Indigenous business policy is tricky

Charles Jacobs

01 December 2017 | IDEAS@THECENTRE

Indigenous Australians are turning to small business ownership as a means of overcoming socio-economic disadvantage. However, they cannot rely on government policies to prop them up — there must be a market case for their success. In the case of the federal government’s Indigenous Procurement Policy (IPP), this is particularly resonant.

Interventionist policies such as the IPP aren’t great for the market. They often aren’t even that great for those who they’re supposed to benefit.

My research report — Risky Business: the problems of Indigenous business policy — assesses the impact of the IPP’s first two years, concluding that while the policy has its benefits, its true impact is limited.

Procurement by its very nature has a restricted footprint— there is only so much the government needs to buy. In 2015-16, the first year of the IPP, over 60% of expenditure went to businesses in construction. Nearly $75 million of this was awarded to just four companies.

Multimillion dollar construction contracts are hardly going to be accessible to the average small business. Indigenous business will ultimately have to succeed on the open market.

While the tangible impacts of the IPP are limited, the policy can be credited for changing the conversation in Aboriginal and Torres Strait Islander affairs. Prior to the IPP, the focus was placed firmly on getting Indigenous people into employment. Now Indigenous people are talking about business opportunities as another means of overcoming socio-economic issues.

The private sector is also starting to talk about business. Some of the biggest companies in Australia have committed to using Indigenous suppliers. For example, 13 of the ASX top 20 have committed to using Indigenous enterprises in their supply chains.

What was once corporate social responsibility has become a market force — it is now commercially advantageous to be able to demonstrate engagement with Indigenous businesses.

Promoting Aboriginal enterprise is a tricky business, and the IPP has significant flaws. However when the policy is dissected it is clear that its greatest strength is not in the number of contracts awarded, but in the creation of an awareness about the role business can play in Indigenous economic development.

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