Eddie Fry: unlocking the economic potential of the Indigenous Estate

By Eddie Fry

August 4, 2016

It was in early 2015 that I was watching TV on a Sunday and purely by chance caught an Indigenous person talking about “The Indigenous Estate”. I hadn’t heard of this — “The Indigenous Estate”. What was this? I had not long before been appointed chair of Indigenous Business Australia. Was there another commercial vehicle no one cared to mention?

What followed was a mission to discover and determine what is often referred to as the “Indigenous Estate”. Here is what I found.

The Indigenous Estate comprises the assets held, or reasonably likely to be held, by or for the benefit of Aboriginal and/or Torres Strait Islander people, whether by:

  • Traditional owner, native title and state/territory land rights based organisations;
  • Commonwealth, state and territory organisations, statutory bodies and funds established to act in the interests of Aboriginal and Torres Strait Islander people, including (without limitation) the assets within IBA, Indigenous Land Corporation, the Indigenous Land Account, Aboriginals Benefit Account and analogous structures under state/territory regimes;
  • Commercial or not-for-profit organisations established by or for the benefit of Aboriginal and Torres Strait Islander people.

The assets comprising the Indigenous Estate are both tangible — lands and waters, and the resources located on or within them, fixed property — and the intangible — cultural and intellectual property rights, as they exist in forms of expression (arts, dance, music, language); traditional cultural, environmental and bioscience practices, and other forms of traditional knowledge.

I would also argue that these intangible assets also include the inherent potential within Aboriginal and Torres Strait communities to bring new perspectives, knowledge and innovation to the wider economy.

What is the current ‘state of play’ of the Indigenous Estate?

More than two decades on from the introduction of the Native Title Act 1993, I believe the Indigenous Estate stands at an inflection point.

Over the past decade in particular we witnessed an accelerated period of agreement-making in the context of determinations and under the future acts regime, as well as under applicable state and territory based legislation.

Clearly, much of this benefit has flowed from resources related activity. Studies conducted on behalf of IBA estimate that there could be up to $10-15 billion in investable assets in the Indigenous Estate, much of which is held in trusts.

By and large, these funds are derived from an “asset swap” or “conversion of interest”, in which Indigenous communities exchange their inherent rights to their assets (lands, waters, related rights and/or intellectual property), for financial assets (primarily cash) or rights to participate in the relevant projects through contracting and employment.

While the total funds flowing from such determinations and agreement-making have been large, the number of new determinations and agreements per annum appears to be slowing.

This is primarily because we are entering a period of transition from the capital expenditure phase of the resources boom into the operational phase, with investment in new projects declining.

The commercial viability and operating model of many resources projects is also being challenged by continued downward pressure on commodities prices (particularly iron ore and coal).

This in turn has resulted in a reduction in, and in some cases a cessation of, the level of royalties flowing into the Indigenous Estate as projects are downsized or cease altogether.

While there remains a reasonably long tail of operational activity left to run — particularly from larger resources players who can withstand commodity price volatility — the royalties and other payments that can flow from such activity into the Indigenous Estate are inevitably finite.

As a result in many cases, Indigenous communities and their leaders are negotiating a “conversion” of their interests in circumstances where they have a single, once-in-a-generation opportunity to gain an economic foothold.

In addition, they must establish and manage the competing and often urgent short, medium and long-term needs and aspirations of each community to maximise the financial opportunity and create social, cultural and economic benefit.

The result of this is that:

  • in absence of other actions, the quantum of new funds flowing into the Estate may decline over the medium term. The funds accumulated to date need to be prudently invested and managed, so they can sustain the communities who stand to benefit over the long term (and well beyond the current resources boom);
  • the non-financial assets within the Estate, particularly lands and waters, need to be identified and assessed strategically for their commercial potential, so they can be put to their “highest and best use” — ultimately for the benefit of the constituent communities. This requires long-term planning;
  • the commercial potential of Indigenous cultural and intellectual property — which is unique in a global setting — is not well-understood, supported or integrated into economic analysis of the development potential of Indigenous opportunities;
  • we need innovative approaches and thinking to develop ventures through which the Indigenous Estate can be leveraged into “future waves” of business activity.

This why I say we are at an inflection point because if we act to put the Indigenous Estate on a sound footing, such that it is well-understood and managed to its maximum potential, we can grow the Estate substantially (and potentially exponentially) for the benefit of its constituent communities.

Conversely, if appropriate structures are not put in place, there is a real risk that communities could lose their once-in-a-generation opportunity to gain an economic foothold, and in some cases this could occur rapidly.

What are the structural settings?

I believe that the Estate, as a whole, is not well-understood, nor is it managed to its maximum potential. My observations are:

  • Commonwealth, state and territory policies relating to economic development are fragmented and often misaligned with each other;
  • Through inadequate planning and co-ordination, and through creep in organisational strategy and a lack of clarity about our roles, a number of government, Indigenous, private and not-for-profit organisations have overlapping mandates and conflicting approaches.

The result is that:

  • Economic development efforts are not co-ordinated and do not utilise human resources and funding efficiently;
  • There does not appear to have been a co-ordinated strategic review of the lands and waters held across the Indigenous Estate to identify the highest and best use of each parcel.
    As a result, much of the Indigenous Estate remains unutilised or under-utilised and is looked-over in favour of non-Indigenous land held by others. Further, this lack of planning has meant that there has been under-investment by governments in the infrastructure needed to make such land “investment-ready”;
  • There has not been sufficient thought or support given to initiatives that can provide a proper commercial platform for our intellectual property and knowledge — such as forms of expression (arts, music), or the employment of Indigenous knowledge in environmental management and bio/life sciences;
  • So governments do not understand the actual or potential savings that could accrue from better planning, utilisation and management of the Indigenous Estate, nor do we have sound, widely accepted measures of these benefits.

In turn this precludes the appropriate application of funds (eg for feasibility assessment) that can kick-start or support initiatives to harness the potential of the Estate.

There is a lack of capacity among many Indigenous organisations to participate effectively in commercial ventures and decision-making. Additionally, organisations often lack access to the economies of scale in shared services or other efficiencies that they need to pursue commercial opportunities properly.

Many Indigenous organisations lack access to sound investment or commercial advice from advisers with strong expertise and ethics.

Where funds have been accumulated, they have often not had the benefit of a prudent underlying investment strategy and management approaches. In some cases, this has been precluded by restrictions imposed by statute, regulation or by external players (eg the providers of royalties), with the result that funds have been left sitting in cash over several investment cycles.

A clear case in point is the Land Account, a large quantum of funds which has been invested in cash or cash equivalent instruments over a period of 20 years, during which there has been considerable growth in the equity markets.

Some analysts suggest that cash rates could under-perform inflation over relatively long periods in the coming cycle, meaning that in real terms, the purchasing power of the funds will decline.

Building blocks for prosperity

The narrative of “wicked problems” now used by some in government departments can make the solutions appear further out of reach than they really are.

While the landscape is complex, I believe the solutions are often inhibited by the lack of co-ordination and strategic foresight, rather than insurmountable obstacles. A holistic approach across governments, agencies and other players/actors would ensure that:

  • The assets within the Indigenous Estate (whether current or future) are properly identified;
  • Resources are shared where possible and put to the best use;
  • Organisations and their constituent communities can be properly informed about and make prudent decisions regarding their economic aspirations and assets;
  • Funds flowing from such assets, whether through a ‘conversion of interest’ or otherwise, are properly invested and managed for the benefit of current and future generations.

As a result, across northern Australia in particular, Indigenous groups have vast landholdings.

At the end of the day, however, Indigenous people do not have the wealth or influence that ownership of such a vast estate should bring.

Poor health, education and stubbornly low living standards have left us ill-equipped to compete for development, or to leverage benefits from our assets.

Too few past investments have delivered intergenerational wealth — the economic wellbeing that underpins other forms of wellbeing.

We need to create new pathways and journeys — about our land, about our assets, our relationships and our obligations.

We must identify and maximise the economic value of our current land and other asset holdings.

We must preserve our land’s social and cultural values, ensure our future wellbeing, strengthen our unique identity and take our rightful place within our great land.

Our gift to the future is to set in train the building blocks for prosperity.

What is being called the Indigenous Estate has re-emerged in the form of land and property holdings and significant cash-based deposits.

According to estimates, Indigenous people now own or have controlling interests to some 40% of the Australian land mass under various forms of title and legislation. On the face of it, this is an extensive area. But it has not brought us much influence on the national stage or converted benefits for Indigenous people of a proportionate amount.

We own a great deal of land that is currently not productive in mainstream terms.

Where to now?

I believe we are at a watershed in Indigenous affairs. Government funds are diminishing. Beyond the issue of constitutional recognition, political and public interest in Indigenous matters is waning.

Our population is growing much faster than the general population, and it is overwhelmingly a younger population.

Put simply, our vast land holdings and interests that must sustain a growing population are not helped by outdated management and poor execution.

We as Indigenous Australians stand at an inflection point. Our future relies not on chance, but on creating a new fellowship among Indigenous people/organisations, government, corporate Australia, domestic and foreign investors.

Unlocking the economic potential of the Indigenous Estate without compromising our culture or values can be achieved.

The Indigenous Estate is a central concept — one that we as a people need to get to grips with. We need to define this concept, understand what it is made up of, and maximise its potential. We need to own it and make it great so it becomes synonymous with success and the highest standards — a brand for the Indigenous Estate that encompasses land, culture, people, and opportunity; that will allow us to forge our way forward in the Australian economy.

We must learn to harness the wider Australian economy to our benefit. This will necessarily be a long-term project encompassing many decades.

We need a target and a plan to withstand the tests and changes of time. If we don’t think in these terms we are likely to be captured by the short-term.

A lot of things in Indigenous affairs generally seem to be operating in the short-term. There is too little strategic or structural thinking. We need a 50-year vision.

I see the Indigenous Estate lifted beyond current perceptions of what is possible in Indigenous Australia. The Indigenous Estate must be accepted as standing for something solid and reliable, a source of value for our people and Australia as a whole; a complex entity that is well run, open for business and a natural partner for investors. It would be the base for strong Indigenous influence in our national life.

Where to start?

If we are to have a bold and long-term vision, we also need an order of priority.

For my part, I want to start with the two agencies I chair — both involved in the Indigenous Estate.

  • Indigenous Business Australia — IBA — promotes Indigenous commercial development.
  • The Indigenous Land Corporation — the ILC — owns small parts of the Estate, leases part of it, including as part of a divestment strategy to Indigenous groups, manages other parts of it, and has a brief to assist Indigenous owners across Australia to gain benefits from their land.

This makes the IBA and ILC significant institutions in helping to define, manage and maximise the use of the Indigenous Estate.

The ILC as it stands

The ILC to date has done many good things. However, I believe that, without change, it will become redundant or irrelevant.

The ILC is providing piecemeal benefits from its statutory land acquisition and management programs.

On the positive side, the ILC has gained knowledge and success in managing parts of the Indigenous Estate. It is involved in two key regional industries — agribusiness and tourism. In partnership with Indigenous groups and landholders it has helped pioneer innovative emissions-reduction technologies on Indigenous land.  It has created jobs for Indigenous people, especially in remote areas and difficult situations.

Nevertheless, the ILC does not enjoy the reputation it requires among its core constituencies, with Indigenous communities and decision makers in business and government, to maximise its effectiveness.

I see my job over the next two to three years, together with the boards, as transforming the ILC, working in tandem with IBA.

Both agencies need to be more proactive, strategic and commercially astute — they must be capable of taking a significant role in helping to transform the Indigenous Estate.

Opportunities

There are opportunities aplenty for Indigenous people, and in particular Indigenous landholders, in many industries.

Given the rural and remote nature of the broader Indigenous estate, agribusiness is an obvious starting point.

Booming markets are on our doorstep.

The Australian dollar is low.

We need to invest in rigorous assessments of our Indigenous assets to determine the highest and best use of our land.

And we need to invest in research and development to position us on the leading edge of technology.

The ILC’s agribusiness portfolio has been active in the northern cattle industry for many years.

We already have an ambitious ten-year strategy to increase the scale and scope of this business.

Operators within the Indigenous Estate need to enter other parts of the supply chain, including fodder, feedlots, and transport.

We should add value by moving up the supply chain.

And we should broaden our product base — for example, to buffalo meat, fodder, horticulture, aquaculture and bush foods.

Tourism is a significant industry for Indigenous people.

Tourism encompasses both large-scale businesses such as Ayers Rock Resort, owned and operated by the ILC, and small-scale cultural and ecotourism businesses operating at the local level.

Significant opportunities exist for Indigenous people in the conservation and carbon economy, particularly for those who live on country.

The ILC has been at the forefront in developing new sources of income for Indigenous land owners, such as carbon farming through controlled savannah burning.

It has partnered with many Indigenous landowners, land councils and private investors to make this happen.

We need to step up this effort.

The Indigenous Estate should be assessed for its potential to generate renewable energy — solar, wind and potentially bio-fuels.

Land and water — these things are becoming scarcer in the modern world.

Indigenous Australia needs to be a player at this critical juncture in human history.

Unlocking value

All of us, collectively, need to unlock the value of the Indigenous Estate.

Let me continue by asking everyone here a question. Not for answering, but to give you a lead into where I am going.

“When was the last time you looked at yourself as an asset and in what circumstances”?

In other words, “as an individual, what are you are bringing to the table to be realised and unlocked”?

You might answer it by saying that your individual value lies within your talent, character, values, skill set and your experiences gained through personal growth over your lifetime.

You have been loaded up with this value from the moment you are born. What you do with it and how you unlock this value to your advantage is the key your wellbeing.

Unlocking the value of the Indigenous Estate is not an insurmountable matter nor is it to be a lost opportunity going forward.

Just like you, the value of the Indigenous Estate can be realised, sustained and grown over a longer lead time in a way that makes sense to everyone.

Like any business, the value of the Indigenous Estate lies in its underlying assets. Its composition of land, Indigenous cultural and intellectural property, product offerings, competencies and development of unique capabilities that value add the core business platform.

I like to apply traditional thinking to matters of business. When a business is able to get the most out of the asset list — value is unlocked.

Maybe the asset list may need to be bundled up or indeed unbundled.

For example, land exploitation could be separated (unbundled) by listing the agribusiness platform from the actual land properties on which the agribusiness is built on.

Shareholders (Indigenous, foreign and domestic investors) have an opportunity to generate two income streams — first, from the agribusiness, and second, rental income as the landlord.

Applying this outlook across all of the Indigenous Estate provides a way to identify hidden value waiting to be unlocked.

We will do this as we seek to accentuate hidden strengths and unique capabilities leading to further opportunities for Indigenous Australians.

We will seek to model and deliver our capital allocation plans via a portfolio management structure into the Indigenous Estate based on three to five year rolling time frames which we can use as a working layout model for the next 50 years.

This approach will provide us with the ability to review and measure, report and determine our performance for remediation, growth or movement away from activities relevant to our stated goals of Indigenous Australians’ wellbeing.

Our intention is to ensure that our connection with Indigenous Australia, government, corporate Australia, domestic and foreign investment partners will provide a sharper focus to our business arrangements.

Both the ILC and the IBA have embarked on this approach. Much work is being done and there is ahead of us a great deal more work to be done.

Yes it is extensive, challenging and fraught with questions yet to be asked and answered, but I hasten to add: we are in play.

To unveil what is becoming known of the Indigenous Estate we will (at the functional level) seek to accentuate the hidden strengths and unique capabilities of the ILC/IBA via the following:

  • Strategic Relationships — identify and bring into the tent individuals who can look at a struggling component of our business apply their lens and assist us to unlock value of the Indigenous Estate;
  • Insight — it is an uncommon gift — harnessing revolutionary and emerging products and research markets that add a game-changing dynamic to our business case will feature in our business outlook. Making sure that the IBA/ILC is driven by insight to give us line of sight beyond the obvious. In keeping an eye on the horizon, just maybe the Indigenous Estate can become highly competitive at minimum and at best lead our competitors.
  • Mentorship — it has been said to me that mentoring is as old as creation.What I believe is that mentoring provides anchorage so that you can build a solid foundation and a strong sense of business heritage upon which to build success. As the ILC/IBA reach deeper into the Indigenous Estate we will seek to employ mentoring so that a roadmap can be developed to show the big picture, reveal where we are today, options on decisions, directions, identify risks and to equip ourselves to manage the road ahead. Mentoring will open doors and be connectors into commercial opportunities. It will unlock value in IBA/ILC, individuals and business settings within the Indigenous Estate.

The Australian Challenge

The agenda I have been describing goes beyond the two agencies I currently chair.

To grasp the future, we Indigenous Australians need a greater collective vision and one that wider corporate Australia wants to be involved with.

The Indigenous Estate must have a strong identity that is recognised within Australia and beyond, where investors and government have to take notice.

We need a greater coming together of our intellectual, strategic and innovative minds.

Nor should we discount the aspirations of individuals — individual effort has been a great driver of progress in human history.

Indigenous Australians should embrace the future, and not just let it happen to us.

Operating within a coherent commercial framework will reap social, cultural and environmental rewards.

That means setting aside some of our politics and any prioritisation of narrow vested interests above a more national Indigenous interest.

We need a stronger and more united vision and to grow our Indigenous Estate.

At this gathering we are rightly celebrating our land rights pioneers and the 40th anniversary of land rights.

The legacy of those who have gone before us, can be celebrated most effectively by making the most of the land they helped to get back for us.

I acknowledge that at this important gathering [Garma], I am speaking to people who have cultural authority, who are owners and custodians of parts of the Indigenous Estate.

You may choose not to collaborate with the agenda I have been describing — that is your right. But I believe we are stronger when we are together, and that we can build a powerful new future for our people.

There needs to be a wide-ranging discussion about how we position the Indigenous Estate to create wealth and wellbeing for our future generations. We must use this time together to question our thinking, to debate our future, and agree on a way forward based on shared values.

Our people deserve nothing less.

This is an edited extract from a speech by Indigenous Land Corporation chair Eddie Fry at the 2016 Garma Festival on July 30 in North East Arnhem Land.

About the author
1 Comment
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Paddy
Paddy
5 years ago

A very interesting read for all and some good recommendations for policymakers.

The Mandarin Premium

Canberra’s changed

Stay on top for only $5 a week

 

Get Premium Today