As a senior executive highly placed in the NZ fertiliser industry recently remarked, “The ramifications reach far beyond the shores of Canada and will be reflected in the cost and supply of food - not only to affluent countries, but could add to the growing number of starving and under nourished people throughout the world.”
He’s talking about the Canadian government’s recent rejection of one of the world’s biggest sagas - BHP Billiton’s US$39 billion hostile takeover bid for Canada’s jewel in its natural resources crown, Potash Corp of Saskatchewan.
The giant Australian company wanted Potash Corp bad – but the Canadian government refused to play ball.
Like so many national and international issues that involve large corporations, there is often a knee-jerk reaction from an uninformed public. Many are confronted with an issue (flogged by all the media and the internet) they know little about. So they simply reduce it down to fit their – in this case - Canadian biases. The Canadian public fears too many of its resource industries are already owned offshore. They don`t take the time to find out that they would more or less be trading American stockholders for Australian.
It`s much worse in the Canadian prairie province of Saskatchewan where for many decades until recently – when they hit the mother lode of potash - they were close to being the poorest province in the country. As an economic basket case and a "have-not" province, the prairie folks got millions from Ottawa (Canada’s Wellington) through federal/provincial tax sharing equalization grants. Most of the millions they got came from wealthier Ontario taxpayers, who ran the industrial engine (that is no more) that drove Canada`s industrial might since the 1940s.
For decades, Saskatchewan has struggled along, producing little other than grain. Premier Wall has leverage with the Canada’s Prime Minister Steven Harper and his Conservative policy makers in Ottawa as the Saskatchewan Conservatives hold about 13 seats in the House of Commons in Ottawa which the Prime Minister is fearful of losing.
In Canada, outside of Saskatchewan, fertiliser is not a big ticket item in the minds of voters, unless they are buyers or sellers. Mention fertiliser to the average urbanite and the Canadian version of "Yates" products to spray on the back flower garden will come to mind.
No doubt Ottawa feels it is on the hook for the free-trade policy has been their baby since Prime Minister Mulroney succeeded with NAFTA (North America Free Trade Agreements) so his successor PM Harper is likely looking for a way to honour that without killing himself politically in Saskatchewan.
Potash is now a classic front pager for it has become a provincial and a national issue morphing into an international one with politicians and bureaucrats and big name industrialists and financiers staking out positions and hoping to resolve it favourably for their particular company or cause.
It`s difficult to truly assess a situation like this with so many players trying to grab the ring while politicians are sweating to resolve the issue while simultaneously working to save their necks. Keep in mind that although Ottawa is in Ontario and Toronto is still the financial capital of the country, our interest is also governed by geography. Saskatchewan is in the far West and Saskatoon is about the same distance from Toronto as Sydney is from Auckland.
I’ll give the last word to a terrific business writer called John Geddes, writing for Canada’s prestigious Macleans magazine.
“Industry Minister Tony Clement’s decision to block Australian mining giant BHP Billiton’s $38.6 billion bid for Saskatchewan’s Potash Corp. leaves a policy vacuum that Prime Minister Stephen Harper must soon fill,” writes business journalist Mr. Geddes.
“Right or wrong, Clement’s move looks to have been improvised in the face of intense political pressure. He stressed that it was his call alone, and not based on a recommendation from his departmental officials after they scrutinized the deal’s terms.
“So, if it wasn’t strictly a technical decision, according to what calculus was Clement “not satisfied that the proposed transaction is likely to be of net benefit to Canada”? He says he’ll explain himself later, after BHP is given the 30 days it’s allowed under the foreign investment law to try to somehow salvage the deal.
“When it finally comes, any narrow explanation of this decision won’t be good enough. The Potash deal wasn’t in any obvious way much different from the foreign takeovers that the federal government approved in the cases of Alcan, Inco, Falconbridge and Stelco.
“Based on whatever reasoning Clement used in the Potash case, then, should all those earlier acquisitions have been blocked, too? This is a serious economic policy question.”
Crafar Farms, anyone?
