The business of disaster

Last updated 05:00 23/09/2012
There is little left for the naked eye to see of the once 236m long container ship Rena.

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Some Bay of Plenty businesses made as much as $1 million out of the Rena grounding, while others were left hundreds of thousands in the red. Tony Wall investigates the economic impact of New Zealand's worst environmental disaster.

It was a chance encounter that resulted in $1 million worth of business for a Mt Maunganui company. Around 24 hours after the Rena struck Astrolabe reef, Warwick Talbut, the managing director of Hose Supplies NZ, spotted a bloke in bright orange overalls in his firm's cafe.

He struck up a conversation and learned that he was Dave Skola, a senior salvage engineer with Svitzer, who had flown in from Australia.

Talbut had assumed up until then that the Rena would simply be towed off the reef, but Skola made it clear that wasn't going to happen. He said as soon as the crew left the ship, the salvors would take over, and begin pumping oil off.

Talbut recognised an opportunity for his family-owned business, and introduced Skola to some key staff, including operations manager John Kelly.

"He had a look around and said, ‘We're gonna need all of this [equipment] and you need to gear yourself up, because when this goes, this is gonna be big - one of the biggest projects we've seen in this country," Kelly says.

"The minute they stepped on board it was game on. The phone just rang red hot. They said, ‘We need six or seven hundred metres of this, we need 500m of that.' We might have typically sold 30 or 40 metres a month of those types of hoses. They were talking hundreds and hundreds of metres."

Hose Supplies staff worked around the clock in that first week, sourcing every last piece of hose from around New Zealand, and when that ran out, going offshore. The salvors would sketch the kind of fittings they needed, and Hose Supplies would go off and make them.

"We were running on adrenaline. Everybody felt a sense of ownership around it. People were prepared and committed to work through the night because they wanted to protect their backyard," Kelly says.

In the end Hose Supplies did about $1m worth of work for the salvors, a sizeable chunk of its yearly revenue in one job.

But for every positive story, there is a story of loss - tourism operators and fishers left thousands of dollars out of pocket; accommodation providers watching their bookings disappear.

Whether the region lost or gained economically from the disaster is a topic of hot discussion. Some people believe the $70m Rena's owners say was spent locally as a result of the salvage operation is 10 times the amount of any losses.

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They say some of the businesses claiming Rena-related losses were struggling anyway and are using Rena as an excuse.

Others say the disaster had a devastating impact on the local economy that is ongoing. More than 100 businesses have joined a class action lawsuit being prepared by North South Environmental Law.

Lawyer Robert Makgill says claims that the owners' expenditure outweighed losses are "fanciful".

Makgill says his firm's economists are still preparing their reports, but he believes the Rena grounding caused hundreds of millions in direct and downstream economic loss.

Tauranga mayor Stuart Crosby disputes that. "There were, without doubt, genuine losses, but there were not hundreds of millions in losses," he says. "Definitely a considerable amount of money went into the area."

He says he spoke to John Owen, senior claims manager of Rena's insurers, the Swedish Club, about the issue.

"The feedback he gave me was that if there are genuine claims they would be prepared to look at compensation. What they didn't want was to be ripped off."

The owners last week placed public notices advising affected parties they had until December 21 to file claims against a limitation fund in Britain of about $27m, while a limitation fund of about $11.5m is expected to be established in New Zealand.

Makgill says this is not a cause for celebration, "rather it is in effect the commencement of a process that will attempt to limit the compensation payable".

But Max Mason, chief executive of the Tauranga Chamber of Commerce, says that it is overstating it to say that there have been hundreds of millions in economic losses from the disaster.

"This is just a gut feeling, but I would think the $11m or $12m [in the proposed limitation fund] would probably cover it. However, the most important thing is equity, and those businesses being able to recover the money they have lost."

Mason says the effects of the disaster will be short, medium and long term.

There was an immediate impact on many tourism, fishing, hospitality and retail operators. "It's very hard to measure because the weather wasn't great and that affects visitor numbers."

He says in the first five months of this year visitor numbers were down about 10 per cent. "That would indicate some external factor has had an impact, and I believe it is the huge negative Rena publicity in the media, that made it appear much worse than it actually was."

Mason says there could be long-term effects on Tauranga and the Bay's brand and reputation, but that would be "incredibly hard" to measure.

"This will probably be much more than the short-term compensation fund that the owners are offering."

Does he think some businesses will try to jump on the compensation bandwagon?

"I guess in every community there are a few people who are chancers, but I believe most of our operators are hard-working, honest people who just want to be treated fairly."

T EN KILOMETRES from Mt Maunganui beach, at Papamoa, the effect of the Rena grounding was devastating.

"The second it hit the news our phones just went mental, everyone was wanting to cancel their bookings," says Rebecca Crosby, general manager of the Papamoa Beach Top 10 Holiday Resort.

"In that first week alone, we refunded $35,000 to $40,000, which obviously sent us into a real panic." She and the resort's owner, her father Bruce Crosby, say losses because of Rena totalled $300,000.

Bruce Crosby was upset by a newsletter dropped in letterboxes earlier this month, signed by Owen for the insurers, which spoke of the $70m spent and jobs created for the local economy.

"They seem to be implying that this has been a good thing for the area," Crosby says. "I am sure some companies have made vast sums from this disaster and that's their good fortune, however I am incensed that they should put this spin on the disaster they created."

He says he has had no contact or apology from the owners, who visited the area in July. "We've been left to our own devices to try and make good our losses over the previous year."

Owen was unavailable for comment.

Rebecca Crosby says the grounding was heartbreaking for her, as someone who was born and bred in the area. "That reef's been on the map since Captain Cook. There's no way anyone should have crashed into it. Most people were out for blood at one stage."

But most of her anger these days is reserved for the news media, which she believes made the economic losses much worse by continually showing images of oil washed up on the beach for weeks after the grounding, even though the oil was gone within the first week and restrictions on the beach lifted after a month.

"It was just a snowball effect. What you were seeing on the news was that same picture of black oil for months, even right into January. It was not the case; it was just so damaging."

Most of their visitors are from New Zealand, but calls were coming in from as far away as Australia from people who'd seen the images and were not prepared to take the risk.

Rebecca Crosby says the flow-on effects were huge. The shops in the area suffered if they relied on people staying at the resort for their own business.

The Crosbys spent long hours on the phone trying to convince people not to cancel. They offered discount deals and spent a lot on marketing. They also tried to broaden the business, to attract weddings and school groups, which they hope will pay off in the long term.

Rebecca Crosby says bookings at the moment are on a par with this time last year, but only time will tell if the business fully recovers.

She is not confident they will be able to recover their $300,000. "We're not going to get that; we might get half that."

Makgill says he expects the owners will establish a New Zealand limitation fund before lawyers working on the lawsuit have had a chance to finish preparing their claim. There will be a challenge if they try to limit the fund to $11.5m, he says.

Does he expect a lengthy legal battle?

"I would hope they would be prepared to sit down and negotiate, but, if they want to go to court, we're prepared to go the whole way."

Back in Mt Maunganui, John Kelly of Hose Supplies can't see what all the fuss is about. He believes economic gains from the Rena grounding have far outstripped losses.

"We were maxed out with welders and contractors. There are another five engineering firms in the area, we'd ring them up and they'd say, ‘No, sorry, we're flat out.' You couldn't get a trailer or a generator. They [the salvors] had hired everything in town. The money poured into accommodation, rental cars, the airport, supermarkets.

"I'd say more companies would have benefited than been disadvantaged."

- © Fairfax NZ News

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