HIA chief explains reform process

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John Hey

BY JOHN HEY

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HIA chief explains reform process

CEO of Horticulture Innovation Australia John Lloyd responds to criticism over lack of industry consultation on functioning of new grower-owned body, and explains roadmap for development

HIA chief explains reform process

CEO of Horticulture Innovation Australia John Lloyd

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Horticulture Innovation Australia (HIA) was launched last November as the new research, development and marketing body to support the country’s A$9.5bn horticulture industry.

The establishment of HIA followed an independent and highly critical report into the performance of former industry services body Horticulture Australia Limited (HAL). The report recommended that HAL transition into a new, grower-owned company, with its financial and other assets transferred to HIA.

The restructure of the industry services body is designed to allow growers to have a direct say in how levies are spent, whereas under the previous system, decisions were largely dictated by 43 peak horticulture industry bodies.

But since the formation of HIA, some of those peak industry bodies (PIBs) have criticised the transition process, and expressed concerns over their funding streams to undertake vital promotional and market development activities. Avocados Australia has complained of a lack of industry consultation or communication over changes to the horticulture funding structure, arguing that it has not been given the opportunity to provide input to how the new company might operate.

Speaking exclusively to Fruitnet, HIA’s CEO John Lloyd responds to some of the criticism. While pointing out that there was a significant consultation process with HAL stakeholders prior to the formation of HIA, he adds that since the launch of the company, the new board has had to get to grips with its obligations under a new Statutory Funding Agreement and Constitution, which are key to accessing Commonwealth-matched funds.

“We have inherited a portfolio of 1,200 funding projects. If they transition past 2015, we have to work out whether they are compliant with the new Statutory Funding Agreement (SFA). That’s our first obligation,” he explains. “Our second obligation is create a new company that reflects the SFA. Right now we don’t have the systems in place that make us compliant. We have been given 12 months by DAFF (Department of Agriculture Forestry and Fisheries) to do this.”

Llloyd says that many of the inherited portfolio of projects do not comply with the SFA, so the board has had to establish interim arrangements, which require industry consultation. Given the number of projects and industries (with different production seasons) in Australia, he says the board have prioritised those sectors with the most immediate needs. “We were only formed in December, but some industries had programmes that ran out at Christmas, whereas others, such as avocados, had six months to go, so we have been dealing with programmes that need to start now. We could not just enter into a contract that looked the same as the old ones, we had to establish ones that were compliant with the SFA.”

Getting out to growers

Another key priority for HIA under the SFA and Constitution is to establish a “robust membership base that represents the full spectrum of Australian horticulture industries across all growing regions” – and to “establish a grower registry to communicate to its members”.

“Our SFA and Constitution says we need to speak to everyone in the industry, including but not only the peak industry bodies (PIBS), whereas in the past we only spoke to the PIBs,” says Lloyd.

Under the previous structure, HAL’s industry advisory committees (IACs) were largely controlled by the PIBs in a number of cases. “In some industries in years gone by, the IAC was in fact the board of the PIB. This was perceived as a conflicted model that required change,” he notes.  


Lloyd adds that the PIBs had grown to account for up to 37 per cent of HAL’s total expenditure under the previous model. “We had a system where the PIBs were making decisions on funding and being the recipient of those funds. I am not saying they should not have been the recipient of those funds, but as this relates to expenditure of public funds there has to be a proper governance process.”

HIA has devised a programme with three levels of consultation in order to “allow every grower to have a say in how the new company is run,” Lloyd explains.

The first level is broad consultation. “We’re working to develop a comprehensive list of levy payers, not a system that is ‘once-removed’. This will take a couple of years to develop.”

These broad communication programmes will involve regional meetings held on a regular basis for growers from a range of industries. “In the first 12 months we expect to go out to around 12 or 14 locations across the country. We want to be in the face of growers and the idea is they don’t have to drive more than a couple of hours to their local meeting,” says Lloyd. “We'll let them know what we’re doing and ask them for feedback on what they’d like us to do.”

Second, there will be more targeted, industry-specific meetings. “We’ll work with a specific industry to target consultation to growers in that industry,” he says. “And we’ll likely engage the PIB for that industry commercially to assist us.”

The third level of consultation will be targeted at growers who neither wish to attend regional meetings nor attend industry meetings. “This may apply to large shareholders who don’t wish to communicate via their PIB – in some industries every grower wants to be part of the PIB, but in others the PIB’s representation of growers is small for instance.”

Lloyd is also keen to quash rumours circulating in the industry that levy payers’ money will be spent on other projects outside their respective industry under the new SFA. “A levy dollar raised and paid by a grower will stay inside the industry and only be used in that industry,” he affirms. “It will be matched dollar for dollar. In cases where an industry raises more levies than that industry’s allotted proportion for dollar-matching, we will look for other co-investment opportunities for the extra levies raised.”

Bigger picture projects

Nevertheless, Lloyd points out that the new SFA has an emphasis on ‘a more balanced investment portfolio’.

“Under HAL, funding projects were exclusively industry-based, but in terms of investing in longer-term, more dynamic projects that reflected national interests, very little was done,” he says. “Under the new model, we’ll still be matching grower levies and keeping those funds in the bucket for individual industries, but we’ll setting aside enough for bigger picture projects.”

One such project is a new ‘fruit fly fund’, whose goal is “to remove fruit fly as the number one barrier to Australia’s exports”, according to Lloyd. “The sights are quite high with the fruit fly fund – it’s not just about fruit fly free zones or cold treatment – it’s a co-investment fund that uses little or no levy money. We’re approaching around A$30m in that fund now, which is weighted two-to-one to our external co-investors.”


Investors in the fruit fly fund include the South Australian government and other state governments, CSIRO, Plant & Food, Macquarie University and potentially Oxford University.

Lloyd says the importance of investing in such long-term goals is underlined by the phase-out of pesticide Dimethoate and Fenthion in Australia, which left the industry in the lurch. “In 2003, it was recommended that Dimethoate should go, and in 2004 that was confirmed. From that point onwards, the old HAL poured money into keeping Dimethoate in use – they did a good job, as they kept it alive for ten years, but we all knew it would go one day. Then inevitably the axe fell, and guess what, we found ourselves underinvested in alternative technologies.”

HIA released a broad consultation paper to industry stakeholders on 27 February to determine the long-term strategic investment priorities, but he notes that the “whole trade issue”, encompassing market access, trade agreements and export promotion, is a key priority. Agricultural robotics and automation are also on the radar.

A Strategic Co-Investment Funding Pool (Pool 2) will be established to address these research priorities. Lloyd says around A$20m worth of seed funding will be allocated to this pool, with a view to co-investors helping to more than double the amount of money available.

In order to ensure grower levies continue to be reinvested in their respective industries, a separate investment pool of around A$60m (Pool 1) will be available for individual industry R&D and marketing activity to meet those industries' specific challenges and opportunities.

The HIA CEO and new board have a big job on their hands, and Lloyd says it will be at least 12 months before systems can be properly implemented. Lloyd likens the launch of HIA to constructing a high-rise building. “You spend the first part digging a hole and getting the foundations right, but we expect to have the design ready by mid-way through this year.”


 

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