Get the rules right

The Indigenous Advancement Policy needs critical refinements. The new government must move away from the mission manager mentality and fully embrace a genuine commercial framework.

by Nyunggai Warren Mundine AO, Executive Chairman of the Australian Indigenous Chamber of Commerce

Indigenous affairs policy has to tread a fine line between two conflicting forces. On the one hand, Indigenous disadvantage will only be solved by economic development and that primarily comes from commercial activities and jobs.  On the other hand, a huge amount of time and energy is directed to things that don’t drive commercial activities or sustainable employment – like welfare, government services and grants.

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Governments create the environment where economic development can flourish (or flounder). But it is commercial initiatives driven by the private sector and private capital that make economic development happen.

So it worries me when initiatives that are supposed to support Indigenous economic development is subject to additional conditions which don’t apply to other Australians.

There are two examples under the Commonwealth government’s Indigenous Advancement Strategy.

The first is the $30 million Indigenous Enterprise Development Fund (IEDF), established to support commercially sustainable businesses to start up or expand with $25 million set aside for remote areas.

It is an excellent initiative in concept. But there are defects in its design and implementation.

First, funding decisions are made by politicians and public servants. Government departments are unqualified to “pick winners” in business and most of the people who work in those departments don’t have business experience. Contrast the government’s Future Fund which holds funds to cover public sector superannuation. It has been set up as an independent fund run by qualified and experienced people from the business community.

Secondly, the IEDF will only match funding provided by Indigenous Business Australia or by commercial lending partners.  IBA is a government agency. And as at a few months ago no commercial lender had yet signed up. Even if they do, major banks don’t have a strong track record of business lending to Indigenous people in remote areas. And, regardless of location, debt funding isn’t always the best form of capital for start-ups and expanding businesses.

I believe Indigenous enterprises are more suited to attract capital from private investors who may want more hands on involvement to get the business off the ground. This would be a good thing and should be facilitated.

The IEDF should be a venture capital fund managed independently by qualified professionals under an investment mandate and with funding decisions made by an experienced and qualified Investment Committee and free to match funding provided by banks or equity investors.

Thirdly, the IEDF is open to not-for-profit and social enterprises. The point is to encourage enterprise and entrepreneurship and help Indigenous people build a livelihood. So funding should only be provided to for-profit enterprises. This is consistent with the Supply Nation approach.

No mainstream investment fund would we set up like the IEDF. So why should it operate this way for an Indigenous fund?

The second example is the existence of Aboriginal and Torres Strait Islander Corporations. These are corporations just for Indigenous people and regulated by a special regulator – the Office of the Registrar for Indigenous Corporations (ORIC).

I oppose special Indigenous corporations. They reinforce segregation which we should be moving away from, not towards.

Yet government has amplified segregation by forcing Indigenous organisations to register as ATSI corporations in certain situations. For grants of $500,000 or more under the Indigenous Advancement Strategy, Indigenous organisations must incorporate as ATSI corporations and non-Indigenous organisations must incorporate as regular companies.

The rationale for this policy is that ORIC offers “special measures to meet the specific needs of Indigenous people” including, among other things, “flexibility to accommodate specific cultural values and practices” and “tailoring to reflect the particular needs and circumstances of individual groups”

I’m a Bundjalung man and also descended from the Gumbaynggirr and Yuin nations. I’ve spent 60 years living and working with Indigenous people all across Australia – in cities, in regional towns, in missions and reserves and in homelands and other deeply traditional communities.  I’ve served on boards of on Indigenous organisations and mainstream companies. And I don’t understand this policy rationale. I can’t think of a situation that an Indigenous organisation needs to address that can’t be accommodated by one of company structures available under the Corporations Act.

I’m also not convinced ORIC is better at monitoring and regulating Indigenous organisations than ASIC. Despite the “special” capability and services that ORIC supposedly provides, we’ve seen numerous instances poor governance, financial mismanagement and fraud of Indigenous organisations to the detriment of Indigenous people.

Mandatory ATSI incorporation is a mission-manager mentality. It’s wrong and needs to change.

These policies are examples of the same intellectual trap that sees civil unrest in Aurukun treated differently from civil unrest in Melbourne – that Indigenous people are different from everyone else and different rules and expectations apply. As Chair of the Prime Minister’s Indigenous Advisory Council I advised both Prime Minister Turnbull and Minister Scullion that I disagree with these policies. I hope that the next government takes steps to reform them.

This article is an extract of a speech delivered by Nyunggai Warren Mundine AO at the Strengthening Indigenous Economic Development Conference on 8 June 2016 as Chair of the Yaabubiin Institute for Disruptive Thinking, an initiative of the Australian Indigenous Chamber of Commerce. A version of this article appeared in the Koori Mail on 29 June 2016.

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  1. Barry Taylor says:

    Totally agree with you Warren. As you are aware my neck of the woods is a rich mining region of Australia and yet economic development has floundered for Indigenous people as we are at the mercy of the mining sector. We have been trying desperately to focus away from mining given the very nature of commodity prices to enter into other business ventures such as tourism which sadly has poor infrastructure in our rich resource region, and government does not drive the economic agenda, continually concentrating on welfare issues.

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