Stricter rules welcomed as minister celebrates Indigenous Business Month

By Stephen Easton

October 9, 2018

Friday’s announcement of stricter rules for the federal Indigenous Procurement Policy has been well received by various stakeholders, and the Minister for Indigenous Affairs has more to say during Indigenous Business Month.

The celebration of Aboriginal and Torres Strait Islander enterprise during October, now in its fourth year, was initiated by alumni and educators from the Melbourne-based Murra Indigenous Business Masterclass program.

“While it’s not our oldest annual celebrations, it is fast becoming one of the most important, as Indigenous businesses record unprecedented growth thanks to initiatives like the Indigenous Procurement Policy (IPP),” Nigel Scullion said in a statement yesterday.

“Aboriginal and Torres Strait Islander people have been engaged in trade and commerce for tens of thousands of years. Many communities have an undoubted business pedigree, that for a range of historical reasons has been stymied but through the IPP is being given the chance to come to the fore again.”

The changes announced last week aim to stop non-Indigenous companies gaming the system through dubious joint ventures and have been welcomed by Supply Nation, the non-government organisation that federal public servants mostly rely on to verify Indigenous ownership status.

The stronger requirements purport to make sure more of the money spent by agencies under the policy, which has now topped $1 billion, actually contributes to employment and socio-economic outcomes for Aboriginal and Torres Strait Islander communities as intended.

They have generally been welcomed by various Indigenous business owners and public servants, some of whom had misgivings about the policy’s true outcomes, despite generally recognising its good intentions.

The NGO has published a simple fact sheet about the policy adjustments and how they will be phased in for joint ventures between Indigenous and non-Indigenous firms.

“From 1 January 2019, incorporated Indigenous joint ventures must register with Supply Nation and be at least 50% Indigenous owned and demonstrate 50% Indigenous involvement in the management and control of the joint venture,” the Supply Nation document explains.

There will be a grace period giving non-compliant joint ventures that were registered with Supply Nation under the older rules until July 2019 to meet the new requirements. Model contract clauses will be developed to help public service procurement officers manage the transition of existing contractors. Agencies will be able to cancel any contracts that are not compliant by the deadline.

Joint operations that hope to gain federal contracts under the policy will have to develop two strategies: one plan “to build the capability of the Indigenous business partner” and the other to grow a larger Indigenous workforce. Aboriginal and Torres Strait Islander business owners thinking of entering into such a joint venture can also take up advisory services from agencies like Indigenous Business Australia.

“Historical undercapitalisation is placing a handbrake on further growth”

To register, the joint ventures will first have to go through a “verification interview” and then be reviewed annually to confirm they are operating in accordance with the plans submitted to Supply Nation, according to its chief executive Laura Berry. It is receiving additional funding from the Commonwealth to cover auditing and monitoring the new requirements for joint ventures, which will also include random spot checks.

“Strengthening the verification standards will ensure that more benefits flow to the Indigenous business sector through increased opportunity, capacity and capability,” said Berry.

Even without the new stricter rules, Berry says it is clear “the policy is working and delivering real results” while the minister calls it a “runaway success” with more than $1 billion worth of Commonwealth spending going to a group of more than 1000 Indigenous-owned suppliers. In comparison, Scullion said only 30 Indigenous businesses won contracts in 2012-13, worth a combined total of $6.2 million.

“Today, Indigenous businesses are producing high quality goods and services across every sector of the economy,” he added.

“Message Stick Conferencing provides teleconferencing services to Government and corporate clients, PSG Holdings is delivering $213 million of wharf upgrades at the Garden Island naval base and Terri Janke and Company is a highly successful law firm specialising in Indigenous cultural and intellectual property law – to name just a few.

“These established businesses are benefiting from increasing opportunities under the IPP and many prospective Indigenous entrepreneurs are pursuing their small business ambitions as a result of it.”

The minister claims the policy target for the sector to receive 3% of federal procurement spending has led to 30% growth in the number of Indigenous-owned companies, compared to 1% among others, and that about half of their employees were Indigenous people, who make up less than 3% of the national labour force.

“However historical undercapitalisation is placing a handbrake on further growth, which is why we recently launched the Indigenous Business Sector Strategy (IBSS), the first comprehensive roadmap to grow the sector through a range of new financial and capital products to help Indigenous SMEs,” Scullion said, listing added measures to support Aboriginal entrepreneurs that will be overeen by a new advisory council chaired by Nyunggai Warren Mundine.

The stricter rules were put in place chiefly to address concern about non-Indigenous companies creating what Supply Nation politely calls “disingenuous arrangements” and has been labelled “black cladding” by Mundine, who first raised the issue two and a half years ago, when he was chair of the Prime Minister’s Indigenous Advisory Council.

Within the nascent business sector, however, there are other concerns around the push to use government procurement as a lever to increase wealth among Indigenous people. Leigh Harris, owner of Blackvine Media in Cairns, says the new crackdown is welcome but still wants the government to go further.

Harris has long been sceptical of the underlying assumption that all Indigenous-owned companies are equally committed to empowering their fellow Aboriginal and Torres Strait Islander people.

He believes the IPP should have even stricter requirements, aimed at making sure the benefits are spread more widely beyond the major capital cities, and argues the government could handle certification, monitoring, reporting and data analysis more efficiently and effectively by setting up an Indigenous Business Number system, and limiting the official role of Supply Nation.

As well as looking more closely at joint ventures, Harris suggests more attention should be paid to where the government’s spending ultimately ends up, via sub-contractors and supply chains that in some cases could put most of it into non-Indigenous or even foreign companies.

A big year for Indigenous Business Australia

Visiting a facilities management company contracted to service Robertson Barracks in Darwin yesterday, Scullion said the federal agency Indigenous Business Australia had a big year in 2017-18, supporting more business clients than ever and providing almost twice as many home loans as in the previous 12 months.

“In 2016, we made an election commitment to work with IBA to refocus its operations to be more client-focused and outcomes-driven, and thanks to the hard work of the organisation and in particular the Chair, Mr Eddie Fry, it has had a record-breaking year.

“To build on this momentum, we are investing an additional $3 million into IBA to roll-out business loans and supports to Indigenous entrepreneurs in remote Northern Territory communities where the barriers to entry can be the highest but the impact the most significant.”

The agency itself spent $7.85m with Indigenous businesses last financial year, up from $2.6m the year before. Now IBA has been asked to expand its support to more people in remote communities. IBA director Shirley McPherson said small business ideas could get off the ground in such places, but she knew it was very difficult from first-hand experience.

“Too many people have great ideas that can lift themselves and their communities out of poverty but just need a helping hand,” McPherson said.

“With this investment, an additional 35 remote Indigenous business will receive start-up packages consisting of tailored grants, loans or leases of up to $100,000, along with ongoing assistance in business management to support business growth.

“These Start-up Grant Loan Packages will support the growth of remote Indigenous businesses in the Northern Territory, and will focus on start-ups in Aboriginal Land Rights Areas, Community Living Areas and Native Title areas.”

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