South Australia in the World 2019 report The view from business leaders, investors and the global media. Comparative advantages and the perception gaps. South Australia in the World As transformation continues internally, it is crucial that we gauge whether external perceptions are keeping up with the realities of what is really happening in our state. Through this report we aim to trigger a discussion on how the world views the South Australian market and how we can influence that perception and ensure people have an accurate and up-to-date understanding of doing business here. To start this conversation, we conducted more than 30 structured interviews or discussions with global business leaders, journalists and investors. The findings aren’t fully representative, but they do allow us to begin to paint a picture of how global business and finance leaders view the state: executive summary 1 2 5 4 3 7 6 South Australia is viewed as a beautiful place to live with a comparatively high-quality of life. Its wine and tourism industries are well known. There is also some awareness of the emerging leadership position in renewables and defence industries. But its capital, Adelaide, is still not seen as an obvious choice for modern, global businesses or the young professionals that drive them. When compared globally to regions or cities of comparative size, South Australia and Adelaide suffers from a general lack of awareness which reinforces established, out-dated perceptions. Sydney and Melbourne remain the reference points for discussions on the Australian economy yet there is an opportunity for South Australia to contrast itself against the East Coast states. There is also a desire for clearer, more coherent messaging from the state on its emerging industries and how they are balanced with established economic drivers in the state.3 Contents The national picture 5 South Australia 6 Wine, beaches and tourism still lead the way 6 Renewable energy, defence and space show perceptions are changing 6 South Australia: beyond trade and investment 9 The problem with nice 9 The media and South Australia 10 What can be done to close the gap? 12 Next steps 14 About the research 15Introduction South Australia is changing. Space and defence tech growth is being driven at Lot Fourteen in the heart of the city where Australia’s national space agency is being joined by a cluster of world- leading nanosatellite and space tech companies. The site will also be home to teams from major established global technology businesses focused on defence and aerospace. Similarly, the Tonsley Innovation District on the city’s fringes continues to innovate, and is now home to several automation, AI and high-tech manufacturing leaders including SAGE Automation and Siemens. Beyond tech, the state retains a national leadership position on renewable energy and storage. For example, Tesla’s industrial-scale lithium-ion battery in the Mid North remains the world’s largest, while home battery storage is also booming. Indeed, South Australia’s virtual power plant is now over-subscribed and looking to expand further to deliver up to 250MW into the state’s renewable dominated grid. These emerging growth sectors are complemented by South Australia’s economic engines: food, agriculture and wine. Yet while significant, these successes don’t hide the economic reality. Rather than catching up, South Australia is falling further behind the eastern states on foreign investment, inward migration and agglomeration, and GDP growth. The economy is stable, with stability in the real estate market a relative advantage for South Australia at present. But the state is not yet attracting the level of outside capital or talent needed to make Adelaide a modern, vibrant international city. One of the seemingly intractable problems for Adelaide and South Australia is the persistent misperceptions or outright lack of knowledge by those outside its borders. Whether you are a global investor, a multinational business, or simply a young professional looking to start a career, Adelaide and South Australia often don’t register as an option let alone make it to due diligence stage. In this report, we explore this knowledge and perception gap: • Why does a city the size of Boston or Bristol seem to continually fly under the radar or make headlines for the wrong reasons? • What is it that people think of when they think of South Australia? • What could South Australia do to ratchet up global interest in the state? To offer some insight on these questions, we decided to look beyond our borders. Over the past two months, we have conducted more than 30 structured interviews or discussions with global business leaders, journalists and investors. Participants were based globally in locations including London, New York, Dublin, Beijing and Paris, while we also spoke to participants in South Australia working for global organisations or who are recent arrivals to the state. To ensure unvarnished, frank input, all interviews were conducted confidentially with any quotes in this report being unattributable. The organisations our participants work for ranged from large blue-chip businesses and investors such as Hermes Investment Management, FTSE Russell and Deloitte, to global media titles including the BBC, Reuters and Fortune Magazine. 5 The national picture To establish a compari- son, we started by asking participants about their views on the Australian economy as a whole. Responses here were relatively aligned. A sig- nificant majority focused on the fact that the coun- try, alone amongst OECD nations, is coming up to the end of its 28th year without recession. From this observation, respondents generally pointed to the positives asso- ciated with the country’s political and economic stability. Some respondents also pointed specifically to the relative success of the eastern states in pivoting towards the global finance and services sectors. Crucially, and perhaps unsurprisingly, the advantages of being so close to Asia were noted by virtually every respon- dent. Indeed, being “on the doorstep of APAC” was seen as the central factor in maintaining Australian economic growth through the last decade. Yet perceptions were not all positive. Resting on continued commodity-led growth, and an ability to tap into the booming Asian markets has made the Australian economy “conservative and blinkered”. There was a general percep- tion among several respondents that the image of Australia as dynamic and proactive was on the wane, including: “Australia is a small player on the world stage. While it has comparative advantages, those associated with its once prevalent ‘can do’ attitude have disappeared.” This for some respondents has had a perceived knock-on effect, resulting in slower adoption rates of new technology and damaging Australia’s previous repu- tation amongst multinational brands as a perfect test-bed for new products. Finally, it is worth noting that while in a significant minority, four international respondents did specifically state that their overall perception of Australia had shifted negatively over the past five years as a result of global media coverage of the Federal Government’s “regressive policies” on climate change and migration. For one respondent specifically, this per- ception of regressive approaches to soci- etal and climate issues – specifically the latter – reinforced her wider perception of Australia no longer being a dynamic, forward-looking market. “Australia is a small player on the world stage. While it has comparative advantag- es, those associated with its once prevalent ‘can do’ atti- tude have disappeared.” This dynamic is important for South Aus- tralia. Through the eyes of the general observer, Australia is one economy. Per- ceptions of South Australia – especially as a comparatively small Australian economy – are linked indelibly to that of the country as a whole, with reputa- tional wins and losses at national level, impacting locally. But there is also an opportunity. When pushed on perceptions of the national economy, respondents invariably re- ferred to the eastern states and Western Australia. Views of these states – positive or negative – are more developed and entrenched. Sydney, Melbourne and Perth may be “known” but the space to create a new narrative is smaller. While respondents did offer positive commentary, specifically on Melbourne, several also offered negative opinions, such as: “Perth is tiny and totally dependent on the ups and downs of the commodities markets” while “Sydney is a great global city, but it’s not London or New York. The things Sydney is great at are not unique.” For South Australia, a lack of global awareness and of entrenched views of the state can be an opportunity. Being able to juxtapose the images of higher profile states with a South Australian al- ternative, especially one which is coun- terintuitive and plays up the dynamism emerging here, could gain traction. South Australia in the World South Australia From a business and investment standpoint, the reality is that Adelaide and South Australia simply don’t have a strong, well- defined image globally, while general awareness of the state, even among stakeholders and media with an APAC focus, is also very weak. The interviews and discussions for this paper revealed no clear, consistent, unified understanding or perceptions of South Australia. There were however some themes that developed: Wine, beaches and tourism still lead the way Not surprisingly, a majority of people did make reference to the state’s wine industry and saw this as a strong selling point for the state. In some circumstances this would roll into wider commentary on the state’s scenery, beaches and popularity as a tourist destination. As we see in table 2, ‘wine’ was the most commonly associated word with South Australia, with ‘holidays and tourism’ and ‘beaches’ all in the top five. And while participants claimed they ‘wouldn’t associate’ the state with creative industries, several international participants did highlight the Adelaide Festival and Fringe, with four participants pointing to it being the reason they visited the state. Two participants from the media cohort both underlined the importance of the Fringe brand to the city, claiming that it put Adelaide in line with a small group of global cities renowned for their cultural importance. Other cities cited in this group included Edinburgh and Paris. Renewable energy, defence and space show perceptions are changing There were also several general references to mining and energy and a recognition that the state had a strong resource base. Within this group of respondents, the most common evidence cited was BHP’s Olympic Dam, but there was also an unevidenced awareness by a large minority of respondents that the state was sitting on large levels of mineral reserves. Linked to this, a majority of participants also had at least some awareness of the state’s position as a leader in renewable energy and energy storage. This awareness was almost always pegged to the blackout of 2016 and the subsequent debate around renewable energy and the arrival of the Tesla industrial-scale battery in the state. Beyond anything else, this was the global media story on South Australia that people remembered and referred to, even if they had trouble remembering the details. The renewable energy narrative was also referred to in overwhelmingly positive terms. For several participants there was a sense that while this was a progressive move in relation to climate change, it also showed the state was willing to foster innovation. Several respondents also specifically remarked that they saw South Australia as being ahead of other Australian states on the issue of renewable energy. “There’s some exciting things happening in South Australia on renewables. Tesla being there made a real difference [Tesla PowerPack, Jamestown] and they have a lot of wind power going on.” Encouragingly, while not as pronounced as with energy, there was also a substantial number of participants that had a knowledge of the state’s emerging strength in defence, aerospace and space industries. Particularly among the journalists we spoke to, there was a strong knowledge of the ship building and naval infrastructure sector with commentary on BAE Systems and Naval Group engagement in the state being offered by several participants. Finally, the news that South Australia was the new home of the Australian Space Agency had also filtered through to some participants. Much like the Tesla story, few respondents could offer detail, but the fact that the Agency was coming to the state was seen as exciting. There was also an acknowledgement that its arrival would play a powerful convening role in developing an innovation ecosystem around the Agency’s operations. 7 Would you associate South Australia with any of the following industries? Energy and Minerals Food and Agribusiness Defence and Space Industries Creative Industries Health and Medical Industries High Tech Sector International Education 0 3 6 9 12 15 Strongly AssociateAssociateWouldn’t associate South Australia has a great reputation for its wine, particularly in Europe where wine bottles in shops are generally labelled ‘Product of South Australia’, which is good branding for the state. South Australia is also developing a reputation as a renewable energy leader, with the state’s new Tesla battery in particular making news across Europe.Technology Defence Beaches Mining and commodities Wine Higher education and research Sport and Leisure Energy Agriculture Creative arts and culture Holidays and tourism Manufacturing 05101520 YesNo Word association: do you associate these words with South Australia?9 South Australia: beyond trade and investment While looking at South Australia through the prism of trade and investment was central to our research, we also wanted to see if there were any correlations and contradictions in feedback when we asked people for their personal, emotional and informal opinion on the state. Generally, when invited to offer a more informal opinion (typically interviewees were asked how they’d talk about South Australia to friends at the pub) responses from Australians became more candid. “Adelaide is just a big country town.” “It’s a nice place but it’s very dated and it’s dull. There is just nothing going on there and it’s very parochial.” “Culturally it’s very conservative, it’s also geared towards, and controlled, by older people. It’s not somewhere you’d want to live or work in your twenties or thirties.” International respondents were more positive: “[Adelaide is] a great place to go for good food and wine, with great links to nature given the city and countryside are so close to each other.” “It’s a lifestyle capital and somewhere I would seriously consider moving my family if there were the same prospects and economic opportunities that would afford the salaries and quality of life we see in other urban centre[s].” “The thing you notice is that it’s so clean and there is just so much space. Never-ending countryside with wineries and beautiful beaches.” The problem with nice In many ways Adelaide’s image problem, in so far that it has a perceptible image externally, is that it’s too nice. Multiple global cities and regions are perceived to be blighted by a range of issues from crime and corruption, to congestion and pollution. For Adelaide and South Australia, none of the above apply. Rather, Adelaide’s image problem is linked to a near universal perception of it being benign. Of a region that people are happy to visit, to enjoy, and to relax in but not to do business or forge a career. But, whether couched in negative or positive terms, the view of Adelaide and the South Australia region as clean, calm and quiet is challenging. These are all virtues, but they do not correlate with what is needed to drive a modern, diversified, dynamic economy. Indeed, while anecdotal, our research suggests such imagery is actively hampering efforts to attract business and investment, especially in new non- established sectors of the economy. The most telling contribution here was from an Adelaide native who works for a global consulting business: “For a specific set of people in Adelaide, the current narrative works. They like the pastoral image, city of churches, rolling countryside. But this is anathema to the kind of companies we want to see move and invest here, and the workforce they need to make Adelaide viable. “In reality, Adelaide is just not like that. There is so much going on here. And yes, it is a bit quirky, a bit weird. But that’s what makes it great. And that’s what programmers, entrepreneurs and young professionals want. But instead we seem fixated on contrasting ourselves with Sydney and Melbourne in terms of Adelaide being ‘nicer’ or ‘more refined’ when it’s just not true and not helpful for our global positioning.”Next >