Joint ventures between government and indigenous business

By Jason Eades

Thursday October 1, 2015

Tom Burton: How do indigenous businesses start to find that partnering arrangement? How do they seek out those partners. Have you got advice on that?

Jason Eades: I think it’s really understanding the segment of the market that you’re working in — who are those players. So identifying very early on who are capability partners that can assist you in delivering that. We’re very fortunate in that the government have previously, sorry, does continue to, invest in Supply Nation, whose members are corporate Australia or in government agencies who are seeking to bring in Aboriginal businesses into their supply chain. So they have been very active out there looking for Aboriginal businesses and in some cases are having those discussions around either how they work with those businesses to lift their skills, to bring them into the business – businesses supply chain, or how they might actually form new either joint ventures or new business structures.

Tom: Where do you see these early opportunities for current indigenous businesses as the rules currently stand?

Jason: In the first year, it’s 0.5% of contracts across the various agencies that have to deliver, the number of contracts they have to deliver to Aboriginal businesses. The big agencies, at the top of that, Defence is the largest with having to reach the target of 70. I think for early opportunities are obviously going to be within Defence itself and we’ve already seen Defence be very active in this space, and they’ve rewarded contracts over the last 12 months to 18 months to Aboriginal businesses. They have some expertise and they will be looking very closely what other opportunities there are.

Tom: And for the indigenous businesses themselves, what advice have you got? You’ve had some experience in WA I think around procurement practices. What advice would you give as they consider this whole space?

Jason: I think it’s a clear understanding that this provides an opportunity for their business and provides an opportunity to win work. But the big lesson from other market places or what we are seeing play out through other instruments is that if you become too dependent upon one source, it’s actually not good for your business nor is it good for the people that you’re purchasing or delivering services to. So in Western Australia with the mining sector, we saw the boom period in which the construction phase resulted in a lot of small Aboriginal businesses being setup. They were moved in or part of the supply chains to very large providers on mining sites.

As the sector has moved out of construction phase into one of business as usual, and of course the resources has fallen through the floor in terms of price, it does have a flow-on effect then, many of those businesses are no longer surviving and having to either liquidate or find other areas in which they can deliver services to. So it’s a real message about don’t be too dependent upon any one purchaser of your goods and services.

Tom: And these rules mimic or copy in some regards, rules from other countries particularly United States. Are there any lessons from there as you look at the whole system?

Jason: I think the whole movement around supply and diversity has been running in the US for a very long time. Some 40-years of experience in this space and they have had government rules in place that are about 5% of minority, sorry 5% of procurements going to minority business. And that definition of minority businesses is quite broad as you would expect but the US is a much larger marketplace as well. But what we have saw is a number of businesses that have grown in size and style. They have billion dollar enterprises that are tier one providers to the federal government in America.

So here, it’s very early days. We won’t expect to see businesses of that magnitude immediately. But I do hope it’s seen as a catalyst and that others will look at us and why it’s important to actually do this, particularly corporate Australia will do more than what it’s currently doing. They’re doing some great work but it’s building upon that. So it’s becoming the incentive.

I think the thing to understand about this is that it’s not just about creating Aboriginal businesses. At its heart, this is about creating jobs. So what is recognised and understood, and it’s mentioned in the Forrest review is that Aboriginal businesses are 100 times more likely to employ Aboriginal people. So this is one mechanism to actually drive aboriginal employment and that’s the reason why the policy is being created. It’s an underlying desire to increase the number of Aboriginal people who are employed.

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