Are you making a real difference when it comes to choosing indigenous suppliers?

Business (and government) support of indigenous-owned businesses has driven many outcomes.

There has been a marked increase in the median economic indicators for indigenous Australians. That is between the census of 2011 and 2016. The statistics delivered in the most recent census show a positive trend.

  • Median weekly income rose faster than the broader Australian population. Yet indigenous Australians still only earned ⅔ of the median wage of the broader population.
  • A higher participation rate in both secondary and tertiary education as a percentage of the population.

These figures show a positive trend. Yet, the figures do not show whether the programs that are in place – or those that businesses subscribe to are making a real difference. We can infer that they are but we may be applying hope to that conclusion.

Business and government have put their own policies in place.

The Federal government procurement policies are changing from a % of contracts to a percentage of spend. The big unanswered question is what percentage of this spend will end up in the hands of the indigenous people who need it?

The constant challenge that many of our customers face is ensuring that they are able to meet their targets. And, of course, ensure that the outcomes for indigenous populations meet the intent of those goals in the first place (not ‘ticking the box’).

Any support for indigenous businesses is a positive

We believe that any support of indigenous-owned businesses is positive. And it delivers some benefits to the community as a whole. Indigenous support has fostered the creation of many businesses. The majority which delivers many benefits in education, employment and training.

However, after 18 years of effort, the indigenous business journey is still in its infancy. There remains a chasm between the types of indigenous businesses currently operating. There are those that merely have a facade as operating as an indigenous business. And there are those that are truly indigenous operating with the help of other minority shareholders.

Supply Clusters believes that in choosing an indigenous business to support it is important to look beyond corporate structures to determine who really controls the entity…

The Indigenous Owner

The simplest and first place to look is this. To see if the majority indigenous owner or owners are present and part of the operation of the business. There may be valid reasons why the owners are not part of the day-to-day operation and/or management but this is still a good starting point.

Where does Control lie?

Beyond share allocations, there lies some truths that we should all consider. The power of equity ownership of a company does not always equate to control of profits.

There are some instances of indigenous-majority owned corporations co-owned through a controlling partner. These could be Australian or international corporations. And, these organisations exert control through ownership of the supply chain, suppliers and back office.

Such businesses operate with an indigenous face who serves as the front to an otherwise non-indigenous operation. This is despite ‘majority’ indigenous ownership.

There is nothing untoward per se with this approach. However, you need to understand whether your organisational goal is to:

  1. ‘tick the indigenous box’ or
  2. Support the growth of indigenous corporations. that are controlled by indigenous Australians.

Is who controls the supply chain important?

So let’s say the minority shareholder of the indigenous corporation controls the supply chain.

Consider what would happen if the majority indigenous owner wishes to move to a different supply chain? This could be due to a lack of performance or worse, a lack of competitiveness.

Would the indigenous owner be able to move to an alternative supply chain?

Unlikely as the minority shareholder has a vested interest in their own supply chain. And changing over to a competitor would be if not impossible, improbable or cost prohibitive.

So in effect, the majority indigenous owner becomes locked into the incumbent supply chain. This results from ownership of the minority shareholding. In essence, control has been missing from the start – it’s not obvious unless you are looking.

Make a considered choice

We will partner with only those indigenous corporations which exert control over their own supply chain. The indigenous business must have the ability to select their own supply chain.

This is not to say that indigenous organisations cannot benefit from using well-known brands as products or services to offer to their customers. It becomes an issue when the indigenous organisation is unable to effectively choose its own destiny, supply chain or suppliers.

Consider, as an analogy, if this was applied to an individual. It would contravene one of the guiding principles of the Modern Slavery Act. That is the right to “refuse or cease work but by doing so may lead to a detriment?”

Our view is that creating an indigenous organisation for the express goal of acquiring new business for a minority owner corporation is not the intent of reconciliation. The intent should be the enfranchisement of our indigenous population. Not the enfranchisement of well-connected and entrepreneurial business individuals who are non-indigenous.

You may think this sounds harsh – we don’t believe so.

Follow your intent with action that matches the intent

Carefully choose which indigenous suppliers you work with. You should also consider other factors in how to support indigenous organisations. Even ensuring that accounts pay on time or in shorter time frames will help those organisations.

Driving a business to the wall on pricing also does not help – deriving business value is more than price. They may be smaller organisations that do not have the economies of scale that larger competitors do. But they often provide a higher level of service. You also need to consider how you will support your indigenous supplier ongoing.

Do something rather than nothing

Any contribution helps at least one indigenous person. Organisations need to consider what they are actually trying to get out of supporting an indigenous business.

If this is something that your organisation is serious about, consider how you can make a real difference. Don’t do only to ‘tick the indigenous box’. Think about the broader implications of how you can support indigenous organisations to grow and prosper for the long term.