Support for the ‘Indigenous business sector’ built on APS procurement

By Stephen Easton

Tuesday February 13, 2018

A big increase in Australian Public Service spending with suppliers that have some Aboriginal or Torres Strait Islander ownership remains one of the federal government’s proudest achievements in Indigenous affairs.

A new Indigenous Business Sector Strategy was released yesterday on the same day as the 2018 Closing the Gap report, building on the procurement policy and giving ministers an avalanche of positive and action-oriented announceables to balance out the slow progress revealed in the latest CtG update.

“The success of the Indigenous Procurement Policy (IPP) shows what we can achieve together when we set targets for which we have sole responsibility,” reads a joint statement from the Prime Minister and the Minister for Indigenous Affairs, Nigel Scullion, in a segue from the awkward Closing the Gap news to the more comfortable topic of stimulating business and entrepreneurship among people of Indigenous backgrounds.

“The IPP target was achieved three years ahead of schedule and has now eclipsed $1 billion in contracts to Indigenous businesses since it was launched two-and-a-half years ago, up from just $6.2 million in 2012-13.”

While the policy has been quite successful, there are indications it has mainly led to non-Indigenous business owners and investors forming joint ventures in order to satisfy the minimum requirements for Indigenous ownership and receive the benefits provided by the policy.

This, in turn, has led to questions being raised about how much the IPP is really increasing employment of Indigenous people, which haven’t really gone away. One of Scullion’s past talking points about the policy was that companies that benefit were “100 times more likely” to employ Indigenous Australians.

Yesterday, he put it another way. “These IPP firms have an average Indigenous workforce of 41 per cent compared to just 0.7 per cent in non-Indigenous businesses – meaning our IPP is getting Indigenous jobseekers into employment by almost 60 times the average rate,” the minister said in a statement.

The IPP is listed in the Closing the Gap report’s section on employment, but it is doubtful that it will do much on its own to close the gap in employment — indeed, the minister argued last year that the IPP was not one of the government’s policies to close that particular gap.

In any case, there is a growing number of businesses that fit the Commonwealth’s working definition of Indigenous-owned — just as there is a growing number of people who identify as Indigenous, especially in major population centres, and a growing Indigenous middle class that is not particularly disadvantaged.

Now the government claims the credit for huge growth in the Indigenous-owned business sector over a few short years, on the back of its public service procurement policy.

“The IPP has changed the entire landscape of the Indigenous business sector,” Scullion said. “Since its introduction in July 2015, over 1000 Indigenous businesses have won over $1 billion in Commonwealth contracts – a phenomenal success given that in 2012-13 Indigenous businesses were winning $6.2 million.

“Data from the 2016 Census shows the IPP is overseeing unprecedented growth in the Indigenous business sector. Since the 2011 Census, the number of Indigenous businesses has grown by 30 per cent compared to just a 1 per cent increase in non-Indigenous businesses.”

A fact sheet about this nascent sector of the economy, and the first ever “road map” for its future development, were among yesterday’s policy launch, which promises a suite of new initiatives including one-stop shops for assistance, investment capital available to entrepreneurs, and microfinance for people trying to start small businesses in rural and remote areas.

Out of just over 15,000 workers employed by a group of 1,114 Indigenous businesses, about 40% are Indigenous themselves, according to figures in the fact sheet from Supply Nation, which registers businesses with 50% Indigenous ownership and “certifies” those that are at least 51% Indigenous owned, managed and controlled.

It appears the government also now intends to give some of these Indigenous-owned businesses an inside track to win a bigger share of about $3 billion in funding for service delivery to Aboriginal and Torres Strait Islander communities, under the new Indigenous Grants Policy.

“The new IGP will apply the principles of the IPP to our service delivery funding, to increase the number of Indigenous owned and controlled organisations delivering the billions worth of grants that are intended to benefit Indigenous Australians,” according to the joint statement.

Separately to the business support policies, the Australian Institute of Aboriginal and Torres Strait Islander Studies (AIATSIS) is being shifted into the Department of the Prime Minister and Cabinet from the education portfolio.

This means it will “play a more strategic role in informing the government on matters relating to Aboriginal and Torres Strait Islander cultures and languages” according to the PM’s statement.

And the land account that provides $45 million in annual funding to the Indigenous Land Corporation is also being transferred to the Future Fund — a reform proposal recommended by the ILC several years ago when it was run by a different board, and picked up by the Greens in 2014. The intent is to provide bigger returns.

The Prime Minister claims this change, which essentially allows for higher risk-to-return settings, will deliver an additional $1.5 billion over 20 years:

“These additional funds will also mean that the Indigenous Land Corporation (ILC), the Commonwealth agency that acquires land on behalf of Aboriginal and Torres Strait Islander Australians can now have its remit expanded to include sea country.”

Three of seven targets are “on track” in this year’s CtG report for the first time since 2011 — although one of those, early childhood education, is a newly revised target. According to the PM and Nigel Scullion’s joint statement, there has been “solid progress in many areas compared with a decade ago” despite outcomes falling well short of the goals.

The targets are also currently up for a “refresh” and there is a growing view that they are painting an unhelpfully negative picture and, on their own at least, they aren’t helping all that much. Two of the leading academic experts on the subject, Nicholas Biddle and Francis Markham, have put forward three reasons why Closing the Gap has been so hard to achieve.

They offer a compelling argument that over the years, “laudable policy ambition was not matched with a radical change in how business is done in Indigenous affairs” and that “governments’ stated policy goals have not always matched their policy actions” while “measures intended to achieve the targets have rarely been subject to careful evaluation and revision” to ensure success.

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