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February 20, 2015
Commerce

The future economy

South Australia’s economy is in a period of flux as our traditional industries shrink under the weight of global forces. If the state is to be as prosperous in 2040 as it is today, the next 25 years must be dedicated to finding new ways to be useful to the world.

  • Words: Farrin Foster
  • Pictures: Ben McGee

As much as the future holds the hope of a daring new reality where technology works in seamless tandem with our human nature and illness is eradicated, it equally raises the depressing possibility that everything could remain somewhat the same.

There is no external, irrepressible force that pushes us forward; instead the future is built on the actions of those in the present. 

South Australia is at a point of transformation. Our old economic drivers – basic manufacturing and export – are falling away amid a new global reality. In their place is a widening gap that is often characterised as either an opportunity or a problem. In reality, it is probably both. 

Here, CityMag looks ahead to 2040 and identifies the three key industries – resources, tourism and knowledge export – that will evolve (or be maintained) to form the backbone of our state’s economy, and examines the barriers that will need to be overcome on the way. 

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Starfish Hill Windfarm at Cape Jervis

It is very early in the morning at the Starfish Hill Windfarm on Cape Jervis – too early even for the ferry to have started its first trip from the mainland across the water to Kangaroo Island. 

A sickle moon sits small in the sky and the sun’s spreading light illuminates kangaroos as they wend their way between the wind turbines dotting the landscape. It’s a still enough day, but the turbines are spinning at a fair clip – feeding kinetic energy created by their movement into South Australia’s power grid. 

“In the renewable sector, South Australia is a leader nationally and globally. You have the right natural resources – South Australia is a very windy and sunny state,” says Alicia Webb, a senior policy advisor with the Clean Energy Council. 

Last financial year, about 31.5 per cent of South Australia’s energy needs were generated by renewable energy. The wind power sector alone supported 842 direct jobs and 1,684 indirect jobs. Relative to the rest of the country, these are big numbers. 

Our success in the industry is partially a result of foresight from previous state and federal government administrations. For decades, the renewable energy sector has been nurtured by a range of measures covering everything from business grants, to incentives for residential solar panel installations, to red tape reduction for development of things like windfarms.

The industry now stands at a point where, barring disaster, it will continue to grow into 2040. But the amount of growth and the amount of value South Australia will see from it remains questionable.  

“There is going to be a renewable energy industry and South Australia will definitely be participating in that space,” says Adrian Ferraretto, the owner of Australia’s only solar panel manufacturer – Tindo Solar, which is based at Technology Park in Mawson Lakes. 

Tindo Solar's Adrian Ferraretto

Tindo Solar’s Adrian Ferraretto

“We either do that by buying everything from overseas – all the wind turbine towers and solar panels and whatever else – or we can make those things ourselves. There’s no reason why we can’t do that here.”

Adrian argues that engaging earlier in the supply chain gives South Australia multiple ways to capitalise on the growth of the renewable energy sector. As well as the obvious extra jobs associated with manufacturing, there is the opportunity for research and development, which can lead to the export of lucrative patents and intellectual property. 

“Things like research and development come from manufacturing, not the other way around,” he says. “As things stand now, China will be the research and development leader in renewable energy – not us. They have the factories where they can put their research and development into practice, having that makes all the difference.”

Historically though, South Australia has had some success in renewable energy innovation. In 2012, local company Zen Energy announced key discoveries that went some way toward making renewable energy storage affordable. This is the most important issue for advancement of a sector whose power is currently only usable as it is generated – as in, only when the sun is shining or the wind is blowing.

“I think once storage becomes economically viable we’re going to see a huge change in the energy landscape,” says Alicia. “Obviously, if you can store solar power and wind power and other renewable power then you can use that power when you want it, which is the main attraction at the moment with fossil fuels, so I think that will be a really important change.” 

While these technological developments are yet to be fully realised and the questions around manufacturing will no doubt hang in the balance for years to come, industry is happy with the State Government’s efforts to bolster the sector. 

Tony Abbott’s Federal Government is a different story – both Adrian and Alicia identify its obfuscation around the national renewable energy target as being the biggest threat to future success. Without the certainty of knowing how much national support is on offer, investors have become gun-shy, a phenomenon that – if it continues – could mean South Australia misses out on new developments that would generate cash long into the future. It’s a policy bind that won’t destroy the industry, but it could hold it back from fully realising its potential. 

A similar scenario is being played out on the flip side of South Australia’s energy economy. The state’s mining companies are currently suffering a low period caused by falling commodity prices and slower rates of growth in China, and investors are turned off by what they see as a sluggish industry. 

But this won’t last forever. CEO of the South Australian Chamber of Mines and Energy, Jason Kuchel, says that almost any human progress is enabled by stuff pulled from the ground. 

“The reality is that our world is so heavily reliant on commodities that we mine that a substitution for one thing only creates an opportunity for something else. And we have a very good range of resources here in SA,” he says.  

“So, yes, markets will be shifting. For example, the cost of renewable energy is coming down so there might be less domestic demand for coal or gas fired power in the long term, but don’t underestimate how many minerals are used in the manufacturing of solar cells. Even for wind energy – those turbines aren’t made out of cardboard – there’s a heck of a lot of concrete and that means a lot of steel that goes into building them as well.” 

“The reality is that our world is so heavily reliant on commodities that we mine that a substitution for one thing only creates an opportunity for something else.”  Jason Kuchel

Santos' Moomba gas plant is likely to be in business for years to come. This picture courtesy Santos.

Santos’ Moomba gas plant is likely to be in business for years to come. This picture courtesy Santos.

The success of our resources economy, then, seems inevitable. But, as in the renewables space, there are some things that could be changed to help grow our share of the value pie. 

“The State Government needs to be mindful of infrastructure,” says Jason. “Particularly in a slow time like now its easy to say that it’s not worth investing in the infrastructure but that’s how you get to be last out of the gate when the next upward cycle comes through.”

By 2040, Jason hopes at least three new ports will have been built, making the state an attractive investment option for up-and-coming international super economies.

The energy and resources industry, while it could yet fail to reach its full potential, can and will survive off the back of the state’s natural advantages. Another major industry that draws on South Australia’s inherent qualities – tourism – has not been endowed with such straightforward prospects.

Tourism is a human pursuit, which makes it complicated. Unlike renewable energy or resources it is not an essential, and it is also made problematic by the element of choice that governs the market. The choice of where to buy your copper has a relatively small amount of variables – cost, ease of access, regulatory framework, diplomatic relations. In contrast, the choice of where to spend your week of summer holidays is influenced by a near infinite number of things – from bad memories of exes to stereotypes about particular locations. 

Tourism is not business – it’s pleasure, and that makes it a much harder economy to master. 

South Australian Tourism Minister Leon Bignell believes the state is primed for exponential tourism growth, but only if we can get a clear, cohesive message out to potential visitors. 

“We want to concentrate on the marketing,” he says. “The New York Times has just put us in the top 25 places in the world to visit… I think its fantastic that South Australia is out there. 

“We’re putting money into marketing, the private sector is putting money into marketing, but what I’d love to see is individuals get the message out to their networks around Australia and around the world as well.”

The local Toursim Commission’s most recent marketing campaigns have impressed many, including general manager of the National Wine Centre Adrian Emeny, who highlights the award-winning Barossa, Be Consumed TV Commercial. But, Adrian is mindful that some practical considerations also need to be addressed before SA tourism can zoom toward a bright future. 

The National Wine Centre's futuristic wine storage system means tourists can taste Grange, even if they can't afford the whole bottle

The National Wine Centre’s futuristic wine storage system means tourists can taste Grange, even if they can’t afford the whole bottle

“I think we need to ensure the infrastructure is right and there’s ease of access to the regions. Roads, bus infrastructure, regional airlines – to make sure that it’s easy to get to those places,” he says.  

He suggests Government work in partnership with private enterprises such as the Adelaide Airport to chip away at issues like low frequency connections into the city.  Smaller operators though, will have to tackle problems with the scale of the state’s industry without Government partnership. Never likely to attract huge influxes of visitors because of our geographical positioning, SA’s small tourism entrepreneurs need strategies that help them survive in between big events and during off season. 

Ben Neville, owner and sole operator of Fleurieu Peninsula’s Off Piste 4WD Tours, has some ideas of how this might be done. 

“I want to work with other little key operators – other tour services, helicopter rides, surf lessons – and really create a great package. I want to work with these guys so people can come in and easily access an experience beyond the normal that is still affordable,” he says.

A collaboration of this ilk is already succeeding at Seppeltsfield in the Barossa Valley. There, the winery has joined forces with a local knifemaker, the Jam Factory, Fino restaurant and others to create a multi-faceted destination with broad appeal.

“People are after that really personal, sort of classic European, local hospitality style of experience.”  Ben Neville

Jose the dog of Off Piste 4WD Tours is much more interested in playing than posing with owner Ben Neville

Jose the dog of Off Piste 4WD Tours is much more interested in playing than posing with owner Ben Neville

If all of these challenges can be managed, then South Australia will have a more than fair chance to build a strong and sustainable tourism industry. The state, after all, is well equipped to offer future tourists exactly what they want.

“People are after that really personal, sort of classic European, local hospitality style of experience,” says Ben. “They want to meet locals, and have that real authentic farmgate encounter.”

This meet-the-maker type holiday Ben speaks of will only increase in importance as technology begins to mediate more and more of our daily interaction. As we head toward 2040, people will crave real world experiences in their downtime and, with an almost ridiculous number of primary produce regions so close to the city, SA is perfectly poised to offer personal interaction with a good measure of food, wine, craft beer, beautiful views, cultural institutions and wildlife thrown in for luck. 

Off Piste's Ben Neville shows CityMag some of the farmgate hospitality he says tourists of the future will look for

Off Piste’s Ben Neville shows CityMag some of the farmgate hospitality he says tourists of the future will look for

The increasing importance of human interaction will also be a vital factor in South Australia’s future ability to participate in a third key industry – the export of knowledge and intellectual property. 

Bringing international students to the state is already big business – unconfirmed figures for 2014 show that about 30,000 students studied here last year and the industry contributed almost $1 billion to the economy. 

Peddling knowledge is our fifth biggest export, but tertiary education is in a period of change as online learning and virtual classrooms begin to replace the traditional lecturer at the front of a big hall model. Despite this, Karyn Kent, the chief executive of Study Adelaide, believes the need to travel and learn will endure.

“That technology-enabled learning is something I’ve been keeping an eye on, but my view is that nothing replaces an actual experience in a market offshore,” she says. 

“The English language skills are a really big thing, particularly for students out of China. And that experience of living and possibly working in an international country is a really attractive thing. 

“When they go home they go to a competitive work market so having that on the CV is very important to them, so there is a big demand to come here and do things like work experience alongside the education.” 

Study Adelaide chief executive Karyn Kent

Study Adelaide chief executive Karyn Kent

Australia is the sensible study location for students from throughout the Asia Pacific, but Adelaide’s challenge is to stand out above other cities that are better known in the international psyche – which is almost all of the mainland capitals. In this pursuit, Study Adelaide’s goals line up with those of the tourism bodies, the State Government and the Adelaide City Council.

Private enterprises looking to ply their wares in our region face the same challenge. There are countless opportunities for South Australians to export skills that are ordinary here to countries where experts are still developing knowledge in those industries. Building a profile for SA could place our businesses front of mind as potential suppliers, but the world is full of people with the same idea.

Adelaide City Council Deputy Mayor Natasha Malani is the co-director of Access India, a business that facilitates business-to-business deals between Adelaide and India.

“An architecture firm here might win a building as a project, but in India they will win a contract to masterplan a township.” – Natasha Malani

Access India's Natasha Malani. This picture courtesy Daniel Marks.

Access India’s Natasha Malani. This picture courtesy Daniel Marks.

“In the architecture industry, for example, India is building townships at the same rate we’re building one building. An architecture firm here might win a building as a project, but in India they will win a contract to masterplan a township,” she says. 

“I think that’s where we can offer expertise. But, Sydney and Melbourne have bigger budgets to attack the market and Adelaide needs to be a bit more niche about it. Australia as a whole is behind on the radar compared to Europe, China, America – we have some work to do. We have to change and adapt for the marketplace.” 

Remarks

Since the time of writing, the State Government has made two announcements that indicate a serious desire to boost the mining sector. The first is a $10 million deal to attract Oz Minerals’ head office to Adelaide, and the second was the unveiling of a Royal Commission that will consider if SA should have a “deeper involvement” in the field of nuclear energy.

Making the right moves to grow these knowledge industries towards 2040 is difficult and nebulous – soft power manoeuvres on behalf of Government need to work in parallel with cultural initiatives in the arts and sport. Export of things like honey and wine could engender goodwill and awareness while positive or negative news stories might fast forward us into a poll position or undo years of good work.

There’s no doubt there will be elements of luck and unexpected scenarios that arise as we head toward the future – we might be overcome by the superior intelligence of robots or swamped beneath rising seas yet. But just because we can’t control everything doesn’t mean we shouldn’t take responsibility for something. By 2040, if we push in the right direction at the right times, our state will have a strong, smart economy that capitalises on those things that make South Australia different. 

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