Practical reconciliation through business support

The Prime Minister's recent promise to grow the Indigenous business sector through a $115 million Indigenous Entrepreneurs package is welcome. But for this package to be effective, the federal government needs to ensure the support is going where it is really needed.

More than 900 contracts worth more than $154 million have been awarded to 274 indigenous businesses since the federal government introduced its Indigenous procurement policy last July. This is a big increase on the number of contracts awarded the previous year - which were worth only $6.2 million.

However, the majority of contracts are going to already established businesses. Further, most Indigenous businesses are located in the south-east corner of Australia, where Indigenous education outcomes are better and there is greater demand for goods and services.

But support for budding Indigenous entrepreneurs is most needed in remote and regional areas where levels of disadvantage are highest and where capability is lowest.

The introduction of a 3% target for Indigenous procurement has identified a gap in the supply side and in some locations there is a shortage of Indigenous businesses to meet demand.

As a result, a practice dubbed 'black cladding' has occurred, whereby non-Indigenous businesses are appointing Indigenous directors to win federal contracts - but these directors often have no real say or control in the running of the company.

This practice highlights the need for government to ensure that where there are joint ventures, Indigenous business partners have a genuine role in management of the business.

When partnerships are genuine, there are many mutual benefits for both Indigenous and non-Indigenous enterprises.

Partnering with non-Indigenous businesses can help Indigenous businesses qualify for contracts otherwise not accessible to them, provide access to new markets and capital, and foster knowledge transfer and skills development.

While the motivation for going into partnership with Indigenous businesses may be access to new markets and increased revenue, some non-Indigenous businesses are also motivated by a sense of social responsibility.

For example, the non-Indigenous partner of Yaru Water- an Indigenous bottled water company -went into business with two Indigenous brothers because he realised that philanthropic support alone rarely leads to sustainable change.

The partnership has been mutually beneficial. Because Yaru water is an Indigenous-owned company, it is eligible for membership with Supply Nation (a not-for-profit organisation that connects Indigenous-owned businesses with opportunities in corporate and government supply chains) which has helped the company secure significant distribution deals and increase sales.

Proceeds from the sale of Yaru water have also been used to help support education and training programs for local Indigenous youth and the construction of a facility to teach visitors about Bundjalung culture.

Such relationships are an important and necessary first step in improving Indigenous social and economic outcomes.

Unlike government programs, which tend to be a passive form of support, supporting Indigenous businesses is a form of active assistance.

When Indigenous people receive support for a business initiative, they actually have to do something. Most of the time, they are the ones who have the business idea - and it is something they are passionate about, but do not have the funds to launch or the business acumen to know where to start.

Supporting Indigenous businesses can also help to foster individual responsibility and personal accountability, with the responsibility that comes from having a business creating an incentive for business people to succeed.

The federal government's $115 million Indigenous Entrepreneurs package is a much needed addition to the government's Indigenous portfolio, with Indigenous affairs noticeably absent from the 2016 budget speech.

If the government gets this policy reform right, not only will it open the door for greater Indigenous participation in the economy, it may also help to break down social barriers and overcome some of the negative stereotypes of Indigenous Australians. By encouraging partnerships between Indigenous and non-Indigenous businesses, there is potential for real practical reconciliation to occur.

Sara Hudson is the Manager of the Indigenous Research Program at the Centre for Independent Studies and author of Awakening the 'Sleeping Giant': the hidden potential of Indigenous businesses.