10 February 2021
Wherever you look, data shows that New Zealand has done what it takes to combat the deadly, global pandemic that beset the world in 2020.
Be it the indices that show New Zealand has had the most successful COVID response in the world, to the very recent announcement of unemployment figures dropping below pre-COVID levels, and it’s clear that in a COVID-world, New Zealand has demonstrated the economic benefits of being a small transparent, diverse, egalitarian, well-led country.
Still, with 2021 well underway and the COVID-19 pandemic still raging around the world, it’s natural to ask the question … Was this all just luck? The answer is ‘partly’, but not ‘substantially’.
While there was certainly an element of luck in the fact that we did not experience a major outbreak of community transmission of the disease, consider that in New Zealand, unlike many countries, there was broad and deep cooperation with lockdowns and other interventions such as wearing masks in public places. There was also much less active public dissent, with surveys across New Zealand showing overwhelming support for lockdowns.
The ‘people first’ approach modelled by our leaders who provided transparency around actions being taken to combat the virus gave New Zealanders a stake in their own future, enabling such a cohesive response to the challenges. The resulting economic impact, as already noted, is that New Zealand is now well placed to move into the future with confidence and agility thanks to our resilience in the face of the COVID-19 challenge.
For those interested in the tech exporting companies that TIN tracks through our annual TIN200 survey, there will no doubt be questions as to what we might expect from this sector this year in terms of growth and performance.
Here are five key reasons why I believe the NZ tech sector is set for a further surge of growth in 2021, in spite of the ongoing global impact of COVID-19:
1. DISRUPTION WILL ACCELERATE CHANGE
Chaos and disruption on this scale, such as has only previously been comparably experienced in times of world wars, are sources of rapid change and technology acceleration that address the challenges of that disruption. Countries not beset by social conflict and disruption are better placed to deal with those changes. As New Zealand’s drop in GDP and job losses have been less than forecast, we are now in a prime position to step up to address those challenges through our forward-thinking and collaborative tech eco-system.
2. GROWTH IN CAPITAL WILL FUEL INNOVATION
In parallel to accelerated change, capital has become more global and is now more accessible to New Zealand companies than ever before. As our 2020 TIN Report showed, many of NZ’s tech companies demonstrated strong growth and profitability as the impact of COVID-19 grew. Even in the midst of the 2020 lockdowns, many companies on the TIN200 delivered record results and were rewarded by large gains in company valuations. Now, as 2021 gathers pace, deal sizes are also increasing with the increase in available capital, which will provide the necessary fuel for innovation.
3. TALENT SHORTAGES WILL ENCOURAGE PEOPLE-CENTRIC STRATEGIES
Whilst capital pools are growing, talent is becoming increasingly scarce, emphasising the need for successful companies to develop people-centric strategies to attract and retain talent. The benefits of this will be far-reaching as employee buy-in to these strategies will improve staff retention and reduce churn. What’s more, the shortage will create an imperative for companies to not only expand their talent searches more broadly overseas, but prompt a renewed focus on developing talent locally. As can be seen in the recently released ‘Digital Skills Aotearoa’ report from NZ Tech, locally developed digital skills were lacking in pre-COVID New Zealand, and so is something in which we can no longer afford to under-invest.
4. OUR LONG TERM RELATIVE ADVANTAGE WILL PUSH US TO DELIVER ROI FASTER
One of New Zealand’s long term advantages, particularly in the tech space, is that poor economies of scale and the absence of low-wage labour, mean that the threshold for ROI from tech innovation in New Zealand happens sooner for companies here than in larger economies. Funding expertise and mechanisms to bring these solutions to the global market are all growing, and as the problems besetting larger economies continue to challenge their economies, New Zealand has the golden opportunity to leap ahead.
5. OUR POSITIVE OUTLOOK FOR THE FUTURE BUILDS RESILIENCE
As a society and economy, the future outlook for New Zealand remains strong, not because it is predictable but rather because uncertainty favours the resilient. As New Zealand has demonstrated, a benefit of being a cohesive, resilient country is the generation of a stable of cohesive, highly resilient companies that are more than capable of addressing the shortcomings in the eco-system through resourcefulness and strategic thinking.
I am constantly impressed and amazed at the resourcefulness of the companies on the TIN200. A little less than a year ago, as the pandemic started to bite, we suggested that the TIN companies’ resilience in the face of COVID-19 would provide a slingshot opportunity for the sector. We are already beginning to see that opportunity realised with many listed companies indicating strong performances for the current year.
Greg Shanahan, Managing Director, TIN
The performance of New Zealand’s tech “exporting” companies is helping our economy. Moreover, the amount of money coming into the tech space shows that investors are voting with their chequebooks.
Resilience wins. Things that undermine that – such as social and racial inequity, lack of transparency – all create friction points, things that undermine faith in a collective future.
There is a paradigm shift that has occurred in the world over the last few decades. The notion that the growth of business is at odds with environmental protection or social equity is a 20th Century paradigm that is at odds with the growth of the tech sector. The new paradigm understands that doing the right thing is actually the best for business – that is, looking after people, and looking after the environment.
It will not surprise me if in 2021 we see the overall growth of the TIN200 companies increase significantly over the last financial year. As these companies continue to invest in people, innovate to address the raft of new challenges coming our way, and build successful companies with a supportive eco-system around them, our country will proposer and set an example for others.
Greg Shanahan
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