Need to clear hurdles to Indigenous business

Dr Peter McAllister says Indigenous business creation has long been a government policy graveyard, but the logic has always seemed compelling.

by Dr Peter McAllister,anthropologist and journalism lecturer in the School of Humanities at Griffith University’s Gold Coast campus

Out of the desert, prophets come, wrote A.D. Hope in his seminal 1939 poemAustralia.

These days, of course, it’s the profits pouring out of the Pilbara we look to for salvation – from the current accounts deficit, obviously, but also from the intractable problem of Indigenous poverty.

Banner headlines splash figures in the billions and proclaim a new era of Indigenous entrepreneurship, piggybacking the mining boom. Yet among the small hard core of actual Indigenous business owners who attended the recent Aboriginal Enterprises in Mining, Exploration and Energy (AEMEE) conference on the Gold Coast, the mood was far more agnostic. They’ve heard this all before, and many times.

Indigenous business creation has long been a government policy graveyard, although the logic has always seemed compelling. Despite being few in number, Indigenous small and medium enterprises employ 10 times the Indigenous employees that mainstream SMEs do. Thus the creation of more such Indigenous SMEs has always seemed a no-brainer.

Backdrop of policy failure

Yet nothing has really worked. One 2011 study by the Australian National University’s Centre for Aboriginal Policy Research found that the rate of Indigenous ownership of SMEs is still, at 3 per cent, just a third of the mainstream rate. Set against this backdrop of policy failure, the apparent explosion of Indigenous business activity in the mining sector over the past few years seems doubly impressive.

mining3“Government has its place,” observed AEMEE deputy chairwoman Professor Christine Charles, ”but there’s a strong feeling that it’s only the private sector that’s been able to really break the deadlock.”

Professor Charles previously headed South Australia’s State Government Cabinet Office as well as numerous industry bodies. What’s more, a who’s who of mining industry reps at AEMEE 2013 backed her up.

One BHP partner spoke of the 90-plus Indigenous businesses its program has helped launch since 2011. Cindy Dunham, a procurement manager for Rio Tinto, described the $1.6 billion Rio has spent with more than 50 Indigenous contractors. Heath Nelson, manager of Aboriginal business development for Fortescue Metals Group, reported that Fortescue had reached its target of $1 billion in contracts awarded to Indigenous contractors by June last year.

Mr Nelson was even able to announce Australia’s first mining joint venture with a native title group: the FMG/Njamal North Star magnetite project. Njamal people will mine the North Star deposit themselves and then sell it to Fortescue.

From the conference floor, however, things sometimes looked very different.

“Capacity building has mostly been a fraud,” said Neville Stewart, managing director of the 100 per cent Indigenous-owned GLH Contracting. ”These joint ventures put Indigenous businesses in with a senior contractor who’s supposed to transfer skills, but of course they don’t really want to because that just creates another competitor.”


Mr Stewart said he couldn’t think of any joint venture that had helped create a viable, independent Indigenous company. He is likewise sceptical about the employment figures trumpeted by mining companies.

“The numbers sound good but they’re often just counting, and sometimes double-counting, every Indigenous person who’s ever worked there – not real, long-term jobs.”

Professor Charles agreed: “In the past, mining companies did throw money at Indigenous businesses without caring about results. They saw it as just part of their CSR (corporate social responsibility), or thought it might help them negotiate with traditional owners.”

The economic case

What they realise now, she added, is that the economic case for Indigenous businesses stacks up.

“With 50 per cent of northern Australia’s population to be Aboriginal by 2050, and constant labour shortages in the sector, mining companies have had no choice but to develop world’s best practice in dealing with Indigenous groups.”

Best practice or not, Indigenous businesses still need to grow before they can capitalise on this contracting bonanza. For example, to even be invited to tender for most mining company or government work, Indigenous contractors need to ‘pre-qualify’, or satisfy certain capacity indicators. However, most find their path to pre-qualification blocked.

If you haven’t got it, the tenderer demands you partner with a senior contractor who does. Again, you’re in bed with someone uninterested in developing your business,” Mr Stewart said, adding that no Indigenous contractor in WA, including his own GLH, had yet qualified for pre-qualification.

mining2However, David Brudenall, senior manager at Indigenous Business Australia, announced to the conference the launch of an IBA pre-qualification support program to remedy this.

Most Indigenous entrepreneurs agree that blocked access to credit is another obstacle.

“GLH is an $80 million business employing 60 people, but we still can’t get approval for an overdraft,” said Mr Stewart, and several AEMEE board members agreed, from the podium, that the banking sector’s misperception of Indigenous businesses as particularly high-risk needs to change.

Organisations such as IBA have stepped in with lender-of-last-resort-style loans but, at $14.7 million in 2011-12 for 76 businesses, these are too small to help most Indigenous contractors. Mr Stewart said GLH can spend IBA’s annual budget in a month.

The same problem afflicts commercial Indigenous banking programs. Westpac’s Indigenous Capital Assistance Scheme, for example, caps most loans at $500,000.

Compliance burden

Ironically, government policies intended to encourage the growth of Indigenous business can in fact be a major obstacle. One complaint aired frequently at AEMEE 2013 concerned the crippling compliance burden faced by Indigenous businesses.

“Our native title group employed an experienced cattle station manager for their pastoral property,” said Craig Jones, director of resource consultancy RREDD. ”He said the pile of compliance reports he had to fill out was five times higher than for any other station he’d managed, simply because it was an Indigenous business.”

However, not all checks to Indigenous contractors’ growth are external. That every Indigenous speaker at AEMEE 2013 respectfully acknowledged the venue’s traditional owners points to a specifically Indigenous one: rights to country. Another Indigenous entrepreneur at the conference made a plea to break this traditional block: ”A white mob can come in, rape and pillage and make millions of dollars, but you won’t let your own people come onto your country. How stupid is that?”

Some Indigenous businesses are finding ways to grow within traditional constraints. Evan Parrish, finance officer for the Waanyi-owned Northern Project Contracting, a contractor for Mount Isa’s Century Mine, said NPC had been invited by traditional owners in the Pilbara and Mackay to develop 100 per cent Indigenous-owned joint ventures on those groups’ country.

The final word

Perhaps the final word on the clash between the mining-driven Indigenous business boom and traditional Aboriginal culture should go to Dangatanga Gondarra, board chairman of Australia’s oldest indigenous corporation, Yolngu Business Enterprises, established in 1968.

“Culture does limit Yolngu involvement in business. We don’t get jobs for our young people driving trucks in the mines because they need to go bush for ceremonies,” he said.

But compromise is possible.

“Our balanda (white) employees do ceremonies with us when we’re doing Yolngu way, but when we’re doing business we do the balanda way.”

Ultimately, Gondarra said, Indigenous business would strengthen Indigenous culture, not destroy it.

“Strong business supports our law and helps our country and that’s what we want to do.”