There’s been 8000 new Indigenous businesses launched in past decade, but federal policy needs work

financial foundations

The federal government’s Indigenous Procurement Policy (IPP) has been beneficial to the Indigenous business sector, but there is still work to be done to smooth out the bumps, an independent evaluation has found.

The IPP was introduced in 2015 to support the growth of Indigenous enterprises and entrepreneurship, as a way to improve outcomes such as health status, work-life balance, social engagement, education and skills for the wider Aboriginal and Torres Strait Islander community.

A recent independent evaluation by Deloitte Consulting has found the implementation of the IPP has had an overall positive effect on Indigenous business, noting that the last decade has seen growth of 8000 new Indigenous businesses.

However, there is a risk of “unintended consequences”, Deloitte found, such as “black cladding”, where non-Indigenous companies either create a business structure where the shareholding percentage allows it to qualify as an Aboriginal business, or attempt to misrepresent themselves as Aboriginal businesses in a bid to win contracts.

The use and understanding of language, access to required skills, difficulties with loan and grant approvals, access to employment and growth opportunities, and confusion over conflicting Commonwealth and state government policies and programs were also identified as issues.

Despite this, Deloitte argued the policy benefits would “more than outweigh any costs associated with accelerating the outcomes available under the IPP”.

“Consideration should be given to the wider social impact of the IPP and its ability to directly impact employment, social inclusion and wellbeing of Indigenous peoples,” the report noted.

Deloitte made nine recommendations:

  1. The Commonwealth should move to a value-based target of 3% of all contestable Commonwealth procurement value to be sourced through Indigenous businesses;
  2. The definition of Indigenous ownership should be amended to require at least 50% Indigenous ownership, and at least 50% Indigenous control of the company;
  3. Trade shows must be led by the Commonwealth in all state and territory capitals, and in regional areas where more than six Commonwealth portfolios are in the region;
  4. Trade shows should feature education sessions run by Department of the Prime Minister and Cabinet and the Department of Finance on the application of the IPP and the Commonwealth Procurement Rules;
  5. The application of Mandatory Minimum Requirements should be broadened to apply to all government contracts including whole-of-government contracts, such as mandated whole-of-government arrangements;
  6. The rollout of the “Project Hubs” in the Indigenous Business Sector Strategy must be broadened to include Indigenous Innovation and Support Hubs based on a Hub and Spoke model to ensure regional and remote areas are able to access services;
  7. A “Contract Ready” business directory should be developed;
  8. PM&C should engage with Finance to consider including Social Return on Investment as part of the national interest test under clause 10.31 of the Commonwealth Procurement Rules for contracts with a value greater than $4 million; and
  9. PM&C must commence a co-design process with stakeholders including Finance, Indigenous Business Australia, Supply Nation, and the First Australians Chamber of Commerce and Industry to create a data governance framework based on leading practice standards.

Minister for Indigenous Australians Ken Wyatt said he was pleased to see the Commonwealth has exceeded its targets for the number of contracts going to Indigenous businesses, but acknowledged the need for improvements.

He said the government would continue to work with Indigenous businesses, particularly in rural and remote areas, to “increase the awareness and understanding of the policy and how it can deliver sustainable investment and support Indigenous businesses to achieve their goals”.

“This will include hosting business trade fairs in more regional locations and linking Indigenous businesses with support services so they can get the most out of the policy,” he said.

He thanked the 450 businesses which contributed to the evaluation, noting that the National Indigenous Australians Agency has been working through the recommendations.

This article was first published on The Mandarin.

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