Rock Lobster Lessons

There is a story in The Australian newspaper today about the Southern Rock Lobster industry. It mentions me and offers an insight into the folly of any industry being reliant on a single customer.

My father always told me:

If your business relies on a single customer then that customer effectively owns your business

I am mentioned in the article because the family office ( which I chair)  invested in the rock lobster industry a few years ago. It's a relatively modest investment in a very interesting industry.

When it was made, the industry was riding high and fishers were making a lot of money selling almost everything they caught to China. As a 'high price, high volume' market the industry became overly reliant on it and took the bumper profits for granted.

Our investment was made with different assumptions. We are not commercial fishers but merely wanted to gain exposure to the commercial fishing sector through investment in quota units or fishing rights. We then made these available to industry participants for an annual fee.

Rock Lobster was just one of the commercial fishing rights we invested in a I believe the entire commercial fishing sector will become much more important in the decades to come.

It's a win win for fishers and investors. They obtain economies of scale without expensive capital costs while investors gain an attractive annual income stream.

It was also obvious that the market was over-reliant on the live export trade to China. The consequence of that is now being felt.

Many of the challenges within the industry were masked by the profitable China trade. The cost of fishing in South Australia is among the highest in the world. This is a product of government fees and charges, regulations and industry inefficiency.

The industry is now acutely aware of the need for reform but it will come too late for many.

There are many fishing operations that may not survive this current period. Boat operators with heavy debt burdens, the processors with large infrastructure or staff commitments, the exporters with overhead are all very vulnerable.

It's perfectly understandable why many will have little sympathy for them. After so may 'fat years' it is only normal one should prepare for the lean ones.

That's how I feel for myself and my family investments. Our livelihoods are not on the line. Regional communities don't depend on our operations to remain viable. Thousands of jobs don't depend on my labours and so we accept the vicissitudes of investment in primary industry.

However there are many not in our place.

These are the family fishing operations that do provide jobs, sustain communities and generate wealth for our country. If we lose these small operations we will only see the industry turned over to corporates and internationals.

It is likely many of these will be Chinese enterprises. I don't think that is good for the country and we would be wise to avoid it.

This is the challenge facing Australia right now. Our over-reliance on the Chinese market makes us very vulnerable in certain industries. The CCP know that and hence they are applying  pressure to impose maximum pain where they can.

This is an international diplomatic spat and I totally support the Australian Government's current position of not surrendering. It is better to have some pain now and maintain one's independence rather than take the easy short-term option with damaging long-term consequences.