Whārangi 1: Biography
Ritchie, John Macfarlane
Merchant, shipping agent, financier, stock and station agent
I tuhia tēnei haurongo e Jim McAloon,, ā, i tāngia tuatahitia ki Ngā Tāngata Taumata Rau Ko te wāhanga , 1993.
John Macfarlane Ritchie was one of the most influential commercial figures in Otago's history. He was born in Rousay, Orkney, Scotland, on 29 December 1842, the eldest of three children of Isabella Anderson and her husband, George Ritchie, a minister of the Free Church of Scotland. After his father's early death left the family with little money, Ritchie was forced to abandon a promising scholastic career and enter a merchant and shipping house in Glasgow.
In 1864 Ritchie was offered a position, leading to a partnership, in Dunedin, New Zealand, by George Gray Russell, a merchant some years his senior. He arrived in Dunedin in January 1865. The firm concentrated on lending money to runholders, and shipping wool; it also acted as a shipping agent, and on behalf of absentee landowners. Russell was often away building up custom in North Otago and South Canterbury – a branch office had been opened in Timaru – so that Ritchie effectively ran the business in Dunedin. He became a partner in 1873, when the name was changed to Russell, Ritchie and Company. Ritchie had by this time made a name for himself as an astute businessman. Of sober habits with little taste for social life, he was a devout church-goer who regularly sent money to his mother in Scotland.
In 1877 the National Mortgage and Agency Company of New Zealand (NMA) was established in London to take advantage of opportunities for investing in land in New Zealand. To assist its entry into the colony, it negotiated a takeover of Russell, Ritchie and Company. The price agreed on was £45,000 (mostly in NMA shares), with Russell and Ritchie becoming managing directors in New Zealand. From 1884, when Russell reduced his involvement, Ritchie dominated the affairs of NMA.
As general manager, Ritchie guided the transformation of NMA from a finance company into a modern stock and station agency. The company was financed, largely in Britain, by short-term borrowing in the form of debentures and cash deposits. Profits therefore depended on interest rates being significantly higher in New Zealand than in Britain. In 1883 the margin fell and profits declined sharply. The company was also extremely vulnerable to a decline in the value of land in New Zealand, such as that which occurred during the later 1880s. Many runholders had taken out large mortgages during the 1870s boom; when values crashed, mortgagee companies suddenly found themselves with clients unable to service their debt, and foreclosed estates that could not be sold except at enormous losses. NMA had to write off over £100,000 on land values during the 1880s and 1890s.
Ritchie's recipe for survival was a mixture of cautious business practice and taking opportunities for expansion. He advocated major calls on shareholders' unpaid capital instead of debenture issues, believing that financing by debt was increasingly unwise. His attitude was borne out by the fate of some companies similar to NMA. Even when his prudent management led to rising profits after 1900, Ritchie insisted on maintaining modest dividends and a continued emphasis on building up reserves. His opinion of shareholders' meetings was always low; or rather, he distinguished between the interests of shareholders and those of the company.
NMA's very existence had been threatened by over-concentration on supplying mortgage finance. Other elements of the company's activities – shipping farm produce on agency and trading in agricultural goods – were risky and not apt to produce stable returns. Nevertheless, they were profitable, and it was these activities, as well as advances on produce, that Ritchie decided to emphasise. In justifying the policy to London (which took considerable time and energy) he pointed out that advances on produce turned around faster, got better interest, and attracted a commission.
Acting as a shipping agency was a major component of NMA's business. Ritchie had a significant role in organising agreements between the Shaw Savill and Albion Company, the New Zealand Shipping Company and others to divide the available business between themselves. British shipping companies were also increasingly involved in financing the New Zealand meat export industry; NMA and Ritchie thus became significant figures in the freezing industry. NMA purchased the Longburn Freezing Works in Manawatu in 1895, the Wellington firm Levin and Company, also in 1895, and many other smaller concerns.
The change of emphasis for NMA was influenced, too, by the trend towards smaller landholding, which resulted from the policy of the Liberal government and from market and technological forces. Ritchie's own opinion (which he shared with some other financiers) was that the locking up of large amounts of land by banks and land companies was increasingly inefficient. Although he was opposed in principle to the use of taxation to encourage land redistribution, he counselled London and Edinburgh frequently during the 1890s against undue alarm and looked forward to, as he put it, a return of the political pendulum. As attorney to the New Zealand and Australian Land Company (which owned hundreds of thousands of acres in the South Island) Ritchie proved a determined lobbyist, and took care to stay on good terms with the Liberal leaders; his final assessment was that Richard Seddon's government saved the propertied classes from much more punitive policies.
Closer land settlement moreover proved extremely profitable. The Government Advances to Settlers Act 1894 meant farmers were paying less for money, and therefore had more for other requirements; they still took from private companies advances secured on produce. More to the point, greatly increased land settlement meant that there were many more farmers each borrowing much less. Thus NMA's turnover and profits were up, but risks were greatly reduced. Even so, the board still complained about the amount out on loan. Ritchie, who took a realistic and long-term view of agricultural development, often pointed out that many of NMA's farmer clients were engaged in the long-term improvement of previously marginal land; pushing them to reduce their debt would cause as much loss to the company as to the clients.
As a leading commercial figure, Ritchie was closely involved in employers' organisations. During the 1890 maritime strike he virtually co-ordinated the organisation of strikebreaking in Dunedin. He was, however, prepared to concede to trade unionism the right to negotiate over wages, provided that unions did not concern themselves with employers' prerogatives of workplace control. Shortly after the maritime strike Ritchie was involved in the establishment of the first Otago Employers' Association and served as president. Apart from this he devoted little time to activities outside business. He was a justice of the peace, and for some time a member of the Otago Harbour Board; he was also chairman of the Dunedin Chamber of Commerce in 1889–90 and president in 1890–91. Socially he was a member of the élite Dunedin Club, serving as president in 1880.
Despite his origins in the manse, Ritchie became a convinced Anglican. He had married Ella McLaren, daughter of an Otago runholder, at Dunedin on 4 November 1875. Ritchie died of heart failure on 19 December 1912, in Dunedin, having suffered a stroke some time earlier. He was survived by his wife, six sons and a daughter. His son George succeeded him as general manager of NMA. Ritchie's estate was valued at £134,047, of which £19,047 was held in Britain.
John Macfarlane Ritchie's career illustrates the transformation of Dunedin's business and financial world. Until 1877 he was involved in a prosperous merchant firm. Thereafter, although he was sufficiently wealthy to own rural land worth some £29,000 and urban land worth £9,000, and was in receipt of a very high salary, he became increasingly involved in managerial work. Many of his attitudes and practices, such as his concentration on a few closely related activities, were ahead of their time; after 1900, they were a characteristic feature of New Zealand's rural economy.