In 2006 the Australian Bureau of Statistics (ABS) estimated that there were around 7,000 self-employed indigenous Australians who operate their own small business. This was around 6% of the total population of indigenous Australians and compares to the non-indigenous community where around 17% of the population own and operate a small business. The number of self-employed people of indigenous background has reportedly grown to around 12,500 in the past seven years suggesting that the spirit of entrepreneurship is growing amongst the Aboriginal community.
It is important to note that the ABS only estimates the number of indigenous entrepreneurs in Australia because the task of clearly defining who or what is an “indigenous” business is difficult. This is an issue addressed by Professor Dennis Foley from the University of Newcastle in a recently published article in the Indigenous Law Bulletin. Entitled “Jus Sanguinis: The root contention in determining what is an Australian Aboriginal Business”, Foley examines the nature of how indigenous businesses are defined and why this process of definition is important. In fact it is inextricably wound up with the entire issue of Aboriginal identity.
How Aboriginal businesses are currently defined
According to Foley the current emphasis within Australia is to define an Aboriginal business as one that has 51% or more of the share capital owned by Aboriginal people. He notes that this definition has been designed to screen out those non-Aboriginal businesses that might seek to claim indigenous heritage in order to fraudulently secure commercial benefit. This has particularly manifested itself in areas such as Aboriginal artistic products or in tourism.
The Australian Government’s Indigenous Business Australia (IBA) uses this definition for assessing which applicants get access to business development and assistance. There is also an Office of the Registrar of Indigenous Corporations that reports there are about 2,500 Aboriginal and Torres Strait Islander corporations registered in Australia. Further, they estimate that the total number of indigenous corporations may be double what has been formally registered.
According to Foley the existing definition for Aboriginal businesses is inadequate. There can be many cases of companies where there are Aboriginal owners, but they don’t own the majority of the share capital thereby excluding them from being recognised as indigenous businesses. He provides several examples of prominent Aboriginal businesses that don’t qualify for the official definition due to the distribution of share capital.
Given these concerns the ABS provided two “operational definitions” of what constitutes an indigenous business. The first of these defines an Aboriginal and Torres Strait Islander owned business as one in which there is at least one owner who identifies as being of indigenous heritage. The second defines such a business as having majority share capital held by people of Aboriginal and Torres Strait Islander origin.
Foley notes that such firms must also be privately owned small to medium enterprises (SMEs) with fewer than 200 employees. This is to reflect the complexity of ownership that is likely to emerge once a business grows large and potentially moves towards public listing. He also points to the use by the Australian Taxation Office (ATO) and the Indigenous Business Council of Australia (IBCA) to focus on at least 50% indigenous ownership as a key measure when defining Aboriginal businesses.
Defining the “Indigenous Business”
The lack of clear definition and the requirement for majority indigenous ownership significantly restricts the overall size of the Aboriginal and Torres Strait Islander businesses that get recognised. This, in Foley’s view, under represents the true population of indigenous enterprises. He highlights the problem this causes for many Aboriginal business owners who may become ineligible for access to opportunities offered under Reconciliation Action Plans (RAPs) because their shareholding in a business is not large enough.
According to Foley:
“The matter of definition is thus highly significant. It matters to legitimate Aboriginal businesses that may miss out on profitable opportunities. Another reason why the operational definition of indigenous business matters is because government policy on Aboriginal business development may be inappropriately targeted” (p. 28).
He likens this debate over the definition of what is or is not an Aboriginal business to the “scientific racism” that once permeated Australian society whereby terms such as “half caste” and “full blood” were used to differentiate racial purity.
Under Australian common law the definition of who is Aboriginal or Torres Strait Islander revolves around whether that person identifies as being of that background, and who is accepted as such by the community in which they live. This leads Foley to suggest that a more relevant definition of what is an Aboriginal or Torres Strait Islander business is one in which at least three conditions are met:
a) At least one person holding equity in the business should identify as being Aboriginal;
b) The business should identify itself as an Aboriginal owned business; and
c) The Aboriginal business community should accept this business as being Aboriginal.
Foley acknowledges that this definition may cause some concerns, but by widening the definition it will allow attention to be placed on a much wider range of businesses than is currently possible.
Indigenous businesses employ indigenous people
It is worth noting that at the 26th Annual conference of the Small Enterprise Association of Australia and New Zealand (SEAANZ) Professor Foley facilitated a special workshop on the growth of Aboriginal and Maori small business. A key point that was highlighted at that workshop was the multiplier effect indigenous businesses have on the creation of jobs for Aboriginal and Torres Strait Islander people.
Indigenous owned enterprises employ indigenous people and also offer significant opportunities for the fostering of economic self-determination. Aboriginal business owners provide their communities with positive role models and serve as mentors for future indigenous entrepreneurs.
Note: Tim Mazzarol is President of the Small Enterprise Association of Australia and New Zealand (SEAANZ).
SEAANZ is a not-for-profit organisation founded in 1987. It is dedicated to the advancement of research, education, policy and practice in small to medium enterprises.
This article was first published in “The Innovator Blog” of the Centre for Entrepreneurial Management and Innovation (CEMI) on 29 November 2013. It has been republished with permission.