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Indigenous Procurement Policy: minister finally cracks down on ‘black cladding’

It has taken two and a half years but Nyunggai Warren Mundine has convinced the Minister for Indigenous Affairs to crack down on dubious joint ventures that take advantage of the federal Indigenous Procurement Policy.

The Aboriginal businessman and former Labor politician has pursued the issue of “black cladding” since early 2016, starting with a series of newspaper editorials, and all of a sudden his efforts have come to fruition. Minister Nigel Scullion has pledged “zero tolerance” to business arrangements designed to game the system, and given Mundine a newly created advisory role as well.

Scullion has established the Indigenous Business and Economic Advisory Council, chaired by Mundine, who was appointed the inaugural chairman of the Prime Minister’s Indigenous Advisory Council in 2013 by then-PM Tony Abbott, but lost that role in early 2017 after Abbott’s successor Malcolm Turnbull chose not to renew his term.

The new business-focused council’s role will be to support new measures to monitor companies and prevent “wrongdoing” in relation to the procurement policy, which has successfully encouraged federal agencies to award a lot more contracts to businesses that meet certain levels of Indigenous ownership, or Indigenous employment.

As part of the push to strengthen its integrity, the minister has given “additional resources” to Supply Nation, a non-government organisation trusted by the government to certify that companies have majority Indigenous ownership, which also maintains a second list of partnerships that are half Indigenous-owned.

“Supply Nation will be given additional resources to continuously monitor the 1600 Indigenous businesses on its Indigenous Business Directory to ensure they are, and remain, bona fide Indigenous businesses,” Scullion said.

“Further, in recognition that joint-ventures can be an ideal vehicle for blackcladding, all joint ventures will now be required to register on Supply Nation’s Indigenous Business Directory, meet a 50 per cent Indigenous ownership and control test, and have a skills capability transfer and Indigenous workforce plan in place which will be reviewed annually by Supply Nation.”

Critical questions have quietly lingered around the ostensibly impressive policy success story since shortly after its introduction, and Mundine has used his public profile to doggedly pursue the issue of “black cladding” and question the real outcomes of the IPP, in terms of broad-based employment and wealth creation in Indigenous communities. When it comes to employment rates particularly, the IPP appears unlikely to shift the dial much on a national scale.

A couple of Indigenous business owners and public servants have also shared similar concerns with The Mandarin — that in practice, the IPP mostly benefits a relatively small group of Indigenous business people and their partners — but our sources were still generally supportive of the policy and unwilling to rain on the minister’s parade.

After all, the IPP has benefited a lot of Indigenous business people who are successful role models, and had rapid and extraordinary impact on the behaviour of government agencies in terms of procurement.

The National Congress of Australia’s First Peoples has also argued that while Indigenous entrepreneurship is a good thing, its benefits have been oversold when viewed alongside other less successful Indigenous affairs policies.

Until now, Scullion has appeared to be largely uninterested in any quibbles or questions that could take the shine off one of his best policy success stories. Yesterday, he reinforced the impressive figures at the same time as finally acknowledging the IPP could also be a pathway to lucrative contracts for firms with few genuine connections to Indigenous communities, which only do the bare minimum to get a piece of the action.

“The IPP has been a runaway success with over 1000 Indigenous businesses winning over $1.084 billion in Commonwealth contracts since its commencement in July 2015, compared to just 30 Indigenous businesses winning $6.2 million in 2012-13,” Scullion said.

“It has been the catalyst for unprecedented growth in the Indigenous business sector and wealth creation for Indigenous Australians, but unfortunately with such success comes those looking to do the wrong thing.”

Mundine raised the issue in the opinion pages of The Australian early in 2016, while he was still chairing the PM’s Indigenous Advisory Council:

“The policy has created demand for indigenous enterprises. But there isn’t yet the supply to meet it. There’s a large capability gap that needs to be bridged. I’ve already seen companies that risk losing government contracts scramb­ling to set up joint ventures with indigenous people. But the capability gap may encourage joint ventures with a thin layer of indig­enous representation over an established business that gets most of the financial benefit through funding arrangements, often with few, if any, indigenous employees.”

The minister rejected the point of view that only a small number of people were getting most of the benefits of the IPP, in a disdainful letter to the editor that poured scorn on two journalists who delved into these concerns in early 2017, reporting the views of various relevant sources including Mundine.

Now, Scullion is all ears. He says Mundine “played a key role in advising the Government on this strengthening of the IPP” as well as helping develop the Indigenous Business Sector Strategy released in February, and quotes the inaugural chair of the new advisory council in his latest statement:

“I have long said that the greatest challenge to the long-term success of the IPP is ensuring we have the supply of Indigenous businesses capable of taking up the new opportunities,” Mundine said.

“The new measures in the Indigenous Business Sector Strategy will ensure there is support for businesses at every stage of the business cycle and I am so pleased that its implementation will be led by Aboriginal and Torres Strait Islander business people.”

Top image: Nyunggai Warren Mundine, centre, at a meeting with Maori business leaders during the Australian New Zealand Leadership Forum in June, 2018, from pmc.gov.au.

Author Bio

Stephen Easton

Stephen Easton is a journalist at The Mandarin based in Canberra. He's previously reported for Canberra CityNews and worked on industry titles for The Intermedia Group.