To the editor - Editorial

Saturday, 01 July 2000


    Don't blame it all on the miners; You still have to build up businesses; Not such a world-beater after all

    Mary White's excellent article May 2000 on soil degradation through unsuitable agricultural practices was spoilt for me by the byline which implied mining was to blame for "the degradation and decline of Australia's basic resources of soil and water". The article did not mention mining once. Does Company Director suffer from the syndrome; if it's in the bush and it's bad, blame the miners? Australia's miners are world leaders in remote area rehabilitation and land management and we deserve better from our friends in the business community.

    Dr Alistair Cowden Managing Director Exodus Minerals Ltd Director, Australian Gold Council

    You still have to build up businesses

    I read your editorial to the May journal with interest, but was at a loss to discern YOUR view of the ear-bashing you received from "Kevin". Was it his tales of woe that depressed you, or did your last sentence mean that you were disturbed by the need for a small businessman to sound off unnecessarily? "Kevin" seems to have described a highly typical small business owner's autobiography, which parallels my own, from 1969 to 1999 when I eventually made a graceful (I hope) exit from the business my wife and I founded. This business now employs 150 people in providing technical services to manufacturing, petrochemical, and mining customers. It is only now that I have been able to afford that four-wheel drive that Kevin hankered after, and also know that the family home is no longer on the line to satisfy the bank's need for bricks and mortar. So what has happened over those 30 years?

    1. The demolition of our national manufacturing base. This was to some extent a benefit to us as it allowed us to offer different services to customers now hell bent on worshiping at the altar of economic rationalism by gutting their middle technical management and destroying their corporate memory. We now often help to provide that memory. It was also a source of revenue in difficult times in assisting to assess and rectify the poor level of quality of many imported manufactures for power stations, and resource projects.

    2. Increasing difficulty in managing cash. Instead of willingly paying their bills, customers have forced smaller suppliers to act as zero-interest bankers. This will continue to be the hardest and least appreciated single activity in any growing business. It will be interesting to see what the cash effect of the implementation of the GST will be as customers extend their payment terms even longer

    3. Increasing payroll burdens. In 1969, the payroll burden was around 20 percent per hour worked to cover annual leave, sick pay, workers compensation etc. This burden now exceeds 50 percent, and has been the great insidious creeping cost increase over thirty years. Combined with bracket creep as wages have spiraled upwards in those 30 years, with little real change in the tax rates, has been a situation where employee wage increases have been consumed by increasing marginal tax rates. The ludicrous situation arises where a $1 increase in base pay becomes a cost of $1.50 with payroll burdens to the employer, and a benefit of around $0.50 to the employee at their marginal tax rate. Talk about a lose-lose situation!

    4. The changing face of human resources management. It is now a business within a business to manage the people who work there - superannuation, training, affirmative action, enterprise agreements, grievance resolution, recruitment, counselling, personal development, sexual harassment, understanding personal needs, OH&S, managing workplace change - the list goes on. Kevin is right - we are being required to provide things for people that in another era they would have provided for themselves (with varying degrees of effectiveness). The ones that manage people best will flog the competition.

    5. Government regulation. In addition to taxes and dealing with multiple state governments and local authorities, there is a plethora of approvals, regulations, reports, acting as custodians of employee retirement planning, and now collecting taxes through the GST. This (by no means exhaustive) list is a common thread of things we all have to manage, irrespective of the type of product or service offered. With exception of managing cash, if we are honest with ourselves, most of these challenges to business have been for the general good of business and the community.

    Our businesses all depend on a vibrant community to provide their employees and consumers. In my observation, the businesses that have thrived over the last 30 years are the ones that have embraced the changing environment and turned it to their advantage. In fact the former Training Guarantee Levy was just common sense for business made into a record-keeping nightmare by government. Businesses that need to train people will do it or fail, irrespective of legislation. Businesses will continue to view entertainment as a valid business expense, irrespective of whether it is tax deductible, but will be less tempted to waste time on self serving liquid lunches if the taxman is not subsidising them! So to "Kevin" I would suggest that while he has eloquently reported the problems that beset real entrepreneurs, has he really built a business or just bought himself a job? You never really "make it" - just remember those Swan Beer ads featuring Alan Bond in the 80s! Don't waste your time or money on rubber chicken with pollies - your customers and employees are the ones that really matter.

    To the editor, these are however real concerns, and it behoves all organisation such as the AIDC to help Kevin through this maze. The Directors' course was of great assistance to me, as were the support of family, a superb accountant, some of the government assistance programs, a successfully planned exit strategy. Most important was the good fortune to recruit an outstanding team of people that made it all such a satisfying thirty years. I could never have worked for anyone else - it was all too much fun. My only regret is that I spent the accumulation period of my life pre GST, and will spend that accumulation in a GST environment.

    Charles Pope MORPETH NSW 2321

    Not such a world-beater after all

    In Jan 1999 I retired as chief executive of Great Southern Energy utility, which provides electricity and gas to about 250,000 customers in southern NSW and contestable customers in Victoria and NSW generally. I was disappointed with the feature story "Man on a high wire" (May Company Director). If you read and believed the story you would assume Advance Energy was a world-beater. If you check the facts in Advance's 1998/99 annual report you find it has dropped about $24 million in profit from the previous year (60 percent profit drop) while its return on equity has dropped to a dismal 5.7 percent compared with Great Southern's ROE of 15.5 percent. If as the story says, Advance energy grew its business "by 55 percent over the last 40 months" why are returns diminishing rapidly and why is the SVA estimated to have dropped by around $10 million for that financial year? One might be tempted to conclude that Advance, like Integral, has been buying unprofitable market share. My advice is that the ESAA benchmarking study showed Great Southern was the leading Australian financial performing utility.

    I am dismayed to see how much value has been wasted at Advance and Integral.

    Brian Burton St Agnes SA


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