If I told you the Federal government is increasing Indigenous spending you probably wouldn’t believe me. If I said government initiatives offer remote Indigenous communities long term viability you might wonder what I’ve been smoking.
Thanks to rhetoric by the government’s opponents - and the government’s own rhetoric misfires - the message on social, Indigenous and mainstream media is that Indigenous programs are being cut and remote communities have a tenous future.
The facts say otherwise.
The 2015 Budget allocates $4.9 billion to the Indigenous Advancement Strategy, $100 million more than 2014. Funding allocations have changed to reflect the government’s key priority areas - with some programs defunded and some receiving new or additional funding - but the overall funding envelope is preserved.
On top of this, the government’s new Indigenous Procurement Policy commences on 1 July. By 2020, 3% of government contracts will be awarded to Indigenous owned businesses each year. Some contracts, including those delivered in remote areas, can only go to tender if there’s no Indigenous business capable of performing it at value for money.
Most Indigenous businesses are small to medium enterprises unequipped to perform big contracts. However, bidders for big contracts will themselves need to meet minimum Indigenous participation requirements in their workforce and supply chains. Subcontracts can also count towards the 3% government target.
With the government’s annual procurement spend at $39 billion, a 3% target puts a huge amount of revenue within reach of Indigenous businesses. Based on average contract value, it’s estimated that, by 2020, around $135 million in contract spend will go to Indigenous businesses annually.
The government will also increase its Indigenous workforce to 3% - an extra 7,500 Indigenous employees. Its Employment Parity Initiative asks Australian companies to do the same, targeting 20,000 additional Indigenous workers in the private sector by 2020. At the median wage, 27,500 jobs represents well over a billion dollars annually in the hands of Indigenous Australians.
Critically, none of this is “sit down money”. It’s revenue and wages earned by Indigenous people and businesses.
Accor and Compass have already signed the Employment Parity Initiative. These companies are not just doing a good thing. They’re engaging in smart business. Companies that reach employment parity are better positioned to meet government Indigenous participation conditions.
Three other initiatives will particularly benefit Indigenous Australians.
The first is small business tax changes. Most Indigenous businesses are small businesses and will benefit from lower tax rates and accelerated depreciation.
The second is the reformed Remote Indigenous Housing Strategy. This funds state and territory governments to build and refurbish remote housing as well as urban and regional housing for remote community residents who are off-country for work. Housing works will drive Indigenous training and employment. There’ll be greater accountability to increase Indigenous home ownership and improve property and tenancy management.
The previous government spent $2.5 billion on overly expensive and poorly constructed remote housing which didn’t fix overcrowding. Most was paid to non-Indigenous people. The new strategy sees greater economic participation by Indigenous communities in building, maintaining, and even owning, their own housing.
The third is the $5 billion Northern Australian Infrastructure Facility.
Indigenous people are disproportionately represented in Australia’s north. By 2040, 50% of northern Australia’s population will be Indigenous. Many of the most remote Indigenous communities are up north. Indigenous Australians already own or have rights over 82% of northern Australia. So if you want to participate in projects up north you have to sit down with Indigenous communities.
And why wouldn’t you want to? Provided you get the implementation right it makes good business sense. Having access to a local talent pool and the ability to source supplies and services locally saves costs and reduces risk. Smart companies will work with locals and local communities to build the skills and experience needed for their projects. And in turn they’ll be well placed to meet Indigenous participation conditions if bidding for government northern development projects, like road building.
The opportunities are there. The challenge will be the capability gap - Indigenous Australians not being job-ready and not enough Indigenous businesses with the skills and experience to perform the contracts on offer.
There’s a proven pathway to meet the challenge of Indigenous unemployment and welfare-to-work. It requires effort, investment and perseverance but it can be done.
There’s no proven pathway to meet the challenges for Indigenous businesses lacking skills and experience or “welfare-to-enterprise”. One promising model is for established companies to partner with Indigenous companies to perform contracts, providing an operational base and skills transfer over a period of time. Both companies benefit; and the Indigenous business can learn, mature and grow.
The government’s initiatives create unprecedented opportunity for Indigenous people to move from poverty to prosperity. They also provide a real pathway for remote Indigenous communities to carve out sustainable futures.
This article was first published in the Australian Financial Review on 1 June 2015.
Budget creates opportunity for Indigenous Australia
1 June 2015
By Nyunggai Warren Mundine