulties as well. Yet these immediate

problems are outweighed by a mood of confidence for the longer term.” The annual report says that 79 per cent of the new DFC business approvals were for projects which will earn or save foreign exchange. The manufacturing sector received assistance totalling $93.3 million, followed by tourism with $40.2 million, energy at $24.2 million and horticulture at $22.8 million. The Small Business Agency handled 23,000 inquiries last year, as well as completing 5274 counselling cases. In its first six months, DFC Ventures approved equity and venture capital investments totalling $12.4 million in 30 companies. Sir John says this was a pleasing level of business for the initial period, in a field where the quality and potential of the investments made is more important than the numbers and value alone. DFC has been granted an Australian merchant banking licence, and Sir John says the corporation’s Australian operation will provide finance and development assistance to support initiatives being taken following the CER agreement. DFC is also to open its

seventh New Zealand office this month, serving the Hawkes Bay from Napier. The annual report says the corporation is continually seeking ways to provide better service for provincial areas, with $52.3 million approved for the designated regional development areas in 1984-85. DFC’s profit for the year to March 31 was $11,275 million ($10,648 million). This is a return of 15.29 per cent on average shareholders’ capital and reserves. Sir John says the year’s results were considerably affected by volatility within the finance sector. “Controls on mortgage lending interest rates early in the year required the corporation to lower some of its lending rates below the cost of funding those advances. “Removal of the requirement for financial institutions to hold specified proportions of their assets in government stock led to the revaluation of these investments to ruling market levels. “Because of sharp increases in interest rates, DFC has had to take into account an unrealised writedown of $5.8 million in the value of government stock holdings,” says Sir John.