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.
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