Weak commodities prices are threatening the positive growth of indigenous business.
Weak commodities prices are threatening the positive growth of indigenous business.
Economic sustainability of many of the state’s indigenous communities is under threat as faltering resources sector returns cut into revenues and future opportunities.
Land-use and native title agreements have funnelled significant capital into indigenous communities, which in turn have been working to create long-lasting benefits through business ventures.
Indigenous organisations established around those agreements have also focused on the mining sector as a way of growing operational revenue.
But the reliance on mining is now backfiring for some, as weak commodity prices strip income from land-use and native title agreements, and business activity.
In one example, Business News revealed online last week that the state’s largest indigenous corporation – the Gumala Aboriginal Corporation – had cut jobs and frozen benefits to its more than 1,000 members because of reduced revenue from its founding land-use agreement.
The corporation was formed on the back of one of the first land-use agreements, the Yandi Land Use Agreement with Rio Tinto subsidiary Hamersley Iron signed in 1997.
Revenue from that agreement has since been a pillar of the Gumala group, with 60 per cent of the total amount paid allocated to funding a range of member benefit programs.
Gumala’s revenue from the agreement during 2013-14 was $20.7 million, $16.4 million less than the previous year due to the fall in the iron ore price from a high of $US150 per tonne in the 2012-13 year to less than $US100/t at the end of June 2014.
The situation has worsened since, with the iron ore price now in the vicinity of $US70/t, which prompted Gumala chief executive Steve Mav to announce redundancies and funding freezes in anticipation of an even tougher financial year in 2014-15.
“I believe being open and honest with everyone is important during this difficult time,” Mr Mav said in a statement.
“Member/beneficiary ordinary entitlements available under the General Gumala Foundation will be subject to a full review over the coming weeks, at which time further information will be provided to traditional owners. Further cost savings will occur.
“I deeply regret this action so close to Christmas.”
Gumala did manage to increase its overall group revenue from $50.2 million to $69.5 million, however, thanks to $11.7 million in increased contract revenue under its business, arm Gumala Enterprises.
Gumala Enterprises operates a hospitality-focused joint venture with ESS Compass Group, the Karijini Eco Retreat and civil works contracting services.
The corporation’s predicament looks set to be replicated by other corporations dependent on native title and land use payments, such as WA’s third largest indigenous corporation, the Yamatji Marlpa Aboriginal Corporation, which gained 60 per cent of its $29.3 million revenue over 2012-13 from native title service provision.
However weak commodities prices have also prompted warnings to other indigenous corporations and businesses, which have been established separate from native title and land-use agreements.
Leading Aboriginal scholar and chair of East Pilbara mining services company Guma ICRG, Marcia Langton, last week applauded the mining sector’s lead in embracing indigenous businesses, but issued a wake-up call to her indigenous counterparts.
“With commodity prices dropping, and here in WA the 50 per cent decline in the iron ore price in one year is the most relevant example, the exposure of Aboriginal businesses to the mining sector demands urgent action,” Professor Langton said in her address to the Indigenous Business, Enterprise and Corporations Conference.
“Our businesses need to diversify into the gas and energy, construction and infrastructure sectors as quickly as possible.”
Also presenting at the conference was the Ngarluma Yindjibarndi Foundation, which offered a flicker of hope to the indigenous business sector.
Like Gumala, NYFL was established following a land-use agreement; in 1998 its total income of $1.25 million came wholly from payments from the agreement with the North West Shelf Project joint venture partners.
That proportion of funding has now dropped to 2.6 per cent of the foundation’s total revenue, which amounted to $56 million in the 2013-14 year.
Chair Vince Adams said the organisation (which is a registered charity rather than an indigenous corporation like Gumala) realised early on that diversification was imperative.
“We understand that mining is not a sustainable thing – [miners] come and go and we get left behind,” Mr Adams said.
Growth initially came through joint ventures with mining services partners such as ESS Compass Group, NRW, and Brierty.
However NYFL’s host of independent businesses – ranging from a garden centre, cafe, car wash and tyre shop, to housing and maintenance services – has provided additional growth.
