Analysis Paper 21 May 2021 Back to Basics : A new model for business creation in remote Indigenous communities Nyunggai Warren Mundine AO and Elizabeth Henderson Back to Basics : A new model for business creation in remote Indigenous communities Indigenous economic participation in remote Australia through business and entrepreneurship — a model based on first principles. Nyunggai Warren Mundine AO and Elizabeth Henderson Analysis Paper 21 Contents Executive Summary ...............................................................................................1 Introduction ..........................................................................................................3 PART 1 – Background .............................................................................................4 Why business? ..............................................................................................4 Myths about remote communities ....................................................................5 There are plenty of business opportunities in remote Australia .............................6 Part 2 – Observations and Learnings on Indigenous Business Creation in Remote Australia ...............................................................................................6 A range of awareness and enthusiasm for business in remote Indigenous Australia ........................................................................6 Accessing business funding is a major challenge to remote Indigenous business creation ................................................................8 Gaining certifications and licences is a barrier to remote Indigenous business creation ................................................................9 Debt funding is not the best model for Indigenous business creation, especially in remote Australia ................................................9 Business creation initiatives shouldn’t try to “pick winners” ................................ 10 Business Support is needed on the ground ...................................................... 11 A word on joint ventures ............................................................................... 12 Part 3 – Foundations of Business Creation ............................................................... 13 Two out of three ain’t bad ............................................................................. 14 Business Support ......................................................................................... 16 Entrepreneurship — building mindsets and imagination ..................................... 16 Part 4 – A Model for Business Creation ................................................................... 17 Overview .................................................................................................... 17 Funding Approval decisions ........................................................................... 19 Business Support ......................................................................................... 21 Assessing outcomes ..................................................................................... 21 Assess community readiness and opportunities ................................................ 22 The role of government ................................................................................ 25 Concluding Remarks ............................................................................................ 26 Appendix – Business Opportunities in Remote Australia ............................................ 27 Appendix – Business Survival Rates ....................................................................... 30 References ......................................................................................................... 31 Glossary ............................................................................................................ 32 v Executive Summary A step-change in Indigenous affairs policy over Supply and demand exist in Indigenous communities, the past decade to focus on economic participation as in all other communities. But the natural supply and business creation saw significant growth in the and demand cycle has been stifled by structures Indigenous business sector, fueled by landmark imposed on remote and regional Indigenous Commonwealth policies: the Indigenous Procurement communities (by legislation, the legal framework for Policy (IPP) and the Indigenous Business Sector Indigenous lands, and government programs) and the Strategy (IBS Strategy). However, these policies have mindsets that have developed as a consequence. not succeeded, particularly in remote Australia where Indigenous economic participation is more desperately Policies and programs designed to promote needed. Indigenous business creation — whether implemented by governments, the not-for-profit sector or the Lack of economic participation underpins all areas of corporate sector — will not succeed unless they align Indigenous disadvantage and is the main barrier to with the age-old economic principle of supply and achieving parity. Economic participation in regional demand. This is a key reason the IBS Strategy has not and remote Australia is particularly important for succeeded. two reasons. First, Indigenous Australians are disproportionately represented in those areas. In a There are three critical foundations for business CIS ‘report card’ on the Closing the Gap initiatives creation. These are: published in July 2020, Nyunggai Warren Mundine • Capability: capacity to provide goods or services AO noted that remote performance under the IPP is someone else will pay for. lagging.1 The most recent data shows a consistent pattern. Yet Indigenous people in remote areas are • Entrepreneurship: will and motivation to generate the poorest and have the least economic participation. your own income by marketing and selling those capabilities through your own enterprise. Second, the disparity between remote Indigenous people and the rest of Australia, including Indigenous • Business Support: functions and activities for people living in the cities, is alarming and growing. business health and survival and ensuring the The recent CIS POLICY Paper, Worlds Apart: Remote business operates legally. Indigenous disadvantage in the context of wider If one is missing, the business will struggle to survive. Australia, sets this out in stark detail.2 There is a wide gap developing between Indigenous Few people possess all three foundations of business Australians living in the cities who go to school creation. In our experience, programs and initiatives and to work, and those in remote Australia who for business creation tend to focus on training overwhelmingly do not. If this disparity is not people in Capability and Business Support when addressed, remote Indigenous people will continue it is more important to focus on Capability and to be the poorest and most disadvantaged people in Entrepreneurship. With those two, a person has what Australia — and this may be masked by improvements it takes start a business. Business Support can be in the lives of those in the cities. sourced externally and, in fact, it is better that it is. Economic growth and development in remote Australia This paper outlines a practical, implementable require commercial, profitable small to medium model for business creation in remote Indigenous enterprises in those areas; and more of them. This communities based around the Three Foundations and is how all small, remote areas in global history have harnessing the fundamental principle of supply and developed. demand. 1 Analysis Paper 11, It’s The Economy, Stupid: Economic participation only way to Close the Gap, Nyunggai Warren Mundine AO, published by the Centre for Independent Studies, July 2020 2 Policy Paper 34, Worlds Apart: Remote Indigenous disadvantage in the context of wider Australia, Jacinta Nampijinpa Price, published by the Centre for Independent Studies, January 2021 1 This model is not limited to government programs and any person or entity with access to capital who wants could be implemented by: to be a part of Indigenous business creation. governments as part of an Indigenous economic The model could be implemented in one community development program, including through existing or at scale. It could be repositioned out of the programs such as the Community Development evolution of existing programs and initiatives and Program (CDP) and Vocation Training and Employment could even pay for itself. For governments, it could be Centres (VTECs); implemented without any additional funding beyond community-controlled organisations such as native what is already allocated in these areas through title Prescribed Body Corporates or land councils with reorganisation of existing structures and programs. asset portfolios or other funding pools; The key requirement (and challenge) is a mindset that private sector organisations wanting to promote or understands — and more importantly. believes in — assist Indigenous economic development; business and entrepreneurship. 2 Introduction The past decade has seen a step-change in difficult; but given that around 40 per cent of Commonwealth Indigenous Affairs policy, with an Indigenous Australians live in Very Remote, Remote increased focus on greater Indigenous economic and Outer Regional areas, it is clear the IPP is not participation and business creation. There has also driving Indigenous business creation in remote been significant growth