A wagyu beef producer in northern NSW benefited from a multimillion-dollar investment from the NSW government, at the recommendation of a private equity firm that owned a majority stake in the company.
NSW Deputy Premier John Barilaro was grilled over the probity of the government's decision to buy a $3.3 million stake in beef company Stone Axe Pastoral Company in February, during a budget estimates hearing on Tuesday.
The hearing heard that private equity firm ROC Partners, which advised the NSW government to invest in Stone Axe Pastoral, had become the majority shareholders of the company months earlier, in May 2017.
At the time of the investment, ROC Partners' managing director Michael Lukin was chairman of Stone Axe Pastoral.
Mr Barilaro defended the equity investment as one which was made at "arm's length" from government, and provided a greater benefit to taxpayers than a grants-based system.
"The reality is these investments are made because these are industries or businesses that are seen as an opportunity to investment taxpayer dollars, rather than grants where there's no return," Mr Barilaro said.
It is the second company the NSW government has invested in through its $150 million GO NSW Equity Fund, which was established in November with the purpose of investing "in approved, high-potential companies which may not otherwise have access to suitable capital".
In May, the state government bought a $3.3 million stake in the loss-making company Australia's Oyster Coast (AOC), in a decision that some oyster farmers claim lacked transparency and would distort the market.
The GO NSW Equity Fund is managed by ROC Partners, and is funded by a $50 million investment from the NSW government and $100 million from superannuation company First State Super.
There are no applications or funding rounds, but rather ROC Partners is responsible for identifying and recommending investments.
Mr Barilaro said investment decisions were signed off by the Jobs for NSW board, which he said was aware of ROC Partner's pre-existing interest in the beef company when it was considering the investment proposal.
Labor's industry spokesman Mick Veitch criticised the process for selection companies as one which failed to pass "the pub test."
“Most people would take issue with the fact that one of the partners in a multimillion-dollar fund scours all of the state for investment opportunities and just happens to turn up a company in which they have already invested and then advise the government to tip in taxpayer funds," Mr Veitch said.
Department of Premier and Cabinet Tim Reardon, who is on the Jobs for NSW Board, told the committee the board "laboured" over decisions before an investment was made.
"The level of due diligence and probity that’s around the decisions is quite considerable," he said.