Issue Brief 3 / 1996

In the late 1980s the Hawke Labor Government introduced the Aboriginal Employment Development Policy which aimed to reduce the differences in socioeconomic status between Indigenous and non-Indigenous Australians. One strategy for achieving this goal was to involve Indigenous people in businesses. This is not a new strategy and indeed, a number of similar economic programs have been in place over the last twenty years. However, many earlier business programs were marked by a lack of commercial success. It has been claimed, that this was often due to the relatively low level of Indigenous managerial skills and because the programs had mixed social and economic objectives.

The CDC - a joint venture approach

In 1990 the Government established the Aboriginal and Torres Strait Islander Commercial Development Corporation (CDC) to stimulate Indigenous involvement in business. The Government sought a new approach that encourages joint venturing with non-Indigenous partners, and that requires the CDC to be largely self financing and to operate along strictly commercial lines.

Since its establishment, the CDC has negotiated and financed partnerships between Indigenous communities and non-Indigenous businesses across a range of industries and geographical locations. Currently, Indigenous people are equity participants in some 16 joint ventures in such areas as aquaculture, tourism, shipping, mining and retailing as shown below.

The majority of these joint ventures are between an Indigenous group, the CDC and an already-established non-Indigenous company, although the CDC has also established joint ventures between itself and Indigenous groups.

How the CDC operates

The CDC operates to a board of Indigenous and non-Indigenous directors, selected by the Minister for Aboriginal and Torres Strait Islander Affairs on the basis of their expertise in commerce or industry. The CDC assesses the viability of projects, negotiates the ownership and managerial structures, lends equity capital to the Indigenous partners, and mentors them to develop their managerial expertise within the joint ventures. The Indigenous partners are required to repay their loan to the CDC, in effect buying them out of the venture. The CDC received seed funding from the government over the first four years of its life but it is now required to finance its operations from loan repayments and from other financial investments made for this purpose.

Efficiency of the CDC

• In terms of the breadth and scope of its portfolio, the CDC looks impressive but there is a tendency for it to continue the trend, observed in earlier programs, of mixing commercial and social objectives. However, given the current cultural and political realities of Indigenous affairs, this would appear to be unavoidable and understandable, suggesting that new methods may be required to assess the costs and the benefits of pursuing social goals within commercial enterprises.
• Though the businesses mentored by the CDC have produced some Indigenous employment, an implicit goal in establishing the CDC was that it would foster an Indigenous entrepreneurial or business class, and the extent to which this is presently occurring is unclear.
• The CDC has had some success in facilitating major joint ventures between communities and mining concerns in the Northern Territory and at a wider level, it may now be well placed to help negotiate some strategic commercial alliances between Indigenous groups, their land-based organisations - such as land councils and representative bodies - and non-Indigenous industries.

Conclusion

The strategy of joint venturing has enabled the CDC to involve Indigenous people in a range of industries and project types. It is also a useful device for enabling the CDC and/or an experienced non-Indigenous partner to provide business support to their less experienced Indigenous partners. Importantly, this strategy also increases the contact between Indigenous and non-Indigenous business people and so may help alleviate some racial tensions and also breakdown some of the negative racial stereotypes that have the potential to inhibit economic self-sufficiency.

However, research is now required which can indicate to what extent joint venturing and the work of the CDC in general are furthering Indigenous self-management and economic development which are the main goals of the CDC's legislation.

W. S. Arthur.

This Issue Brief summarised CAEPR Discussion Paper No. 113, 'The Aboriginal and Torres Strait Islander Commercial Development Corporation: a new approach to enterprise?' by W.S. Arthur published in July 1996. It was prepared by Bill Arthur, assisted by Linda Roach and Melissa Lucashenko and edited by Maureen MacKenzie-Taylor.