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Creating an indigenous enterprise culture through government procurement

28-May-2015

Australian Financial Review: 

On Tuesday night, leaders of the corporate and indigenous community gathered at Darling Harbour for the Supply Nation Gala dinner which recognises indigenous entrepreneurship across the nation.

I wish the night could be attended by all Australians because it shows the extraordinary, but typically unheralded, work that indigenous business people have done in building businesses, creating wealth and employing others. The glamorous black-tie evening is the opposite of the negative images that are so frequently associated with indigenous people.

There are about 9,000 indigenous owned businesses across the nation, covering everything from telephony to construction to catering.

They are, in some regards, an ultimate demonstration of individual self-determination and illustrate what we should all be trying to achieve: a shift from a welfare culture to an enterprise culture.

We cannot force entrepreneurship, but governments can encourage and stimulate it. In the most recent budget, we announced measures to help start-ups get off the ground and small businesses to thrive.

In addition, however, we are seeking to turbo-boost the indigenous business sector through the use of the government procurement dollar. This could have a profound impact on the growth of a stronger indigenous middle class over the years ahead, similar to what has occurred with minorities in the United States and Canada.

The Australian Government presently spends over $39 billion per annum on various contracts, but last year only about $6 million went to indigenous businesses – that's 0.02 per cent. There are structural reasons for this, including the relative underdevelopment of the indigenous business sector.

Procurement using taxpayer dollars must be done on the basis of value for money, but if indigenous businesses (and consequently indigenous employment) can be boosted at the same time, then this is desirable.

Lifting indigenous employment is urgent. Out of all the closing-the-gap indicators, the only one that is going backwards is the most important: jobs. More indigenous people rely on welfare than a job and the proportion out of work is getting higher. Unless more indigenous people are in work, then we will always struggle to address some of the other social problems such as health and housing.

Indigenous businesses can be a significant part of addressing the employment gap, because these businesses employ indigenous people at a rate 100 times that of non-indigenous businesses. They are particularly good at employing those who may have been long-term unemployed and have challenges across multiple fronts.

Consequently, the government has for the first time set a procurement target. By 2020, we aim to give 3 percent of federal government contracts to indigenous businesses. Three percent correlates to the proportion of indigenous people in the nation. No contract will be given to a business unless it can demonstrate value for money, but the target will put pressure on government departments to seek out large and small indigenous owned companies that can provide goods and services for the government.

This target complements other initiatives aimed at boosting indigenous employment: stronger indigenous employment in the public service, greater mobility assistance, the expansion of employment-led training, and asking the top companies to lift their ambitions.

Our procurement target is new for Australia but is not a new idea. The United States under President Nixon set itself a target in 1969. Five percent of federal procurement dollars was set aside for small minority businesses by law. As a result, the US Government is today 150 times more successful with procurement from Native American suppliers than we are in Australia with indigenous procurement. The large African American middle class is in part due to this policy which started 45 years ago.

Similarly in Canada, the government set a 4 per cent target back in 1996. Today, contracts valued at $3.4 billion have been awarded to indigenous businesses, supporting thousands of jobs.

A government's role is, in part, to ensure that everyone has an opportunity to achieve, so that key groups are not left behind. As everyone knows, indigenous people have been socially disadvantaged for a long time. This procurement target will assist in ameliorating this. Of course, we must continue to work with the states and territories on education - the ultimate leveller. Indigenous people with a good education get employed at the same rate as anyone else. But in the short to medium term, supporting indigenous enterprises that have a proven ability to help the most disadvantaged job seekers, is better than the expense and poison of ongoing welfare.

In the years ahead, let's hope that there are not 9,000 indigenous businesses, but tens of thousands, taking thousands more off the dole queue and generating wealth. The beginning of an enterprise culture is already present.

With a bit of encouragement, it could absolutely thrive.

Alan Tudge is Parliamentary Secretary to the Prime Minister

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