What it means to be an Aboriginal business is central to the debate over ‘black cladding’.
Australia’s Indigenous business sector has been growing at breakneck speed in recent years.
The number of Indigenous businesses listed with Supply Nation – the federal government-backed body charged with boosting the sector – has nearly quadrupled in the past five years, to 3,567.
The sector’s revenue has also been growing rapidly – up by 12.5 per cent a year, according to Supply Nation.
The growth has been driven by an abundance of opportunities.
State and federal governments have set procurement targets that require their agencies to buy from or award contracts to Indigenous suppliers.
The Western Australian government, for instance, awarded 284 contracts worth $136 million to Indigenous businesses last financial year under its Aboriginal Procurement Policy.
The corporate sector has provided much larger opportunities.
With an eye to their environmental, social and corporate governance (ESG) obligations, corporates are looking to increase their engagement with Aboriginal suppliers and contractors.
The big iron ore miners in the Pilbara have been leading the way, in part to meet their obligations under Indigenous Land Use Agreements.
Collectively, Fortescue Metals Group, Rio Tinto and BHP spent nearly $900 million with Aboriginal businesses last financial year, according to data supplied to Business News.
As the Indigenous business sector grows, so does the debate around ‘black cladding’.
It’s a term that means different things to different people but typically applies to joint ventures where the non-Indigenous business takes advantage of their Indigenous partner to win work they wouldn’t otherwise qualify for.
It’s a fraught topic because there are many legitimate joint ventures.
Where joint ventures work well, the Indigenous partner is actively involved in running the operation and learns new skills from the ‘capacity partner’, while new jobs are created for Indigenous people.
Supply Nation told Business News it took any allegations about black cladding extremely seriously and had robust verification and investigation processes.
However, pinning down the incidence of black cladding is an impossible task because it goes beyond ownership structures.
It goes to the spirit of joint ventures and whether Indigenous partners are genuinely involved, and real efforts are made to maximise Indigenous employment.
Francois Langlois, who leads Roebourne-based Aboriginal business Brida, speaks for many in the sector.
“There is so much black cladding that continues to happen,” Mr Langlois told Business News.
“It’s just a tick-a-box exercise, so they can say they have an Aboriginal contractor on site.
“Those so-called Aboriginal contractors all employ white fellas and the benefits flow where? They go back over east somewhere.”
Many other people prefer to not speak on the record, but some refer to a running joke in the Pilbara to illustrate the issue.
They say every second Hilux seems to have an Aboriginal logo on the door but very few are driven by Aboriginal people.
New definition
Against this backdrop, the 11 Indigenous chambers of commerce operating across Australia want to tighten the definition of Aboriginal business.
At their inaugural national meeting last month, they called for governments and corporates to adopt a stricter definition.
“The collective confirmed our definition of an Aboriginal business to be majority owned, managed and controlled, 51 per cent or greater,” they said in a joint statement.
The 11 chambers include three in WA: the Noongar Chamber of Commerce and Industry; the Goldfields Aboriginal Business Chamber; and the Pilbara Aboriginal Business Chamber.
The tighter definition is at odds with both the Australian government’s Indigenous Procurement Policy (IPP) and the WA government’s Aboriginal Procurement Policy, which require only 50 per cent Indigenous ownership.
If the new definition was adopted by governments and corporates, many Aboriginal businesses would miss out.
Supply Nation has disclosed that only 25 per cent of businesses on its database are majority Indigenous owned, controlled and operated.
This makes them ‘certified’ Indigenous businesses.
Of the remaining businesses listed as ‘registered’, it said about three quarters were majority Indigenous owned but were yet to complete the certification process.
That still leaves hundreds on the outer.
Despite this, Supply Nation has indicated it would support a change in the definition of Aboriginal business to 51 per cent minimum.
This would take Supply Nation back to the original definition it applied when it was launched in 2009.
Former chief executive Laura Berry told a Commonwealth parliamentary inquiry last year on Indigenous Participation in Employment and Business that the extra 1 per cent would help ensure indigenous entrepreneurs had more control and involvement in their business.
The House of Representatives Standing Committee on Indigenous Affairs was not convinced.
“The percentage of ownership does not indicate anything about the values of the company, nor its focus on broader Aboriginal and Torres Strait Islander economic development beyond the owners of the business,” its report concluded.
Instead, the committee called for other changes to ensure government procurement policies benefit genuine Indigenous businesses.
It recommended independent random audits of entities that have been awarded IPP contracts to ensure black cladding is not happening.
The audits would assess if employment, skills transfer or other benefits to Aboriginal and Torres Strait Islander people was occurring because of the contract.
It also recommended that Supply Nation should look beyond the percentage ownership of Aboriginal businesses to include the proportion of Aboriginal employees, skills transfer, the use of company profits and whether the business has been able to attract work from the broader commercial marketplace.
Similarly, it said the performance of the IPP should not be based just on contract numbers and value.
It should also consider Indigenous employment and skills transfer.
The WA government has already moved in this direction.
In a policy change last year, it said Aboriginal suppliers awarded contracts via the APP needed to achieve minimum Indigenous employment levels, ranging from 2 per cent in Perth to 10 per cent in the Pilbara.
Broader approach
Aboriginal entrepreneur Blaze Kwaymullina has also been pushing for a change in the way Indigenous businesses are assessed.
A Pilbara traditional owner, he is a founder and director of North West Alliance, a 50:50 joint venture owned by his family trust and global waste management company Veolia.
The joint venture, operated by Veolia, has been running successfully since 2013 and has contracts with BHP, Woodside, Rio Tinto and Roy Hill Holdings.
In addition, Mr Kwaymullina has established a family office, Emu Nest, that invests in Indigenous businesses and communities.
He believes there is too much focus on the ownership of Indigenous businesses, saying there should be a broader assessment.
“The ownership percentage doesn’t really bother me, we need to focus on their impact,” Mr Kwaymullina said.
“How many Aboriginal people do they employ?
“How much do they invest in training and professional development, and do they operate in a culturally safe way?
“How much do they spend with Indigenous suppliers?
“What do they put back into the community?”
He believes there is no single business model that is best.
“What is useful is having a spectrum of opportunities for traditional owners, so they can establish structures that are most suitable to their needs,” Mr Kwaymullina told Business News.
“It’s all in the details.
“Any model can be good, or it can be terrible.
“You need to look at the shareholders’ agreements and the service agreements and you need to be flexible over time.”
Mr Kwaymullina believes that, in the right circumstances, joint ventures are a suitable model for many Indigenous groups as it allows them to team up with an established business.
A key test, he said, was how effectively the ‘capacity partner’ helped the Indigenous party develop their skills and capability.
Mr Kwaymullina said North West Alliance’s 50:50 ownership structure had worked well for the two owners, balancing risk, liability, capital and expertise.
He noted that a 51 per cent ownership level may deliver legal and operational control, but it also brought greater legal liability.
Job outcomes
The wide variation among Aboriginal businesses in WA is highlighted by a quick review of their employment and ownership structures.
Brida, for instance, employs nearly 200 people and about half are Aboriginal or Torres Strait Islanders.
That proportion is much higher than for most other Aboriginal businesses.
Supply Nation has reported that the average Indigenous employment rate among Aboriginal businesses is 37 per cent.
In Brida’s case, the Indigenous employment rate was substantially higher in the past.
Like most small and medium businesses in the Pilbara, it has struggled to retain experienced staff lured by higher salaries offered by the big miners and tier one contractors.
This leads to the perverse situation where the big companies give with one hand but take with the other.
They are keen to award more contracts to Aboriginal businesses, yet their poaching makes it harder for these businesses to deliver.
The headline numbers also fail to show what happens behind the scenes.
Brida, which is 100 per cent owned by Ngarliyarndu Bindirri Aboriginal Corporation, operates more like a social enterprise while also making a profit.
It has a big focus on training and support to help marginalised Aboriginal people move into the workforce.
“A more traditional employer would not be so understanding,” Mr Langlois said.
“Value for money in the mining industry is so different to what it means for us.”
Brida looks very different to many other Aboriginal businesses, which have different ownership, operate in different regions, and provide different services.
North West Alliance currently has around 60 staff and has maintained 45 per cent Indigenous employment for most of its life.
That proportion has fallen to 20 per cent in the past two years as Aboriginal and local staff were poached by mining companies, government agencies and large constructions firms amid the mining and government infrastructure booms.
“It’s very hard to get people and retain people,” Mr Kwaymullina said.
“We’re looking at work experience and traineeships to boost our teams.”
He added the alliance had a five-year program to build up the professional skills of its people but that made its staff more attractive to the big miners.
While Indigenous employment had declined, Mr Kwaymullina said female employment had increased to 47 per cent, in large part because the alliance offered flexible conditions that suited many women.
The state’s longest-running Aboriginal business is mining and civil contractor Carey Group, founded and owned by Daniel Tucker.
It employs about 400 people, mostly in the Goldfields, with about 40 per cent being Aboriginal. WA’s largest Aboriginal business is Warrikal, led by 51 per cent shareholder and director Amanda Healy.
It employs about 700 people and targets 20 per cent Indigenous employment – a low number that reflects the more specialised nature of its mechanical services work.
Its actual Indigenous employment rate has fallen to about 12 per cent.
“As the business has grown, it is getting harder and harder,” Ms Healy said.
Evaluating the impact of Aboriginal businesses is complicated by the fact that many have joint ventures or subsidiaries that undertake major contracts, and the ownership of these is variable.
Ms Healy, who also leads Kirrikin Australia – a social enterprise producing luxury clothing featuring contemporary Indigenous art – said each Aboriginal business needed to be looked at on its merits.
Warrikal and Kirrikin both reinvest in their communities.
“Being an Aboriginal person, we are always obliged to give back to our communities, that is the key thing,” she said.
Ms Healy has also seen questionable joint ventures.
“Some joint ventures have not been above board,” she said. “I’ve helped some friends get out of situations that are appalling.”
Ms Healy said she had also been on the receiving end of some bad deals over the course of her career but had taken something from it.
“When people have screwed me over, it’s not a good thing but I’ve learned from it, I’ve found it educational, and I’m sure others would too,” she said.
A contract announcement last month by BHP illustrated some of the complexities in the Aboriginal business sector.
The big miner ran a competitive tender that was restricted to Banjima companies, structured specifically to enable traditional owner businesses to work on-country.
The contract, for crushing services at Mining Area C, was awarded to PMW Industries, “a 100 per cent owned and operated Banjima business, and its strategic partner CSI Mining Services”.
That description was technically correct but not especially clear.
PMW is owned by one Banjima traditional owner, Paula White, who also owns a second contracting business, White Cliffs.
Ms White explained to Business News that PMW planned to establish a 51:49 joint venture with CSI, which is a wholly owned subsidiary of Chris Ellison-led Mineral Resources.
CSI is the world’s largest crushing contractor with 23 operating plants; if all goes well, the joint venture should be a great success.
CSI gets to work on a BHP mine while passing on its expertise and knowledge to PMW, which hopes to win this kind of work in its own right in future.
But like all new business ventures, its an open question whether the goals will be achieved.
New guidelines
To help all organisations measure their overall contribution, Mr Kwaymullina has published a set of guidelines on Aboriginal economic participation.
It includes a standardised methodology for measuring how much is spent employing and training Aboriginal people, the total spend on Aboriginal suppliers and contractors, and the total value donated to Aboriginal people or Aboriginal organisations in cash, time, equipment or services.
Mr Kwaymullina said his own business had set a target of spending 10 per cent of its revenue on Aboriginal economic empowerment.
This could be delivered in different ways.
Some organisations may operate in a location with limited opportunities for Aboriginal employment; they can spend more with Aboriginal suppliers or on capacity strengthening.
The guidelines have been used by several consultancies and other businesses across Australia.
Mr Kwaymullina said widespread adoption would clear up the debate over black cladding.
“It provides a standard measurement that means you can compare performance,” he said.
“It doesn’t rely on the ownership structure or the management structure, it measures the impact.”
He added this should be more broadly applied.
“Economic and social impact should not be a requirement that is only placed on Aboriginal business, but instead all businesses,” Mr Kwaymullina said.
“The policy framework should allow for businesses that produce greater impact to have this properly valued in tendering criteria and factored into the overall commercial assessment.
“We should have a scoring system for impact, where companies have ranked performance that can be compared on a like-for-like basis that is publicly accessible.”
