Business studies empowering Indigenous success

Revised 29 October 2018

Source:  Artwork by Dennis Golding, Nura Gill

Lessons from across the Tasman

There is an old Māori proverb – he kai kei aku ringa – which literally translated means “there is food at the end of my hands.”  It is about Māori using and growing their capabilities to take best advantage of their assets and resources, self-determining their economic and social wellbeing.

Since the close of the last century iwi (Māori tribes) have witnessed the progressive return of land confiscated, received financial redress and, in some cases, a Crown apology.  Today the Māori economy is valued NZ$50 billion, approximately six percent of New Zealand’s total asset base. 

At the time of settlement, low financial literacy meant Māori were not prepared to protect their interests.  This plus reliance of external advisors drove the desire by Māori to become educated - to be their own advisors.  Iwi invested in developing the financial literacy skills of their people, and the New Zealand Government invested in initiatives to support the same.  Its Maori development strategy adopted the name and philosophy of the old proverb.

 

Today Māori represent 11.5 percent of enrolments in Management and Commerce higher education programs.  The Māori economy is growing rapidly, outpacing the wider New Zealand economy.  Key economic indicators for the Māori economy have been improving at an annual rate of greater than five percent.  This compares against around two to three percent growth in recent times for the whole New Zealand economy.

Australia stands to learn much from its neighbours from across the ditch.  And I am not just saying that because I am a proud Kiwi.  (Okay, maybe there is a just a little bit of bias creeping in).  Indigenous Australians are at similar crossroads as Māori were two decades ago.  With the settlement of native land claims and other developments, unprecedented opportunities are opening for Indigenous Australian’s.  Far in excess of those experienced by their Māori cousins.  The risk is that best advantage is not taken of the emerging opportunities unless Indigenous Australians take charge of driving their own success.

Unprecedented opportunities

Current situation

There are an estimated 8,600 to 11,900 Indigenous businesses in the Australian economy, comprising self-employed individuals, enterprises and trusts.  Together they added between A$2.2 billion and A$6.6 billion to the Australian economy in 2016, representing between 0.1 percent to 0.4 percent of the nation’s gross domestic product. 

Given the strengths of the Indigenous business sector and the growing Indigenous population, the magnitude of this contribution is expected to increase.  However, compared to the figures cited above for New Zealand, the contribution of Indigenous businesses would need to triple in order to be comparable to the contribution of Māori businesses to the New Zealand economy (when taking relative populations in to account).

The good news is that Australia’s top ranking 500 Indigenous corporations registered with the Office of the Registrar of Indigenous Corporations (ORIC) evidence the growth potential.  Their combined income in 2015-16, at A$1.9 billion, has doubled over little more than a decade.  The value of the combined assets of these businesses has been accelerating at an even faster rate - approaching an annual average rate of growth of more than 10 percent, suggesting a significantly augmented basis for future growth.  The expansion of these top performing Indigenous businesses is in turn supporting job growth.  Employee numbers have swelled from close on 7000 in 2007-08 to approaching 13,000 by the end of the period shown in the chart below. 

Future potential

 

The even better news is that the above discussion only hints at the future potential.  There are three sources of unprecedented opportunities.

 

The first is that Indigenous Australians now own or have rights or interests to a massive 34 percent of Australia’s land mass under various forms of title and legislation.  Studies estimate that there could be up to A$10 billion in investable assets in the Indigenous Estate

The potential is even greater still as a further 25 percent of Australia’s land mass is currently is subject native title claims.  This is significant because it means that in the not too distant future, Indigenous Australians could either own or have rights or interests in more than half of the nation’s land mass.

 

The second consideration is the record level of public sector demand to procure goods and services from Indigenous businesses.  In 2015, the Federal Government launched its Indigenous Procurement Policy which specifies an overall Indigenous procurement target of three percent, and separate targets for each government department.  In 2016-17, more than A$285 million worth of contracts were awarded to 723 Indigenous businesses in Australia.  This compares against the A$6.2 million worth of contracts issued just four years earlier.

 

Many state governments have followed suit.  The governments of South Australia, Western Australia, Queensland, Victoria and New South Wales have each adopted Indigenous procurement policies and targets to stimulate the Indigenous business sector. 

 

The third consideration is the record level of private sector demand to procure goods and services from Indigenous businesses.  The Business Council of Australia’s annual survey of Indigenous engagement by its membership finds that the number of respondents indicating that they use Indigenous businesses in their supply chain has more than tripled from 16 businesses in 2009 to 57 in 2016.  The Reconciliation Action Plan (RAP) Impact Measurement Report for 2016 reports that RAP organisations purchased goods and services worth over A$169 million from Supply Nation certified businesses.  Primary research by PwC’s Indigenous Consulting shows that there is a significant appetite from the private sector to increase the current level of engagement with Indigenous businesses, with many large corporate leaders exploring and committing to ambitious Indigenous procurement targets.

 

 

The case for more Indigenous Australian’s undertaking business studies

The future potential is clearly huge.  However, the very real risk is that Indigenous Australians and Indigenous businesses do not fully awaken to the potential.

This risk is minimised if more Indigenous Australian’s undertake business-related studies.  This is necessary to:

  • address the capabilities gap currently evident in Indigenous businesses;

  • self-determine Indigenous business success; and

  • support the labour market outcomes of Indigenous Australians.

Below I consider each in turn.  But first a bit of context.

Indigenous participation in business studies

Indigenous participation in business studies is low.  In 2016 a measly one percent of domestic students studying towards qualifications in Management and Commerce were Indigenous.  This compares poorly against the 1.7 percent enrolled in all broad fields of higher education; participation rates of around two percent for Education, Society and Culture, and Health; and an Indigenous population share of three percent.  Many reasons can be posited for this, but that is not the purpose of this piece (perhaps a future one).  The main impression I want to leave you with here is that participation is low.  Add to that the fact that less than half will see their studies through to an end, it is concerning.

More optimistically, the figures are trending in the right direction.  Five years ago Indigenous Australians comprised only 0.8 percent of domestic students studying Management and Commerce programs.  Over the period the Management and Commerce share of all Indigenous enrolments has increased from 10 to 11 percent.  This share will need to keep on increasing if it is to come anywhere near the propensity of 18 percent of non-Indigenous Australians to enrol in Management and Commerce programs.

Earlier in this piece I observed that 11.5 percent of domestic students in New Zealand studying Management and Commerce are Māori.  This is perhaps less impressive when benchmarked against Māori’s 15 percent population share.  However, participation need ‘only’ increase by less than 50 percent in order to bridge the gap.  In Australia, participation would need to triple.

 

Capabilities gap in Indigenous businesses

 

Turning now to the case for more Indigenous Australian’s undertaking business studies and the first of the three imperatives.  In order to illustrate the Indigenous business sector’s growth potential the discussion above deliberately shared the good news story of Australia’s top performing Indigenous corporations.  But what of the ones that do not fare so well?  What of the ones that fail?

 

In 2010, ORIC examined 93 cases of corporate failure by Indigenous corporations.  Topping the list of the 23 symptoms of corporate failure uncovered is inadequate, or non-existent processes or records for financial accounts.  This was a symptom shared by a large 81 percent of cases examined.  A further finding is that a clear majority (67 percent) of Indigenous corporations examined failed because of poor management or poor corporate governance.  The study concludes that this illustrates the need for corporations to be able to hire staff, especially senior staff, to adequately and properly manage their daily affairs, such as the finances.

Six years on, in a report on igniting the Indigenous economy, KPMG echoes these sentiments.  It advises that to take full opportunity of their Estate there is a need for Indigenous Australians to develop the commercial capability necessary to make informed strategic, investment and commercial decisions.

In the same year, high profile Aboriginal businessman and advisor, Warren Mundine, counselled that “In the same way we need to understand our country to sustain and take care of it, we need to understand how to sustain and take care of our financial assets too.  At the moment we are not equipped.”

Self-determined Indigenous business success

Warren Mundine’s counsel was motivated not only by the need to unlock the potential of Indigenous business, but by the observation that too often there are cases of mismanagement and even misappropriation that cripple Indigenous organisations and deplete Indigenous assets.  ABC’s Four Corners exposed how billions of dollars of taxpayer money poured into Indigenous programs in remote communities, designed to ‘close the gap’, had been squandered.  In some cases the communities were the victims of fraud.  In others mere incompetence made them vulnerable to exploitation and betrayal.

The purpose here is not to suggest that Indigenous businesses and communities should not access or rely on external advice.  Of course they should.  Just as non-Indigenous businesses can and do.  The key point I want to stress is that in order for Indigenous businesses to build prosperity from the assets, wealth and opportunities they have fought hard to obtain, they need to grow their own capabilities from within.  That is what it means to have truly empowered Indigenous businesses that self-determine their own success.  He kai kei aku ringa.

Supporting the labour market outcomes of Indigenous Australians

The final point I want to make here is that growing the business-related capabilities of Indigenous Australians is not only essential for business success, it matters for individual success.

Indigenous Australian’s who hold tertiary qualifications in Management and Commerce enjoy positive labour market outcomes.  While the latest Census data would suggest that their employment and unemployment rates are only fractionally better than their peers who hold qualifications from other fields of education, two points are worth making.  The first is that the share of Indigenous Management and Commerce qualification holders actively participating in the labour force, at 77 percent, lies well above the participation rate of 63 percent of their peers in other programs.  The second is that Indigenous Management and Commerce qualification holders enjoy significantly better labour market outcomes than the average for all working-aged Indigenous Australians.

There remains much scope for these numbers to improve.  The previously referenced Indigenous engagement survey of the Business Council of Australia’s membership reveals that the major barrier to employing more Indigenous Australians is finding appropriately qualified individuals.  This mirrors my own experience when, as co-project director for the Indigenous Accountants Australia initiative of the professional accounting bodies, employer after employer shared with us that they were eager to employ qualified Indigenous accountants, but struggled to find any.  There is not an absence of demand.  There is a significant supply-side problem.

 

Facilitating self-determined success

 

The preceding discussion on the unprecedented opportunities facing Indigenous individuals and business, and the risk of squander due to low levels of engagement in business-related studies was deliberately set against the story of New Zealand Māori.  When faced with the challenge of making best use of post-settlement assets, they took matters into their own hands.  He kai kei aku ringa.  They invested in developing their financial literacy skills, and undertook in business-related studies.  The efforts of the New Zealand Government and others centred on facilitating self-determined success.

 

There are a growing number of initiatives in Australia directed towards the same end, including:

  • the aforementioned Indigenous Accountants Australia initiative of the professional accounting bodies, designed to redress the dramatic under-representation of Indigenous Australians in the profession;

  • the Indigenous Business Development Program, where academics from Australian universities have come together at the own volition to run workshops designed to upskill existing Indigenous business owners and managers in accounting, finance, marketing and strategy;

  • a suite of initiatives by the Australian Business Deans Council designed to encourage the participation, retention and success of Indigenous Australians in business programs, including research into the barriers and a National Indigenous Business Summer School for Indigenous high school students contemplating further studies in business; and

  • Melbourne Business School’s MURRA Program created for Indigenous entrepreneurs and leaders to raise the capabilities of Indigenous businesses to grow.

There is a role for Government to both directly support and encourage Indigenous engagement in business studies, and to indirectly provide impetus by leveraging and helping to grow the initiatives of others.

Mary Clarke

Principal

DXP Consulting

M: +61 401 088 571

E:  mary.clarke@dxpconsulting.com.au