1 May 2012 10:13am

Rising from the ruins

In the aftermath of the 2011 earthquake, Christchurch is fighting to piece itself back together. And, says Xenia Taliotis, its accountants are on the front line

Like all extraordinary days, 22 February 2011 started anonymously. And so it would remain for billions of people around the world. For Christchurch, New Zealand, there would be no such peaceful end; at 12.51pm local time a 6.3-magnitude earthquake tore through the city, claiming 185 lives and ripping apart thousands more. While not the strongest tremor to have hit Christchurch in 80 years, it was the most devastating because it was close to the surface, five km deep, and because its epicentre was only 10km away. It was these two factors that, in the words of New Zealand prime minister John Key, “wreaked havoc”, causing NZ$20–30bn of damage, ensuring that 22 February 2011 would go down “as one of [New Zealand’s] darkest days”.

While nothing can console those bereaved, the intervening months have brought a new normality to affected businesses, which manage to function among the dysfunction. Much of the city remains in ruins, cordoned off in the red zone, with engineers, builders, plumbers and electricians knocking down ruins and constructing anew.

Clients contacted me within hours of the quake to ask if they’d have to pay rent and wages

Warren Johnstone

However, the backstage professions – solicitors, loss adjustors and accountants – also worked hard from day one, keeping the wheels of commerce going. “Clients contacted me within hours of the quake to ask if they’d have to pay rent and wages,” says Warren Johnstone, managing partner of BDO New Zealand. “When disaster strikes the assumption is that a city just needs emergency crews and building contractors. The cameras capture the most dramatic moments – people saving lives, demolishing ruined buildings and building new ones.

“Behind that, there are professionals like me keeping our clients’ businesses afloat, keeping suppliers and staff paid, settling insurance claims, even when we are dealing with the same problems.”

That, says Johnstone, proved critical in knowing how best to advise their clients. “The fact we’d also had to move to new premises, talk to our bankers and the Inland Revenue, enabled us to handle the same problems for our clients,” he says.

Johnstone’s point that a city’s recovery from catastrophe depends on a vital workforce, with accountants near the top, is borne out by the spike in recruitment that the profession has seen since February 2011, with the New Zealand Institute of Chartered Accountants (NZICA) reporting that many firms have hired extra staff. And your typical Christchurch accountant now offers what can best be described as a total business survival package. 

Anne Newman, PR and communications specialist for NZICA, says accountants have had to become more involved in more aspects of their clients’ business since the earthquake. “Many of our members are now acting as business advisers," she says, “offering clients new levels of expertise in areas that have only come to light post-tremor – 1,500 premises had to be demolished, so accountants have been helping clients negotiate new short-term leases. More importantly, they’ve been dealing with their clients’ insurance claims. The Christchurch earthquake was the world’s most highly insured natural disaster so there are thousands of business claims to deal with, some amounting to millions of dollars. Ensuring good settlements can make the difference between survival or insolvency.”

The city’s accountants are also busy with a growing number of start-ups. “You wouldn’t believe the number of mobile coffee bars that have sprung up to serve the companies that have had to relocate away from the central business district,” says Newman. “Some smart people have taken the opportunity to supply the demand.”

Yet it’s not all good news. At least 10% of businesses in Christchurch haven’t got this far, says Johnstone, and he expects more casualties now that business interruption insurance indemnity periods are coming to an end.

Jon Robertson, partner at Staples Rodway agrees. “Clients are still struggling with uncertainty round the rebuild,” he says. “Builders and other tradesmen are perceived to have a lot of work, but often the work is merely promised, not done.”

In between the winners and the losers is the Sauce Kitchen, a coffee bar and catering company owned by Jill Elliot and Gabrielle Lewis. They lost everything in the quake but are unequivocal about who’s responsible for their survival. “We wouldn’t still be trading without our accountant Michael Hooker,” says Lewis. “He handled our insurance claim and maximised our settlement. We can’t look back, we have to be focused on the next step.”

The same might be said for Christchurch itself.

Where the fault lies

Christchurch is in the district of Canterbury, on the east coast of South Island and is home to 348,400 people. Maori oral history suggests the first inhabitants settled there 1,000 years ago.

The first Europeans arrived in 1815, but organised settlement didn’t occur until 1840. The Brits arrived a decade later.

The area is of outstanding beauty, but there’s a price to pay, which is living near constant earth movement. Canterbury recorded more than 7,000 earthquakes between the magnitude 7 tremor that hit in September 2010 and February’s disaster.

And it won’t end there because seismologists now believe their original assumption – that the nearest fault line to Christchurch was some 130km away – is wrong. It seems that there may be one right beneath the city, lying dormant and covered by sediment for 10,000 years or more.