Chris Lee & Partners Ltd

Taking Stock 27 August 2026

Edward Lee writes:

THERE comes a point in any debate when legitimate scrutiny gives way to speculation. We may have just reached that point with Santana Minerals’ proposed gold mine.

Nobody should argue that a mining project should proceed without careful scrutiny. There are legitimate questions about water, ecology, landscape effects, rehabilitation and the design of the tailings storage facility. These questions deserve proper answers.

But there is an important difference between identifying a risk and assuming that the worst possible outcome will occur.

Increasingly, some of the arguments against the project seem to make precisely that leap. We are being asked to contemplate a future where the gold price collapses, the mine becomes uneconomic, the engineers get the tailings facility wrong, the structure fails, enormous numbers of lizards die, water becomes contaminated, vineyards suffer and tourists abandon Central Otago.

Each possibility is presented as another reason the mine should not proceed. Stack enough worst-case assumptions together and the conclusion is presented as if failure has now become inevitable.

But this is not how sensible risk assessment works.

One argument raised against the project is that today’s gold price will not last. That is perfectly possible. Nobody, including Santana, knows what it will trade at in five, ten or fifteen years. 

However, Santana’s economics were never built around today’s gold price. 

Infact, its updated Pre-Feasibility Study used a base-case gold price of just A$3,500 an ounce compared to the current price of A$6,400 an ounce today.

At A$3,500, the project produced an after-tax NPV of A$780 million, an internal rate of return (IRR) of 39% and an estimated payback period of 2.6 years.

Gold therefore does not need to remain anywhere near today’s price for the project to be economic.

And looking at the financial metrics at A$6,000 (less than the current gold price), the NPV almost triples to A$2.1 billion, an IRR of 85% and a 15-month payback period.

Could gold eventually fall substantially? Of course. It could also rise. That is commodity investing.

But forecasting a dramatic fall in gold and then treating that forecast as evidence that the project is uneconomic is not analysis. It is simply choosing the commodity price necessary to produce the conclusion you want.

The people risking hundreds of millions of dollars developing the mine will ultimately have rather more incentive to determine whether the project is economic than somebody writing a submission opposing it.

Then we move to the tailings storage facility. Tailings facilities deserve scrutiny. History provides some examples around the world to demonstrate why. But the appropriate response to that risk is engineering, regulation, monitoring and independent review. It is not to assume that the structure will fail, as the vast majority don’t.

The proposed Bendigo-Ophir facility is intended to comply with the New Zealand Dam Safety Guidelines. Its design criteria include an extreme seismic event with an annual probability equivalent to approximately one in 10,000 years. The proposed structure will also be supported by an enormous engineered rockfill landform.

There are geotechnical questions still being considered, including the potential interaction with historic landslide material. Those questions should be resolved before construction. That is precisely what a consenting and detailed-design process is for.

Yet some of the public discussion seems to begin at the opposite end. Instead of asking whether the engineering can satisfactorily manage the risk, it assumes that the engineering will fail and then assesses the consequences of that hypothetical failure.

Apply that standard consistently and New Zealand would build very little.

Dams can fail. Bridges can collapse. Wastewater systems can leak. Transmission lines can cause fires. Aircraft can crash. None of these risks is zero.

Society instead requires competent design, appropriate safety margins, independent oversight and systems that reduce the probability and consequences of failure to an acceptable level.

Mining should be treated no differently.

Then there are the lizards.

This is a genuine environmental issue and deserves to be treated seriously. The expert conferencing process concluded that more than 500,000 lizards could be living within the development footprint. The experts also agreed that the project’s effects on lizards are significant and that it will not be feasible to salvage every individual.

Those are important findings. But something rather strange happens when this enters the public debate.

More than 500,000 lizards being present within an affected area can quickly become “hundreds of thousands of lizards being killed by a mine”.

They are not the same statement.

The expert evidence itself discusses several different effects, including habitat disturbance, displacement, mortality, salvage, relocation and eventual rehabilitation. There are legitimate disagreements between the experts about how successful that rehabilitation will be and about the appropriate mitigation and compensation. That is exactly the discussion the consenting panel should be having.

But the public deserves to understand what the numbers actually mean. If 500,000 animals live within an area affected by a development, it does not follow that 500,000 animals will die. Turning an estimate of population affected into an implied death toll might make a better headline. It does not make it better science.

The economic arguments become even more extraordinary.

Opponents have raised concerns about vineyards, tourism and Central Otago’s reputation. Again, there may be some effects.

A vineyard immediately neighbouring a mine may reasonably have concerns about amenity, landscape or disruption. Those effects should be considered.

But from there the doomsday argument starts expanding.

The mine damages the landscape. That damages the wine industry. That damages Central Otago tourism. That damages Queenstown and Wānaka. That potentially damages New Zealand tourism. Eventually a mine in Bendigo becomes a threat to a sizeable part of the South Island economy.

Really?

The economic expert evidence provides some useful perspective.

Only a tiny proportion of Otago visitor days occur in areas near the proposed mine. One economist involved in the expert conferencing said that, without further evidence, he was not persuaded that the project would have large effects on tourism activity in Queenstown and Wānaka.

That seems a rather more reasonable starting point. Central Otago is not going to disappear. Neither is Queenstown. Neither are its vineyards. Nor is New Zealand’s tourism industry.

Indeed, mining and tourism already coexist in New Zealand. Macraes has operated in Otago for decades. Waihi has a working gold mine beside a town. The existence of mining does not automatically extinguish every other economic activity around it.

Water provides perhaps the clearest example of the problem.

A mine should absolutely be required to demonstrate that it can appropriately manage groundwater and surface water. There should be baseline measurements, monitoring, limits, reporting requirements and contingency plans.

And there are.

The Bendigo-Ophir process has included baseline water reporting, water management plans, water quality assurance work, groundwater modelling, treatment studies, geochemical testing and expert conferencing involving specialists from different parties.

That does not mean contamination is impossible. It means the risk is being studied and controls are being designed around it.

Economic evidence has even contemplated scenarios in which groundwater contamination affects the output of local wineries.

Again, it is reasonable to ask what the consequences of a serious event would be. But there is an enormous difference between assessing the consequences of an event and establishing that the event is likely to happen.

This seems increasingly absent from this debate.

Perhaps the strangest suggestion is that the Fast-track process somehow means these issues are not receiving adequate scrutiny.

Anyone who has followed the process would struggle to sustain that argument.

There have been specialist reports and expert conferencing covering groundwater, water quality, geochemistry, freshwater ecology, lizards, terrestrial ecology, engineering, geotechnical matters, economics, air quality, contaminated land, traffic, landscape, heritage and numerous other subjects.

The panel has requested further information. Experts have disagreed with one another. Management plans have been changed. Additional evidence has been supplied. Hearings have been held. Conditions have been debated. And the public have been able to participate.

So the process has been exhaustive and that is how it should be.

The purpose of environmental regulation should not be to establish that a project has no effects and no risks. No meaningful infrastructure project could satisfy that test.

The question is whether the effects can be appropriately avoided, mitigated, remedied, offset or compensated for, and whether the remaining effects are acceptable when weighed against the benefits of the project.

Santana potentially represents billions of dollars of economic activity, hundreds of jobs and substantial tax and royalty revenue for New Zealand. Those benefits do not give Santana a free pass. But neither should opponents receive one.

If Santana’s engineering is inadequate, demonstrate why. If its water modelling is wrong, demonstrate where. If its rehabilitation programme will not work, provide the evidence. If the mine will materially damage Central Otago tourism, quantify the effect and establish the mechanism. If the economics only work at an unrealistic gold price, test the numbers.

That is scrutiny.

Predicting that everything that could conceivably go wrong eventually will is something else entirely.

New Zealand needs to become better at distinguishing between risk and catastrophe. Every major project involves risk, so the job is to understand it, reduce it and decide whether what remains is acceptable.

If instead our starting assumption becomes that engineers will fail, environmental controls will fail, rehabilitation will fail, commodity prices will collapse and surrounding industries will suffer their worst imaginable outcome, we should at least be honest about the consequence.

Assuming that the worst is guaranteed to happen will not simply stop the Bendigo-Ophir mine.

It means that eventually we will stop building almost everything.

Travel

Johnny Lee - Taupo - 1 September

Johnny Lee - Hamilton - 2 September

Johnny Lee - Tauranga - 3 September

Johnny Lee - Christchurch - 7 September (FULL)

Chris Lee & Partners Limited

Taking Stock - 20 August 2026

Edward Lee writes:

DATA centres are coming, but who pays for the power?

For most people, artificial intelligence exists somewhere in the cloud. We type a question into ChatGPT, ask Claude to summarise a document or use Google to search the internet, and an answer magically appears seconds later.

The reality of what happens behind the scenes is much more physical.

Behind “the cloud” are enormous data centres filled with computer chips, cooling systems, batteries and electrical equipment. They consume vast amounts of electricity and, as investment in artificial intelligence accelerates, their demand for power is becoming large enough to influence electricity markets around the world.

The International Energy Agency expects global data centre electricity consumption to almost double over the next five years, creating a new challenge for governments.

Whilst countries want the investment, the technology and the economic activity associated with AI, they also need to work out where all the additional electricity will come from and who pays for the generation and grid infrastructure required to support it.

New Zealand has now joined that debate, and developments over the past few months suggest it could become an increasingly important issue for investors as well.

Last month, the Green Party called for a one-year moratorium on consenting new data centres in New Zealand as they would like to add additional regulation to the consenting process. It argues that data centres should be required to bring additional electricity generation with them and pay the full infrastructure costs associated with their development.

The concern about who pays for that infrastructure is legitimate, but we think the proposed solution is wrong.

New Zealand cannot afford to respond to critical infrastructure investment by putting consenting on hold, especially when the market is currently behaving as it should.

Data centres, electricity generation and transmission infrastructure already take years to plan and build, while artificial intelligence is developing considerably faster. 

Delaying investment decisions creates uncertainty, adds cost and increases the risk that projects are built elsewhere.

Australia, the United States, Ireland and other countries are all competing for data centre investment, and international capital will not wait indefinitely for New Zealand to make up its mind.

More importantly, overseas experience shows that these issues can be addressed without stopping development. 

The better response is to establish clear expectations around who pays for new infrastructure, how additional generation is supported and what long-term commitments large electricity users must make, while allowing investment to continue.

New Zealand's electricity companies also have a strong commercial incentive to ensure new demand is accompanied by new generation. 

Recent announcements from Contact Energy and Mercury suggest that this is already starting to happen. With 31 prospective large electricity projects already in the pipeline, we do need to think carefully about who should pay for the generation, transmission and other infrastructure required to supply them.

Not all of these projects will be built. Some projects will be delayed, others will become smaller and some will disappear entirely. 

Even so, the scale of the pipeline is significant.

That does not mean we should stop them. It simply means the electricity system needs to be capable of accommodating them, and the costs of doing so need to be allocated fairly.

A good example of how this could work emerged last week when Contact Energy and CDC Data Centres announced that they are exploring the development of a major new data centre in Taranaki. 

The proposed facility would have 250 megawatts of computing capacity and could require approximately 350 megawatts of electricity at peak times.

For comparison, that one development could have peak electricity demand equivalent to almost 5% of New Zealand’s current record national peak.

That sounds like a lot of power, but the announcement included how Contact and CDC were proposing to supply the site with electricity. Contact intends that electricity would be supplied under a long-term contract supported by new geothermal, wind and solar generation.

A long-term contract of this scale materially strengthens the investment case for new generation, giving Contact greater certainty that the electricity produced by a new power station will have a committed buyer.

Importantly, this arrangement is being developed commercially rather than waiting for a government moratorium to determine how it should work. Contact and CDC have recognised the problem and are designing the generation, storage and data centre together.

This is exactly the model New Zealand should be exploring. 

Rather than asking whether the electricity system can somehow absorb another 350 megawatts of demand, the developer and generator are working together to support new generation, add batteries, make use of existing grid infrastructure and secure long- term electricity demand.

This proposal also makes this particularly relevant to New Zealand investors because CDC is not some distant international technology company. 

Infratil owns almost half of CDC Data Centres. CDC has become Infratil’s most important investment and is now the largest developer, owner and operator of secure data centre infrastructure across Australia and New Zealand.

Infratil expects CDC’s earnings to exceed A$1 billion in the 2028 financial year and to reach around A$2 billion once its currently contracted capacity is fully deployed. 

Data centres have therefore moved from being an interesting part of the Infratil portfolio to one of the major drivers of its future earnings.

The proposed development brings both sides of the investment story together. 

Infratil shareholders participate through CDC, while Contact shareholders participate through the electricity generation, batteries and long-term supply contract required to power it.

Mercury provides another example. It has entered into a 15-year, 140 megawatt power purchase option agreement with Datagrid for the proposed data centre in Southland. The electricity involved represents roughly 3% of current national electricity demand.

Mercury has subsequently gone further, investing $53 million for a 12.7% equity interest in Datagrid.

Mercury is not just looking at a data centre as another large electricity customer. It is participating in the value created by the data centre itself while also providing a long- term electricity arrangement to support it, effectively benefiting from both sides of the coin.

These examples point towards a much more sophisticated relationship between data centres and electricity generators than simply supplying another large customer with power.

There is also a broader economic effect that should not be overlooked. 

If these projects proceed, the economic activity extends far beyond the data centre itself. 

New generation needs to be constructed, batteries installed, transmission strengthened and substations expanded. That creates work for construction companies, engineers, electricians, equipment manufacturers and the businesses that supply them. 

Further upstream, it adds demand for copper and other critical minerals needed for cables, transformers, batteries and electrical infrastructure. 

The result can be a substantial chain of investment, employment, wages and tax revenue flowing through the economy. At a time when New Zealand is searching for stronger productivity, investment and economic growth, that opportunity should not be dismissed lightly.

Building new renewable generation requires considerable capital upfront, while the asset itself might operate for several decades. Developers and their lenders therefore want confidence that there will be customers prepared to buy the electricity once the project is completed.

New Zealand solar developer Lodestone Energy provides a useful example. It has used long-term commercial offtake agreements as part of the development of its growing solar portfolio, including an agreement to supply renewable electricity across sites operated by The Warehouse Group.

A data centre potentially takes the same concept to another level. Instead of contracting electricity across a collection of shops or industrial sites, a single customer might be prepared to contract hundreds of megawatts for 15 or 20 years. 

That long-term demand can provide the revenue certainty needed to finance new generation.

This is why we should be careful about viewing data centres solely as a threat to electricity supply. A 350 megawatt data centre arriving tomorrow and competing for New Zealand’s existing generation would clearly create additional pressure. 

A 350 megawatt data centre whose long-term contract enables hundreds of megawatts of new generation and storage to be financed is a very different proposition.

The electricity demand itself can therefore become part of the financing solution. Rather than stopping development through a one-year moratorium, New Zealand should continue building while ensuring the rules governing new generation and infrastructure costs keep pace.

New Zealand already has an enormous infrastructure deficit. Electricity generation and transmission need significant investment, and demand is likely to increase as transport, industry and other parts of the economy electrify. 

Adding another layer of delay to major investment is unlikely to improve that position.

Data centres are critical infrastructure in their own right. Artificial intelligence, cloud computing, financial services, government systems and much of the modern economy increasingly depend upon them. 

New Zealand should be thinking about how to attract this investment and ensure we have the infrastructure to support it, rather than debating how to temporarily stop it.

For investors, this debate illustrates how quickly the artificial intelligence investment story is broadening.

The first stage of the AI boom was largely about semiconductor companies. Nvidia became one of the world’s most valuable businesses because its chips were essential for training and running increasingly powerful AI models. 

Microsoft, Alphabet, Amazon and Meta then began spending extraordinary amounts of money constructing the data centres required to deliver those models.

The next stage increasingly looks like an electricity and infrastructure story. Data centres require generation, generation requires transmission, and renewable generation increasingly requires storage and backup.

All of it requires transformers, electrical equipment, copper and enormous amounts of capital.

For New Zealand investors, this is already appearing in companies listed on our own sharemarket. 

Infratil provides exposure to the physical data centre infrastructure through CDC. Contact is considering a model that combines CDC with long-term electricity supply, new renewable generation and battery storage, whilst Mercury has entered into a long- term electricity arrangement with Datagrid and taken an equity interest in the company. 

Further down the chain, greater investment in electricity infrastructure means greater demand for the commodities required to build it. 

Companies such as BHP and Rio Tinto therefore have an indirect relationship with the AI boom through copper and other materials required for electrification. 

Internationally, Cameco provides another angle as nuclear power attracts renewed attention from technology companies seeking reliable electricity around the clock.

Artificial intelligence may have started as a technology investment story, but this is becoming an infrastructure and electricity story.

The Green Party's proposed moratorium has brought the debate into the open, but pausing development to add further regulation and rules would be a mistake. New Zealand needs investment, more electricity generation and greater productivity, and we should want to participate in one of the most important technological changes occurring in the global economy, especially when the market is already behaving as it should, without further regulation.

The objective should not be to protect New Zealand's existing electricity supply from data centres. It should be to use data centre investment to expand it.

If the world's largest technology companies want access to New Zealand's renewable electricity, there is nothing unreasonable about expecting them to help fund the generation and infrastructure needed to supply it.

Done badly, the AI boom could place further pressure on an already constrained electricity system. Done well, it could provide billions of dollars of investment, significant employment, greater demand for New Zealand businesses, additional tax revenue and large customers prepared to underwrite the construction of new generation.

The electricity required by artificial intelligence has to come from somewhere.

New Zealand's challenge is making sure that if we help power it, New Zealand captures its fair share of the economic benefits.

Travel

Johnny Lee - Taupo - 1 September

Johnny Lee - Hamilton - 2 September

Johnny Lee - Tauranga - 3 September

Johnny Lee - Christchurch - 7 September (FULL)

Chris Lee & Partners Limited

Taking Stock 13 August 2026

Chris Lee writes:

AMONG the many privileges gained from prolonged visits to other countries is the gift of having one’s perspective widened.

Staying and mixing with friends, family and business friends exposes one to the views and knowledge of those from different cultures.

A month or two spread amongst Germany, Hungary, Slovakia, Austria and, mostly, Malta simply underlines the real unresolved problems of Europe and the world. If not resolved, heaven help our grandkids.

In no particular order we listened to concerns as follows:

1) The impossibility of taxes ever servicing the mind-blowing debt, most recently fuelled by political dimwits. The debt taken in by the G20 countries, the 20 wealthiest countries in the world, has risen from 98% of combined GDP to 112%, representing additional tens of trillions, from a base that was already unserviceable.

2) The unbudgeted cost of adapting to weather changes, unable to be funded by insurers, the shortfall being collectively hundreds of billions. The cost to countries who shift their goods from just one European river, the Danube, has been extreme just in the past few weeks.

3) The unbudgeted cost of funding a comprehensive defence system will be collectively hundreds of billions, to repel the threats posed by countries seeking to overturn world order.

4) The unbudgeted cost of providing for the new phenomenon of longevity, rising at an astonishing rate, life expectancy likely to hit three figures in many countries within three decades. Health costs may be addressed by technology and better diagnosis, helped by AI, and by sharing data, and by genomics. The up-front costs will be significant. Pension modelling has never used a 30-35 year time span for the average pensioner.

5) Immigration is often referred to as “ imported labour”, with no thought of granting permanent residency. Illegal immigration is now seen in places like Britain, Italy, France and Germany as being as threatening as war. Is such immigration uncontrollable? 

But it was the sixth issue, discussed in almost every meeting, that I had not anticipated.

Think the word “corruption”, probably written in capital letters, a behaviour that so corrodes social order.

No adult New Zealander would be shocked, corruption evident here for at least 70 years, just as it has been in Africa, Asia, America, Britain, Western and particularly Eastern Europe, indeed everywhere.

Many in NZ would recall the empires built on import licensing, inextricably linked with “political donations”.

Few will be unaware of the local government councillors and senior staff who have jumped up the wealth ladder mysteriously, while land is rezoned, or large contracts are let. Much of these infractions have been revealed in court cases, several in just the past few years.

Personally I will never forget the clandestine approach of a CEO of a large Christchurch company which won a lucrative subcontract, post-earthquakes. The CEO won the contract on the condition that a new kitchen was built for free for the fellow who was running the tender.

When South Canterbury Finance collapsed, many “deals” were done that could only be explained by the concept of brown paper bags.

How do we explain the stream of nincompoops and blundering political party people appointed to well-paid roles in Crown-controlled organisations, the dimwits often with well-known failures, which in any transparent process would have disqualified them from such appointments? (Read In the Jaws of the Dragon, a NZ book which itemises shocking examples of inexplicable behaviour.)

Well do I recall in 1980 being offered a matchbox full of gold if I would switch stationery contracts with the large company that employed me.

So let us not be pious, not even coy, about corruption in NZ.

Yet the details of corruption in Europe, presented to me from many sources, especially in Malta, were offensive and unforgettable.

Globally, the defence sector is synonymous with black hearted transactions, backhanders ubiquitous.

So, too, are major property developments, requiring rezoning or local authority endorsement.

Living in NZ today is a wealthy American, essentially a good man, whose US business was transitioned when he won a multi-million Federal contract. There was one small condition he discovered when he won the tender: he had to donate $1 million to the US President’s re-election campaign.

I record all of this to clear the way to discuss examples of deplorable events from recent times in Europe.

As examples have emerged in public, Europeans are forced to respond. The telescope can no longer be directed to a blind eye. The back stories are fascinating, as the largest examples of corruption illustrate.

In Malta, the electricity grid in 2013 was fuelled by Libyan oil as it had been for 40 years, the result of an agreement with Libyan leader Gaddafi and Maltese leader Dom Mintoff, just after Malta became a republic. Malta agreed not to tap a shared oilfield. Libya agreed to supply cheap oil for 40 years.

In 2014 the contract ended, the fixed price of oil no longer locked in at 1974 prices.

Malta’s electricity company had run up a €800 million debt to its largest bank, the Bank of Valetta. Stripped of cheap oil, the electricity company faced an unaffordable debt. The national party government declared the company’s value to be one euro.

Cynical people read this evaluation as a warning that the grid provider would be sold off to a consortium of political friends for little more than a sackful of wet pencil shavings.

The Maltese Labour Government, led by Muscat, persuaded a Chinese electricity provider to buy 33.3% of the Maltese grid provider for a total of €320 million. Russia would provide the gas.

China agreed. The conversion was successful. Today the grid is fuelled by LNG and partly by energy provided from Sicily. The company is worth billions, even if demand sometimes leads to closedowns.

Not long after, the government switched its LNG supplier to Azerbaijan. The Maltese people praised the Labour government politicians who had organised the deal. It saved the Bank of Valetta from collapse as well as providing a long-term good. When Russian gas was sanctioned, the Azerbaijan gas proved to be reliable, if more expensive, and not threatened by sanctions of Russian gas. From the start of the Ukraine war Malta has subsidised household electricity.  

So far, so good.

 As the deal was being done, various government leaders and their wives opened family trust accounts, and in countries like Panama and New Zealand, millions of now anonymously sourced money appeared in their trusts.

Did the people of Malta complain? In general, they did not fully understand the hidden details but in recent years the details have surfaced. They had long accepted that these sorts of deals were none of their business. They wanted a functioning power provider.

Along came a journalist with a family source in the electric gas company. Copies of emails were provided to her. The journalist had the evidence to expose the graft.

Before she did, in a frenzy of behind-the-scenes activity, three hitmen were hired. In 2017 they wired up her car and she was killed when she got in.

The court case, some nine years later, is still proceeding, with clear links exposed to the then Prime Minister, Joseph Muscat, and his chief of staff and the deputy police commissioner, along with many other businessmen. The evidence exposed in the new trial continues to dominate conversation and media coverage. Corruption is one thing, murder is another.

All sorts of related corruption have been revealed.

The family of the journalist remain highly focused on revealing the corruption.

The Times of Malta sells its excellent daily paper with detailed coverage of the trial.

Are the people of Malta horrified, amazed or revolted; or are they immune to corruption?

When the subject is raised, within minutes the conversation switches to the remarkable transition of Malta from a Roman Catholic-dominated country with low wages, little ambition but happy people, to a bustling, high-wage, growing country where the much bigger debate is growth versus lifestyle. Malta is now the fastest growing economy in Europe.

In the past 10 years Malta’s population has grown by nearly 50%; its average wage has risen by more than 200%; its GDP per head has risen by nearly 300% and it now measures holiday poverty, which has decreased by 200%. (Holiday poverty is the number of adults who can afford an overseas holiday, usually in Europe, for at least one week every year.)

Ten years ago 72% of Maltese adults could not afford such a luxury. Today 26% cannot afford that luxury.

 (As an aside, holiday poverty seems a peculiar line in the sand by which to judge poverty. Malta has a comprehensive health education and Social Security system far better than any country with which I am familiar, bar Singapore and Switzerland. Surplus income for overseas holidays is surely not a subject to bring into a conversation about poverty.)

Perhaps a more relevant statistic for Malta is this: 20 years ago the Maltese people were the second slimmest people in Europe. Recent EU research identifies the Maltese as now the least slim people in Europe, some 65% of adults classified as overweight. The growth of income clearly correlates to different habits and consumption of convenience food. McDonalds has come to Malta.

Malta has grown its economy through a focus on tourism and education. Last year Malta, population 600,000, had 4 million tourists with very few of them backpackers at hostels. The forecast is that this will hit 5 million in a couple of years. 

It has 30 educational schools for foreign students, aged 12 to 18, most of whom arrive from eastern Europe, Spain and Scandinavia.

Malta’s growth has been turbocharged by selling its passport and residency for 1 million euros, conditional upon house purchases, employing Maltese people and using Maltese directors. The EU has recently banned the selling of passports in this way.

Property development is at breakneck speed. The tiny islands of Malta and Gozo combined are about the size of Wellington.

Foreign construction companies are building hotels, apartments and new infrastructure at an astonishing rate. We stayed this year in a hotel wing that had not been started 12 months ago.

There would be at least 100 industrial cranes at different works sites throughout Malta and Gozo. Roads are being dug up to build better and bigger underground facilities. Implicit in all of this is the rezoning of land. The Maltese love the higher wages that result from tourism and, silently, from the tax havens created to attract global companies, tax being applied at 5% rather than 35%. Many giant global companies now have a zombie office in Valletta, exploiting the 5% tax rate, probably at a cost to the US treasury.

But the rapid disruptive growth has not just been inconvenient. A nod and a wink is the public acceptance of more contributions to trusts belonging to public officials and politicians.

Malta especially, but Europe in general, knows how to nod and wink.

Unlike New Zealand, Malta has media outlets that thrive on intrusive, sometimes dangerous, journalism. A cartoon in the main newspaper recently portrayed the former Prime Minister’s chief of staff benevolently smiling and telling an interviewer: “Everyone knows I have a heart of gold. I just cannot remember who I stole it from.”

Malta has a wonderful social welfare system, a world leading education system, especially in engineering and medicine, and a generous pension scheme. It has what by my definition is the best climate in the world, its food hygiene is excellent and its people friendly, cheerful, well-educated and proficient in English.

But corruption, like rust, tends to feed on itself.

The very public case of the organised murder of a journalist will need to be resolved in the High Court.

Bitcoin cannot be allowed to cover all the corruption.

_ _ _ _ _ _ _ _ _ _ _ _

IT is fascinating to read of how various crooks have been uncovered amongst these corrupt or terrible deeds.

The Pan Am Lockerbie air disaster in 1974 was traced back to a Libyan terrorist through the forensic discovery that he had bought his clothing from a supplier in Malta who identified the perpetrator.

One of the prime crooks in the journalist’s murder was caught by airport customs dogs who are said to have sniffed out currency from a suitcase as he was leaving the country, the currency unrelated to the murder case. 

Closed-circuit television and smart phone technology nailed others in this crime.

Hilariously, a recent capture of drug criminals was made because of their own idiotic error. Drug lords had set off from Sicily in a large launch carrying €750,000 of illegal money. The boy at the wharf in Sicily had forgotten to fill the petrol tanks of the launch. When the boat ran out of fuel offshore a friendly passerby contacted the police to come and rescue the marooned launch.

The drug lords saw the police boat heading their way so threw overboard suitcases of money totalling €750,000. In fact the police were offering a tow. The suitcases washed up on a Sicilian beach. Beachgoers were delighted; money from heaven. The police nailed the drug lords.

 If corruption is to be constrained you need honest police and an honest justice system where cronyism is absent.

Europe and Malta are now and will be under the spotlight.

_ _ _ _ _ _ _ _ _ _ _ _

NOT through corruption but through piety, British pensioners are now claiming they are being robbed.

A recent industry study has shown that a pensioner who asks for their funds to be invested in Environmental, Social and Governance funds (ESG) would expect to build a lump sum smaller by £50,000 than the fund invested under non-ESG guidelines, over a 30-year period.

Perhaps the timing of the research is important. In recent years the mining and oil production sectors have produced sensational results. Using the trend line established by those rises, the modelling of the 30-year term might be somewhat presumptuous.

_ _ _ _ _ _ _ _ _

THANK YOU to all readers who have commented on the insightfulness and wisdom of the newsletters written by Edward and James Lee, who have been writing Taking Stock recently.

Going forward, the writing of TS will be shared by the three of us.

_ _ _ _ _ _ _ _ _ _

Travel

Johnny Lee - Taupo - 1 September

Johnny Lee - Hamilton - 2 September

Johnny Lee - Tauranga - 3 September

Johnny Lee - Christchurch - 7 September (FULL)

Chris Lee & Partners Limited

Taking Stock 6 August 2026: The Scoreboard

James Lee writes:

“I just want to make a difference.”

It wasn’t the answer I expected.

I was sitting on a cold concrete step during an Ed Sheeran concert with the outgoing CEO of Air New Zealand. Between songs, I asked him what came next. After leading one of New Zealand’s most recognised companies, what did he want to do?

His answer was remarkably simple.

“I just want to make a difference.”

It resonated with me at the time because I have always believed that, when the time eventually comes to judge our lives - whether by our children, our own version of faith or simply the face staring back at us in the mirror - that is the question we should all be asked.

Did we make a difference to someone or something?

Perhaps it is because I am getting older, or perhaps it is because of my children: whatever the reason, I find myself thinking about that conversation more often than I once did. My definition of success has evolved over the years, but even today one of my proudest professional moments was watching Synlait Milk hire its 1,000th employee. We had been on that journey since the site was little more than an empty paddock, and seeing how meaningful employment could transform families, communities and an entire region changed the way I thought about building companies.

Perhaps that is why I remember it so vividly. It taught me that the greatest legacy a business can leave isn’t simply a higher share price. It is the opportunities it creates for families you will never meet.

Quarterly earnings, share prices, and building successful businesses will always matter. But increasingly I find myself asking a much simpler question - will my children inherit a country with more opportunity than the one I grew up in, and what role did I play in helping create it?

Will they grow up in a New Zealand that is prosperous, modern, safe and, yes, as Jacinda Ardern has said, kind? Will ambitious young New Zealanders believe they can build globally significant companies without feeling that success requires leaving our shores? Will this still be a country where optimism outweighs caution?

Those questions came flooding back this week when Prime Minister Christopher Luxon remarked that it is the role of business, not government, to create jobs.

He is right.

Governments do not employ hundreds of thousands of New Zealanders. Businesses do. Every meaningful increase in living standards has ultimately come from entrepreneurs willing to take risks, employ people and create something larger than themselves. Governments do not build software companies, manufacture products or win export contracts. Leaders do.

But while the Prime Minister’s observation is true, it is also incomplete.

Businesses create jobs, but governments create the environment in which businesses are willing to create them.

That distinction matters because employment is not the cause of economic success. It is the result of it.

The same is true of the NZX.

The NZX is not New Zealand’s economic engine - it is New Zealand’s economic scoreboard

If you don’t like what the scoreboard says, don’t blame the scoreboard. Change the way the game is being played.

For years we have debated why our stock exchange continues to lose relevance. It has almost become a national sport to criticise the NZX. At times I think some of the criticism is unfair. I have enormous respect for the efforts made over the years by leaders such as Mark Petersen, Tim Bennett and Mark Weldon. They all recognised the challenge and, in different ways, tried to address it.

Every few months another proposal emerges to improve liquidity, attract more listings or modernise the exchange.

But perhaps we have been trying to fix the scoreboard instead of improving the game being played beneath it?

Like every scoreboard, the NZX simply reflects whether businesses are growing, whether entrepreneurs are building, whether investors are backing ambition and whether a country believes its future is worth investing in.

Right now our scoreboard is telling us something uncomfortable.

We are losing.

There is an old saying in venture capital that captures this perfectly.

Silicon Valley didn’t become great because it had NASDAQ.

NASDAQ became great because Silicon Valley existed.

The exchange was never the catalyst. It was the consequence.

The same lesson can be found almost anywhere you choose to look. Sweden, with a population of little more than ten million people, has produced IKEA, Volvo, Ericsson, Atlas Copco and Spotify, along with countless other globally competitive businesses. Their stock market did not somehow inspire those companies into existence. Swedish culture, public policy, capital and ambition did. The exchange simply became the place where their success was reflected.

Their success wasn’t built by fixing a stock exchange. It was built by producing companies worth listing.

New Zealand has already proven it possesses the talent to do exactly the same.

Mainfreight now employs thousands of people across Europe, Asia, Australia and the Americas, demonstrating that a logistics company founded in Auckland can compete with the world’s largest operators. Fisher & Paykel Healthcare competes globally from the edge of the Pacific. Xero transformed accounting software for millions of businesses. Rocket Lab has become one of the defining aerospace companies of its generation.

These companies are not accidents.

They are proof. Proof that New Zealand can build globally significant businesses.

The question is why they remain the exception instead of becoming the rule.

Why doesn’t Fisher Funds list and acquire AMP? Why doesn’t ZURU list locally while creating another thousand high-value jobs here? Why not Fidelity Life, Beca or, heaven forbid, investment banks such as Barrenjoey or Goldman Sachs following the same path they did in their own home markets?

Building a great company has never been particularly mysterious. A successful ecosystem only requires three ingredients:

It requires long-term pools of capital willing to back ambitious founders.

It requires entrepreneurs with the courage and ability to build businesses capable of competing globally.

And it requires laws and public policy that encourage investment, reward innovation and provide confidence that taking long-term risks will not be punished.

Remarkably, New Zealand already possesses much of that foundation.

Our entrepreneurs are among the best in the world. Every generation seems to produce another Peter Beck, another Nick Mowbray, another Cecilia Robinson, proving once again that geography has never limited Kiwi ingenuity.

We also possess one of the fastest-growing pools of long-term investment capital in our history. KiwiSaver now represents hundreds of billions of dollars of patient capital, accumulated by ordinary New Zealanders investing in their own futures. Yet a substantial proportion of that capital ultimately finds its way offshore because there simply are not enough New Zealand companies of sufficient scale to absorb it.

We have built an extraordinary savings machine, but too much of its fuel powers the growth of other economies instead of our own.

Imagine if even another five percent of KiwiSaver assets found their way into globally competitive New Zealand companies over the next two decades. The returns would not simply appear on portfolio statements. They would appear in laboratories, engineering firms, software companies and thousands of highly skilled jobs.

It is deeply unsatisfying to think that our retirement savings are helping build someone else’s future while too few opportunities exist to build our own. Today, capital is not the constraint we often imagine it to be. I would argue the real shortage is confidence.

Somewhere over the past two decades we have become exceptionally good at preserving wealth, but less accomplished at creating it.

We celebrate financial security. The NBR Rich List receives extraordinary attention despite, in many ways, its focus on big fish in little ponds rather than celebrating those swimming in the ocean. There is nothing wrong with owning a beautiful home, a boat, a bach or a BMW. They are symbols of success earned through hard work.

The problem is when they become the destination rather than the reward.

Somewhere along the way we stopped admiring the people who built the companies and started admiring the people who owned them.

We became more comfortable talking about property portfolios than product launches, more interested in protecting what we have than creating what we might yet become. Too many businesses reach 20 employees, then 50, then perhaps 100 before deciding that is enough. Growth gives way to preservation. Ambition quietly gives way to comfort. Boards become increasingly focused on protecting today’s value rather than creating tomorrow’s.

This is not simply a political problem. Nor is it simply a business problem.

It is ultimately a cultural one.

And this is where I think Luxon is only partly right.

For more than a decade, governments of different colours have made decisions that have slowly eroded business confidence. Competition policy has often favoured consolidation over dynamism. Foreign investment rules have too frequently treated international capital with suspicion rather than recognising the role it can play in helping New Zealand companies reach global scale. Housing policy has channelled enormous amounts of capital into existing residential property instead of productive enterprise. Monetary policy became singularly focused on inflation while the wider consequences for business confidence, investment and employment rippled through every sector of the economy.

Markets do not exist independently of government. They are shaped by it, which is why, while businesses create jobs, governments cannot distance themselves from the conditions that determine whether businesses feel confident enough to hire.

If we want a different scoreboard, we need a different game.

Fortunately, changing the game is surprisingly simple. We need to change three rules:

The first is making New Zealand the most attractive place in the world for New Zealand companies to employ New Zealanders. If tax settings rewarded companies for bringing high-value engineering, software development, research and executive roles back home, even shifting a small percentage of globally mobile employment into New Zealand would create thousands of highly-skilled careers and strengthen the ecosystem around them.

The second is redefining what constitutes our national interest when New Zealand companies are acquired. Too often our focus ends with the purchase price. It should extend to where decisions are made, where research is undertaken, where intellectual property resides and, ultimately, where jobs are created. Domestic employment should not be an afterthought in takeover decisions. It should be recognised as a strategic national asset.

The third is making New Zealand one of the most attractive countries in the world for employee ownership. The countries that repeatedly create great companies do not simply create wealthy founders; they create thousands of wealthy employees who become the founders, investors and early backers of the next generation.

Every engineer, scientist, software developer and salesperson who helps build a great New Zealand company should have the opportunity to share meaningfully in the value they create. A sensible tax regime could defer taxation on genuine employee equity until those shares are sold rather than when they are granted. Employee ownership does far more than reward success. It creates the next generation of founders, investors and entrepreneurs who go on to build the companies that follow.

None of these ideas, however, will matter if we fail to address the deeper issue.

Culture always wins.

The countries that consistently produce great companies do not simply have better tax systems or better stock exchanges.

They celebrate builders, they celebrate the people willing to risk failure in pursuit of something extraordinary.

One of my greatest frustrations is watching people who have never attempted to build anything ridicule those who have. Every successful entrepreneur has stumbled. Every great company has made mistakes. If we punish every fumble, eventually fewer people will step onto the field.

Peter Beck. Nick Mowbray. Cecilia Robinson. They should not remain remarkable exceptions, they should become the aspiration and, eventually, the expectation.

Luxon was right all those years ago when he said he wanted to make a difference.

I also think he is right that businesses create jobs.

Where I think Luxon is only half right is that governments do not create jobs, but they absolutely create the conditions that determine whether those jobs are created here, overseas, or not at all.

The greatest difference any of us can make is helping to build a country where the next generation believes creating the world’s next great company from New Zealand is entirely normal.

Because nations do not become wealthy by storing capital, they become wealthy by putting it to work.

If New Zealand once again becomes a nation of builders rather than simply a nation of wealth preservers, the NZX will not need fixing.

Like every good scoreboard, it will simply reflect the success that has already been created.

Perhaps that is the greatest difference any government, entrepreneur or investor can make.

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Travel

David Colman - New Plymouth - 7 August

Edward Lee and Gavin Parkes - Wellington - 10 August

Johnny Lee - Taupo - 1 September

Johnny Lee - Hamilton - 2 September

Johnny Lee - Tauranga - 3 September

Johnny Lee - Christchurch - 7 September

Chris Lee & Partners Limited