Consulting is vital to support agriculture industry growth, KPMG finds

21 November 2018

The Australian agricultural industry is going through a dramatic period of growth. Expected to reach a total value of $100 billion by 2030, the surge will bring with it a number of practical, operational and technical issues. In order to properly confront these issues, the consulting industry must play a key role in the scaling process.

Driven by the fact that Australia sits on the doorstep of the fastest growing economies on the planet, the agricultural industry uptake may come as no surprise. According to World Bank data, Australia has the third largest area of agricultural land behind China and the United States.

Although Australia’s population may be far less than that of both the leaders, our agricultural exports go far beyond Australian dinner tables. In fact, two thirds of all produce grown in Australia is consumed outside of the country. Alongside this, Australia also grows 93% of its its own food supply, making it one of the most secure food nations on the planet.

However, for such a large country with vast amounts of fertile land, Australian agriculture still has a long way to go. In terms of increasing sustainability, adjusting to international trends and keeping abreast of technological advancement, as well as understanding concomitant policy requirements, Australia may well struggle to keep up with demand and efficiency.

Consulting is vital to support agriculture industry growth; KPMG

“The agribusiness industry in Australia is shifting and evolving rapidly. The reach of agriculture has extended beyond the paddock due to today’s connected, educated and demanding population,” says Evie Murdoch a senior KPMG Food and Agribusiness consultant. “The importance of food and fibre production is increasing in line with the need to feed both a growing population in Australia and a global market hungry for safe, fresh food from clean, trusted sources.”

“Technology, innovation and the internet, coupled with improved funding for research capabilities, are fast becoming the most relied upon methods of increasing our production efficiencies in our regional areas, and more recently in distinct, intensive hubs co-located with large infrastructure such as airports,” she says.

As reported by KPMG and recently, Australia’s agri-food export sector is one third the size of The Netherlands’. This becomes even more relevant when considering size. The Netherlands is 1/185th the size of Australia. In other terms, a hectare of productive land in The Netherlands is 810 times more profitable than its counterpart in Australia. This is largely due to a culture of innovation, technology and investment which are fostered by a forward thinking government.

In Australia, the uptake of an digital culture has begun to flourish but is yet to transform the agricultural industry. However according to Murdoch, the industry as a whole will create opportunities for consultancy to solve the growing pains, streamline supply chains and digital innovation.

“As the economy, environment and international drivers shift and change, the carryover effect upon the supply chain after the farm gate is shifting too. There is a distinct opportunity for us to support this business beyond the farm gate as well as drive efficiencies, improve accessibility and generate traceability and provenance,” she says. “Commercial guidance and expert assistance is going to help companies capitalise on the opportunities that exist beyond the farm gate.”


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Chinese investment into Australia plunges to eight-year low

09 April 2019

Chinese investment into Australia plunged to US$6.2 billion last year according to the latest KPMG analysis, down by more than 35 percent to an eight-year low. 

A study from global professional services firm KPMG in conjunction with The University of Sydney has found that Chinese investment into Australia dropped by 36.3 percent in 2018, despite Chinese outbound direct investment growing by 4.2 percent globally to nearly US$130 billion. Taking in mergers and acquisitions, joint ventures, and green-field projects, Chinese investment into Australia totaled US$6.2 billion in 2018, down from US$10 billion the previous year.

As part of an ongoing collaboration between the Big Four firm and Sydney Uni, the latest release in the ‘Demystifying Chinese Investment in Australia’ report series (now into its fifteenth edition) points to Chinese domestic policy changes for the decline, with the local downward rate of investment now coming into line with trends seen in the US and Canada, which last year recorded respective Chinese inbound investment drops of 83 percent and 47 percent (in USD terms).Value of Chinese ODI into US, Europe and Australia 2012-2018

Designed to reduce its international exposure, the policy measures being implemented in China since early 2017 require overseas investments by Chinese firms to be non-speculative, only undertaken after fully considering major potential risks, and consistent with the company’s strategy and the country’s socio‑economic development goals – with certain categories of investment encouraged and others prohibited or restricted.

With 80 percent of Chinese executives stating that it was more difficult to get capital out of China in 2018 compared with 65 percent the year prior, the result is the second-lowest Chinese inbound investment in Australia since the mining & gas driven investment peak of 2008, with over US$16 billion coming into the country. Outside of the US$3.9 billion figure in 2010, the investment sum hasn’t dipped below US$8 billion in a decade.Chinese investment into Australia - 2007 to 2018

Yet, despite the domestic policy measures and downturn in inbound investment, Australia is still seen as a relatively safe investment destination according to a cross-sector survey of Chinese executives, with an improving political climate (those cautious due to the local political debate dropped from 70 percent in 2017 to 59 percent last year) and slight increase in the sense of being welcomed – up three points to 38 percent, although those feeling ‘unwelcome’ also rose by four points to 19 percent.

“Whilst Chinese investors confirm they remain positive about many aspects of the Australian market and its prospects compared with many other countries, there is an increasing concern around transparency of regulations, high costs and their continued perception of being unwelcome as reflected by negative Australian media coverage.” the report states.  “We need to be aware of the very real impact that poorly received, politically motivated public discourse and unbalanced media coverage can have on the future level of Chinese capital entering Australia.”2018 Chinese investment into Australia by sector

As an investment breakdown, private Chinese companies accounted for 87 percent of the deal value in 2018 and over 92 percent of deal volume, with state-owned entities contributing only 13 percent of value and 8 percent of the volume – which in total, dropped by 28 percent from 102 transactions in 2017 to 74 last year. As per those deals, over 40 percent of the investment total was made in the Australian healthcare sector, a more than 110 percent increase on the prior year.

According to the analysts, Chinese investors are primarily interested in scalable medical services and healthcare products which can be scaled in their home market, and the Australian healthcare sector has gained increased interest due in part to the ‘Australia package’ – ‘the combination of transferable management know‑how, high‑level care service experience, state of the art technology, the ‘clean, green and healthy’ image of Australian products.”

Meanwhile, new mining investment has dropped sharply – down 90 percent from a spike last year for just 5.6 percent of the total – opening the door for commercial real estate (predominantly mixed-use development and office stock according to figures provided by Knight Frank) to claim the second highest levels of Chinese investment at ~37 percent (albeit down 31 percent on 2017 levels). The remaining deal value was mostly in oil & gas (8.8 percent, up 295 percent) and renewable energy (4.8 percent, up 217 percent) sectors.2018 Chinese investment into Australia by geography

Perhaps of further note, at least in terms of demystifying Chinese-Australian investment, ‘Northern Australia’ attracted at most just 8 percent of total investment, with Queensland accounting for only 5 percent, Western Australia 3 percent, and zero deals made in the Northern Territory. Here, the bulk of the inbound investment was made in New South Wales (56 percent) and Victoria (27 percent) with South Australia (8 percent) claiming the majority of the remainder.

“While this annual result brings Chinese ODI in Australia back to the second lowest level since 2008, there is no reason why Australia can’t return to higher levels seen historically,” the report concludes. “2018 need not define a trend, but it is a period to reflect upon. There are a great many opportunities for Chinese companies to contribute towards the development and internationalisation of Australian industries and supply chains in the coming years and there is much that can be done to improve the perception of the Australian market to Chinese investors and vice versa.”