The Government is missing in action over the shock receivership of one of the country’s largest construction companies. Prime Minister John Key needs to get involved, and fast.
I can’t have been the only one stunned to learn on Waitangi Day, as most of us were putting down a hangi or lying on the beach, that Mainzeal Property and Construction had essentially gone belly-up.
Key looked pretty surprised at the news as well, which beggars belief. The prime minister should have had advance warning of financial news of this magnitude. And he should have had something more to say besides that he reckons it’ll be sold in part or in full.
Given that the Government’s economic plan for 2013 seems be (and forgive me for getting technical here) A: Fund some more apprentices, and, B: Rely on the Christchurch rebuild, I’d have thought a little more panic at Mainzeal’s imminent demise might have been in order.
Mainzeal has been around since the year I was born - 1968. It was New Zealand’s third-largest construction firm. It employed more than 400 staff and was directly involved in over 7 billion dollars’ worth of projects, including Vector Arena and the Two Double Seven shopping centre in Auckland, the Supreme Court in Wellington, the Manukau Institute of Technology’s $250 million campus and a bunch of major rebuilding projects in Christchurch.
I remember watching both National and Labour governments sitting by and doing nothing while construction companies collapsed after the big share market crash of 1987. It didn’t do the country any good then, and it won’t do it any good now either.
Key’s response to date has been to shrug and suggest that due to the amount of building work required in Christchurch, most of those who are likely to lose their jobs will be re-employed.
To his credit, he did add that he had concerns about the flow-on effects. As well he might. Because when something the size of Mainzeal sinks, a whole lot else gets caught as it goes down.
There will be literally hundreds of small sub-contracting firms who will not be able to pay their bills next month because of this. That will knock on to the people they employ, and so on and so on. A number of small Kiwi companies could go under.
I reckon the Government should take a leaf out of their own book from the Global Financial Crisis and offer to underwrite Mainzeal’s outstanding creditors until the liquidators have finished going through the company’s books. That will at least give everyone some breathing space.
No doubt this idea will be opposed by fans of less government, but I think it calls for bold moves to prevent it escalating into a minor crisis.
It’s rumoured that the last straw for Mainzeal was the failure to make a $1.8 million payment on an outstanding $20 million credit facility. That indicates there have been problems in the company for some time.
It also seems to have been dogged by escalating costs in the leaky homes fiasco, as have so many other building companies - and home owners.
There are obviously questions to be answered about how a company in the construction sector managed to find itself in this position in the middle of what is supposed to be a boom in the industry. There’ll be time enough to answer those.
In the meantime, Key needs to act to prevent the situation getting worse.
Coming just a week or so after the layoff of 200 workers at Summit Wool Spinners in the South Island, this latest piece of economic bad news is not what the Prime Minister needed hogging the headlines at the start of the year.
Key says the liquidation of Mainzeal won’t impact on the Christchurch rebuild, but talk is cheap. The Government needs to actively get involved to ensure that this is the case.
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