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Māori small and medium-sized businesses

Māori SMEs are innovative but likely to be concerned about costs and time

In 2015, the total innovation rate for Māori SMEs sampled in Business Operations Survey (enterprises with at least 6 employees) reached 63 percent, significantly above the 48 percent reached for 2013. The innovation rate for all New Zealand businesses in the 2015 survey was 49 percent.

Nineteen percent of Māori SMEs sampled in 2015 reported no barrier to innovation at all. More than half the SMEs identified ‘costs to develop or introduce innovation’ (57 percent) and ‘lack of management resources such as time’ (56 percent) as medium- to high-degree barriers. SMEs rated these two barriers higher in 2015 than 2013; and those two were the same two lead factors for all New Zealand business. Lack of appropriate personnel, as a high or medium degree barrier, increased from around 30 percent in 2013 to around 40 percent in 2015.

Figure 14
Graph, showing proportion of Māori SMEs with barriers to innovation, by degree of restriction

 

Employment and activity

Growth is visible in filled jobs

Māori SMEs accounted for 5,620 filled jobs over the average of the year to March quarter 2015. Figure 15 illustrates the general upward trend.

Filled jobs across Māori SMEs for March quarter 2015 were 2.1 percent above the March quarter 2014 estimate and were 19.1 percent above the March quarter 2011 estimate.

Figure 15
Graph, showing filled jobs for Māori SMEs, June 2010 to March 2015 quarters

Bay of Plenty is the most significant region for filled jobs

Bay of Plenty accounted for 23 percent of filled jobs at the March 2015 quarter, followed by Auckland (15 percent), Wellington (10 percent), and Waikato and Canterbury with just under 10 percent each.

Figure 16
Graph, showing distribution of Māori SMEs' filled jobs, by region

Survival rate 2013 to 2015 is 86 percent

We identified 660 economically significant Māori SMEs operating at February 2015. Eighty-six percent of these SMEs had survived from 2013 to 2015. The survival rate for all private sector businesses of this size over the same period was around 93 percent. 

Worker turnover rate is relatively high

Over the two years to the March 2015 quarter, worker turnover rate for Māori SMEs averaged 20.2. Worker turnover rate for private sector businesses of this size was 15.3, and the rate for Māori authorities was 16.4. By comparison, Māori tourism had a worker turnover rate of 19.1 in the same period.

Job vacancies are relatively hard to fill

In 2014, among the small proportion of Māori SMEs sampled in the Business Operations Survey, the proportion of Māori SMEs with job vacancies was 82 percent, 6 percent higher than 2013 (figure 17).

The proportion reporting that their vacancies had been hard to fill was 61 percent in 2014, significantly higher than Māori authorities’ experience, which was 44 percent that year. By comparison the rate for New Zealand business as a whole in 2014 was 54 percent.

Figure 17
Graph, showing proportion of Māori SMEs with job vacancies

Professional/technical and management/supervisory skills are the toughest to find

Around 1 in 4 Māori SMEs sampled found it difficult to obtain job applicants in two skill areas: management/supervisory and professional/technical skills (figure 18).

The proportion having difficulty recruiting professional or technical skills (27 percent) was similar to Māori authorities (30 percent) and significantly higher than for New Zealand business as a whole (18 percent). By contrast, for just under half those sampled, teamworking and oral communication skills were not difficult to find among applicants.

Figure 18
Graph, showing proportion of Māori SMEs with difficulty obtaining skilled applicants, by skill area

Training is common and external agencies quite likely to be used

In 2014, almost all Māori SMEs sampled offered their staff training. Of those that did offer training, around 4 in 5 would at least sometimes employ an external agency.

Investment activity is dominated by tourism engagement, but R&D engagement is relatively active too

Among Māori SMEs sampled in the Business Operations Survey, tourism was the stand-out for business activities, followed by exporting. 

The proportion engaged in research and development (R&D) in 2012, 2013, and 2015, while below the proportion for Māori authorities, was well above that obtaining for all New Zealand business (figure 19).

In 2011, only seven percent of Māori SMEs invested in expansion, compared with 21 percent for all New Zealand business, but by 2015 the proportion for Māori SMEs had grown to 12 percent compared with 20 percent for all New Zealand business.

Figure 19
Graph, showing business activities for Māori SMEs, last financial year at August 2011 to 2015

Innovation is relatively prominent and some SMEs stretch the limits

As noted in the section Māori SMEs are innovative, Māori SMEs’ innovation rate in 2015 was 63 percent, higher than Māori authorities (56 percent) and significantly higher than New Zealand businesses in general (49 percent).

The proportion of SMEs sampled that performed one or two types of innovation increased from 29 percent in 2013 to 34 percent in 2015. The proportion that performed three or four types of innovation increased from 15 percent in 2013 to 26 percent in 2015.

SMEs engaging in as many as four types of innovation is exceptional: no Māori authorities reported it in either 2013 or 2015 and only one percent of New Zealand business as a whole reported it.

Māori authorities have overtaken SMEs on product development

Māori SMEs moved from a position of being generally above Māori authorities in product development activity rates in 2013 to being below: for in 2015, Māori authorities’ rates for product development overtook the SMEs’ rates. This is because Māori authorities’ rates increased significantly – for example their overall rate moved from 20 percent to 44 percent – while Māori SMEs rates stayed relatively level save for marketing activities which increased from 10 percent to 19 percent. Figure 20 shows SMEs’ product development activity rates in 2013 and 2015.

However, Māori SMEs’ rates for product development activity in 2015 were higher than New Zealand businesses in general

Figure 20
Graph, showing product development activities for Māori SMEs, last two financial years

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Engaging with world markets

Nearly 1 in 5 SMEs market overseas and most use brand and uniqueness

In 2015, nearly 1 in 5 Māori SMEs sampled in the Business Operations Survey sold goods and services to overseas markets. The great majority, 80 percent, considered that a unique intellectual property (mana whakairo hinengaro) or valuable brand (waitohu whaipainga) was the key factor for competing in overseas markets. This factor was ranked third for New Zealand business as a whole at 50 percent. Quality or customisable goods and/or services (60 percent) was also a very significant factor for Māori SMEs though not as significant as for New Zealand business as a whole (73 percent), followed by staff experience (40 percent for Māori SMEs), and cost control (20 percent for Māori SMEs).

Almost all online and e-sales are growing rapidly

Almost all Māori SMEs sampled in the Business Operations Survey in 2012 and 2014 had an internet connection for their business.

The proportion using the internet for receiving orders for goods or services grew from 31 percent in 2012 to 52 percent in 2014. The proportion of those that made more than 25 percent of all sales through the internet leaped from almost nothing in 2012 to 22 percent in 2014.

Research shows that firms that make use of internet services raise competitiveness and are more productive. (Sapere Research Group, 2014).

Seventy-five percent of those selling overseas, market to Australia

Of the SMEs that sold goods and services to overseas markets in 2015, no one destination stood out among top destinations. Each of the top destinations was the market for 12–15 percent of Māori SMEs (see figure 21), with Australia being the most common at 15 percent of all Māori SMEs – 75 percent of those selling goods and services overseas.

China (including Hong Kong and Macau) and Japan each attracted around 8 percent of Māori SMEs – 40 percent of those selling goods and services overseas. 
 

Figure 21
Graph, showing top markets for Māori SMEs to market to

Export destinations for SMEs

 

Goods exported by Māori SMEs in 2015 went to 53 countries and were worth $44 million, up $6 million (15 percent) from 2014.

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Financial performance

See Technical notes and limitations of the data for definitions.

Finances are healthy on average

Around 40 percent of Māori SMEs sampled in the Business Operations Survey requested finance in 2015, and 91 percent of those sought it through new or additional debt. Forty-four percent also requested finance through new or additional equity.
Māori SMEs ability to pay off debt, so far as sample size allows judgement, was secure as shown by the financial ratios in figure 22:

  • the quick ratio averaged 118 percent, or $1.18 of liquid assets available to cover each $1 of current liabilities
  • the current ratio, which measures theoretical ability to pay off current liabilities with current assets, averaged a healthy 127 percent
  • the debt ratio, averaging 66 percent, is typical of general private sector business levels.

Other features of the 2014 financial year for all Māori SMEs sampled in Annual Enterprise Survey were:

  • return on equity averaged 15.5 percent
  • return on total assets averaged 5.2 percent.

Figure 22
Graph, financial ratios for Māori SMEs, 2014 financial year

Credit facilities relatively stable

In 2014, fees, overdraft or credit limit, and security or collateral requirements stayed the same for at least half the Māori SMEs sampled in the Business Operations Survey (figure 23).

Forty-one percent of SMEs experienced an increase in interest rates and 41 percent experienced no increase. The next-largest category to show an increase was fees, where 36 percent experienced an increase.

Figure 23 
Graph, showing change in credit facilities from previous year for Māori SMEs

Day-to-day business activities the focus of debt

Day-to-day business dominated outstanding debt types in 2014 with around 60 percent of Māori SMEs sampled in the Business Operations Survey owing debt to trade creditors or suppliers or owing holiday pay, PAYE, GST or other debt or using bank overdraft.

Other finance-sector debt such as loans with terms of more than a year, credit card debt, and capital or financing leases were also reported by over one-third of those sampled. Mortgage loans and shareholders’ current accounts were relatively uncommon forms of debt.

Figure 24 
Graph, showing types of outstanding debt for Māori SMEs

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How we identified and measured Māori SMEs

In Tatauranga Umanga Māori 2016: Statistics on Māori businesses, we define a ‘Māori SME’ as a business or enterprise with the following characteristics:

  • the business owner(s) define it as a Māori business
  • it is not owned by another enterprise
  • it is not a Māori authority
  • it has fewer than 100 employees.

This is our first reporting of Māori SME statistics. To find our Māori SME population we pooled all of the self-identified businesses identified from our partners Poutama Trust and NZ Māori Tourism together with those identified in the 2015 Business Operations Survey; then removed any that did not fit the characteristics above.

Both Poutama Trust and NZ Māori Tourism retain clients indefinitely, which means we were able to identify enterprises that have ceased. This affords a more true-to-life picture than had we simply been able to find a snapshot of currently active enterprises. The Business Operations Survey has a low proportion of churn but, obviously, only reports on live enterprises. However, these compose a relatively small proportion of our SME population. We feel confident that where we display a time-series, it does not merely relate to currently-active enterprises but is more representative of Māori SMEs across the time shown.

Throughout the report we view Māori businesses from the latest data we have for them. We matched our Business Register to the various sources, and extracted information on those businesses as they appear now. That means that changes occurring before the present reporting period are incorporated throughout.

Some of the collections used to examine Māori SMEs in this report are comprehensive, and others take a sample. Where coverage of a collection is not total, we cannot be sure that a representative sample has been taken. There is no ‘total account’ of Māori SMEs, only what we know so far. So there is no existing design of a representative sample. For example, BOS samples enterprises with at least six employees. We believe Poutama Trust focus on SMEs that are likely to survive. We know that NZ Māori Tourism’s focus is tourism.
 

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