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Removing the Welfare Shackles is a discussion paper which was released by the Commonwealth Minister for Aboriginal and Torres Strait Islander Affairs in April 1998. The discussion paper suggests five key changes to legislative and administrative arrangements relating to indigenous economic development:
1.establish Indigenous Business Australia (‘the IBA’) to contain the current operations of the Commercial Development Corporation (‘the CDC’);
2.amalgamate the Aboriginal and Torres Strait Islander Commission’s (‘ATSIC’) business programs with those of the current CDC;
3.transfer the ATSIC Housing Fund (‘the fund’) to the proposed IBA;
4.transfer the funds management activities of the Aboriginal and Torres Strait Islander Land Fund (‘the ATSILF’) and Aborigines Benefit Reserve (‘the ABR’) into the proposed IBA;
5.using these combined financial sources, establish what is loosely called an ‘indigenous bank’.
These proposals, if developed and implemented, would result in a broad strategic reorientation for the management of indigenous business programs. The paper is ‘aimed primarily at a conceptual level’ and presents its proposals cautiously, noting that further ‘analysis and negotiation’ will be necessary[1]. The stated aims of Removing the Welfare Shackles are the optimisation of commercial returns by indigenous business programs and the reduction of indigenous dependence on welfare.[2] However, there are questions about the underlying logic and legitimacy of the proposals, and the lack of detail leaves the potential for confusion and misunderstanding.
Removing the Welfare Shackles proposes the establishment of a statutory authority to be known as Indigenous Business Australia. Indigenous Business Australia would be responsible to the Minister for Aboriginal and Torres Strait Islander Affairs and would be controlled by a board of directors appointed by the Minister.
Under the Aboriginal and Torres Strait Islander Commission Act 1989 (Cth) (‘the ATSIC Act’), the board of directors of the CDC is appointed by the Minister for Aboriginal and Torres Strait Islander Affairs. The Act does not prescribe any limit to the number of directors who may be appointed. However, the Minister must appoint a chairperson and at least four other directors who are Aboriginal persons or Torres Strait Islanders.[3] The Minister must be convinced that all directors have experience in both industry and commerce and Aboriginal or Torres Strait Islander life or enterprises.[4] Appointments to the board of directors must be made in consultation with the CDC and with ATSIC.[5] These provisions institutionalise a link between the major commercial investments within the Aboriginal and Torres Strait Islander portfolio and a board that is directly responsible to the Minister. Independent appropriation and reporting requirements maintain a high standard of accountability. As a result, the CDC is constituted as an indigenous-managed commercial corporation operating as a separate legal entity from ATSIC.
One of the clear intentions of Removing the Welfare Shackles is that the management structures of the IBA replicate both the corporate hierarchy currently in place between the CDC and ATSIC and the internal governance structures within the CDC itself. Such management structures provide a clear separation of commercial investment activities from the broader funding activities of ATSIC. However, the ATSIC Act already provides for this separation and enshrines commercial criteria as the sole basis for the CDC’s decision-making. Why, then, is it necessary to re-incorporate the CDC as the IBA? Removing the Welfare Shackles fails to explain how a mere change of name will achieve any of the broad policy goals mentioned in the introduction.
Indigenous Business Australia would be responsible not only for the functions of the CDC, but also for ATSIC’s business programs. ATSIC currently operates two business programs: the Business Funding Scheme (‘the BFS’) and the Indigenous Business Incentive Program (‘the IBIP’).[6] These programs are very different from those operated by the CDC.
The CDC’s orientation is towards the funding of large projects, frequently structured as joint ventures involving non-indigenous partners. ATSIC’s business programs are more focussed upon smaller-scale enterprises. However, the two programs do interact. In a number of cases, ATSIC business programs have provided funds enabling indigenous organisations to become equity partners in joint ventures supported by the CDC.
Removing the Welfare Shackles suggests that,
“...there would be three broad potential benefits, in terms of greater efficiency and effectiveness, by amalgamating some commercially oriented programs into one organisation:
The general aims of improved efficiency and effectiveness within the Aboriginal and Torres Strait Islander portfolio are laudable. However, there is nothing in the discussion paper to support the proposition that significant cost benefits could be obtained by unifying the two ATSIC programs and the functions of the CDC under the administration of the IBA. Furthermore, it does not give sufficient weight to the qualitative distinction between the BFS, the IBIP and the CDC, and fails to provide any indication of current expenditures within these programs.
The ATSIC Housing Fund (‘the fund’) is a statutory fund providing loans to indigenous Australians for the purposes of improving home ownership levels. Removing the Welfare Shackles suggests that ‘given the commercial nature of the funding decisions’ made by the fund, it would ‘fit easily within the [projected] functions of the IBA’.[8] In fact, the fund can be described as having a commercial orientation only to the extent that it possesses a loans portfolio with commercially valued receivables. Beyond this, the housing fund fulfills a basic social justice function.
Existing arrangements for the financial management of the fund are stated clearly in the ATSIC Act. The Act prescribes that monies in the fund which are not immediately required may be invested on deposit in banks, in Commonwealth securities or “in any other manner approved by the Treasurer”.[9] The current legislative guidelines for ATSIC’s housing lending practices do not prescribe commercial criteria in the making of such investments.[10] It may be presumed that the Act’s silence in this regard reflects the need for a level of administrative flexibility to make loans according a range of economic and social factors.
The discussion paper’s case for including the fund in the IBA rests solely on the proposition that the amalgamation would improve its commercial viability. Adding the fund’s outstanding loans to a larger investment pool would facilitate financial flexibility and enable the IBA to be promoted as a commercially rigorous organisation. Certainly, the potential costs benefits of transferring the fund to the IBA do not appear to relate to administrative savings. On the contrary, transferring the fund to the IBA would separate it from other components of ATSIC’s home ownership sub-program, potentially increasing administrative expenses.
Implementing the recommendations of Removing the Welfare Shackles in relation to the fund would indeed obtain higher commercial returns on available monies. However, the recommendations also provide a strategy for removing the fund from the ambit of Commonwealth audit legislation.[11] Given that the fund utilises public monies, it is proper that its investments are independently administered and that high standards of accountability are maintained. Yet the discussion paper does not recommend the packaging of these monies into a fund lodged with a professional funds manager.
The Aboriginal and Torres Strait Islander Land Fund (‘the ATSILF’) was established along with the Indigenous Land Corporation as part of the Keating Government’s response to the High Court’s decision in Mabo (No 2).[12]
Currently, the ATSILF operates as a trust account within ATSIC. Monies are managed according to the provisions of the Financial Management and Accountability Act 1997 (Cth), the Commonwealth Authorities and Companies Act 1997 (Cth), and the Auditor-General Act 1997 (Cth).
The implications of transferring the funds management functions of the ATSILF to the IBA would be similar to those relating to the proposed transfer of the housing fund. For, while ATSIC currently has considerable powers to manage ATSILF funds, there may be an arguable case that commercial returns and financial flexibility could be enhanced if these monies were amalgamated into a larger pool.
Funds management practices that generate net financial benefits are to be welcomed. However, ATSLIF money is public money. The suggestion that public monies be invested for the period between their disbursement by Treasury and their allocation by Aboriginal organisations raises many questions about the equities and risks involved. For instance, which organisation will bear the administrative costs of operating the ATSILF? Similarly, who will bear the responsibility for the risk of the investment decisions? And who will be eligible to challenge the wisdom and validity of these decisions?
The Aboriginal Benefits Reserve (‘the ABR’, formerly the Aboriginal Benefits Trust Account, or ABTA) currently exists as a Trust Account for the purposes of Commonwealth legislation.[13] For administrative purposes, the ABR is attached to the Northern Territory Office of ATSIC. The ABR is managed by a Committee of fourteen members who are nominated by the four Northern Territory Land Councils. The chairperson of the ABR is appointed by the Minister for Aboriginal and Torres Strait Islander Affairs.
Yet again, we encounter the argument that transferring funds management functions, here of the ABR, to the IBA would bring the management of these monies in line with private commercial practice, thus improving investment returns.
However, an important distinction must be drawn between the public monies held in trust by the housing fund and ATSILF, and those monies held for disbursement through the ABR. Monies held for disbursement by the ABR are private monies, allocated by the Commonwealth in recognition of the social and economic disruption caused by mining on Aboriginal lands in the form of mining royalties. The Commonwealth Government implicitly acknowledges the compensatory nature of these payments through its levying them with a Mining Withholding Tax.[14]
Current arrangements mean that compensation moneys are managed and controlled via what is effectively an agency agreement between traditional owners and the Commonwealth Minister. This arrangement is inconsistent with the initial vision of Woodward,[15] with the recommendations of Toohey[16] and with the wider policy goals of self-determination and self-management. The proposal to shift the funds management functions of the ABR to the IBA will not resolve this inconsistency. Shifting the locus of management and control of these monies to an Aboriginal-controlled organisation does not place them within the reach of traditional owners.
The Northern and Central Land Councils have submitted to the 1998 Reeves Review of the Northern Territory Land Rights Act that the inconsistency between the current agency arrangement and the goals of self-determination could be overcome only by the direct payment of ABR moneys to the Land Councils.[17] Removing the administration of ABR disbursements from the paternalistic control of the Commonwealth Minister and granting control to traditional owners would affect neither audit requirements nor the ABR’s transparency to public scrutiny.
It is difficult to comment on the purpose or the concept of the indigenous bank because of its cursory treatment in the discussion paper.
Removing the Welfare Shackles would have the reader believe that:
“History shows that the most common problem faced by Indigenous organisations responsible for commercially oriented programmes in the past has been the conflict between social and economic goals where social needs have sled to poor commercial decisions, and thus commercial failures in so-called Indigenous economic ventures”.[18]
The suggestion that ‘social goals’ and ‘economic goals’ represent conflicting policy objectives reflects a bureaucratic desire to slot activities neatly into program windows with individually discrete goals, performance indicators and expenditure categories. In practice, indigenous communities and organisations operate in an environment where outcomes are fluid and interactive. Indeed, history shows that most indigenous commercial enterprises have been established to fulfil a range of economic, social and cultural outcomes simultaneously. It is alarming that the discussion paper sidelines the debate over the relationship between social and economic goals in favor of the view that many indigenous business failures can be explained by an unsubstantiated conflict between ‘the economic’ and ‘the social’. This is not to say that, in particular cases, indigenous interests have not been badly served by proposals being developed with unclear distinctions between social and economic goals. However, a more complex milieu of factors both within and outside the sphere of government influence may be relevant to an analysis of the problems associated with indigenous business programs.
The example of the Northern Territory pastoral industry is illustrative. Since the early 1980s, Aboriginal people have become owners of a significant proportion of Northern Territory pastoral properties. A study of the Utopia pastoral station in central Australia[19] concludes that the Aboriginal owners of this property use the land to support social, commercial, traditional and environmental objectives. These objectives interact in complex relation to the historical, traditional, cultural and community contexts leading to the acquisition of the station by Aboriginal people and the evolution of their own management practices.
Satisfaction of multiple objectives as part of a commercial or investment strategy is not peculiar to the indigenous community. The need or desire to satisfy multiple objectives is common to both indigenous and non-indigenous business worlds. A study of farms owned by non-indigenous families reveals that a mix of economic and ‘lifestyle’ factors inform their commercial decision-making practices.[20] Similarly, in the small business sector generally, many businesses remain afloat even in the presence of poor or negative commercial returns due to entrepreneurs’ decisions to find a balance between their economic and social interests. It is a fundamental tenet of capitalism that entrepreneurial returns and benefits are not always expressed in monetary terms.
Yet the question remains: how might this need or desire to satisfy multiple goals be articulated in indigenous commercial policies?
Arthur suggests a funding model that separates the commercial and non-commercial components of individual projects so that they may be funded independently.[21] In this way, commercial organisations such as the proposed IBA may make decisions relating to commercial projects (or project elements) on purely commercial grounds. Non-commercial components of a project would be funded via other program areas (for example, “consumer service obligations”). This approach to the problem of multiple objectives is appealing in terms of bureaucratic accountability. However, the experience of organisations like the Central and Northern Land Councils suggests that the commercial and non-commercial components of funded projects are not always easily identified or disentangled.
The report of the House of Representatives Standing Committee on Aboriginal Affairs, Our Future, Our Selves, suggests an alternative approach that establishes a framework for accountability and project funding which can relate more flexibly to the need or desire to satisfy multiple goals.[22]
Under the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth), Land Councils are required “to consult with traditional Aboriginal owners of, and other Aborigines interested in, Aboriginal land in the area of the Land Council with respect to any proposal relating to the use of that land”.[23] To perform this function, the Land Councils necessarily become involved in discussions and negotiations concerning commercial development proposals for Aboriginal land. The Northern Territory experience demonstrates that indigenous people are keen participants in commercial development, so long as this development is consistent with traditional, cultural and social objectives.
Consistent with this experience, the Northern and Central Land Councils have suggested that a second discussion paper be prepared for public comment before the proposals contained in Removing the Welfare Shackles are taken forward for further consideration. This second report would need to:
The discussion paper suggests that welfare dependency may be ‘cured’ simply by changing an individual’s or an organisation’s source of income. Income from a government payment obtained on the basis of civil and political rights is represented as “welfare”. Income obtained through private rights to disbursements from a private trust fund or to dividend payments from a private company is represented as “self-reliance”. [24] Given the discussion paper’s insistence upon the separation of social and economic functions in indigenous economic development programs, it is ironic that the solutions it proposes simply subsume social goals into economic goals.
Bill Pritchard is a lecturer in the School of Geosciences at the University of Sydney. The research for this report was conducted as part of a consultancy with the Northern Land Council and the Central Land Council.
[1] Removing the Welfare Shackles, (AGPS, Canberra, 1998), pp 19 & 13.
[2] Ibid, pp 6 & 21.
[3]ATSIC Act, s157 (1).
[4]Ibid, s157 (4).
[5]Ibid, s158.
[6]These programs are established under the Business Development Program contained in the ATSIC Act s67 (1).
[7]Removing the Welfare Shackles, op cit, p 13.
[8]Ibid, p 18.
[9]ATSIC Act, s67 (6).
[10]Ibid, s16.
[11]Audit Act 1901 (Cth), s62B.
[12]ATSIC Act, s192W(1).
[13]See, for example, note 10.
[14]Aboriginal Land Rights (Northern Territory) Act 1976 (Cth) s 64. See also Altman, J ‘Taxation of Mining Royalty Equivalents’, Report of the Review of the ABTA (Unpublished report to the Minister for Aboriginal Affairs, Chapter 13).
[15] Woodward, A E Aboriginal Rights Commission: First Report (AGPS, Canberra, 1973).
[16] Toohey, J Seven Years On, (AGPS, Canberra, 1984).
[17] Northern Land Council, Submission to the Review of the Northern Territory Land Rights Act 1998, p 114; Central Land Council, Submission to the Review of the Northern Territory Land Rights Act 1998, p 108. The argument that ABR monies are private in character and should be managed by traditional owners is made at length in these submissions to the current Review of the NT Land Rights Act, being undertaken by John Reeves, QC.
[18]Removing the Welfare Shackles, op cit, p 6.
[19]Allen, C Pastoralism, Sustainability, and Self Determination in Central Australia: Aboriginal Multiple Land Use at Utopia, ( Unpublished B Ec(SS)(Hons) Thesis, University of Sydney, 1994).
[20]Baxter, V & Mann, S ‘The survival and revival of non-wage labour in a global economy’, (1992) Sociologia Ruralis 23(2/3), pp 231-4.
[21]Arthur, W ‘The Aboriginal and Torres Strait Islander Commercial Development Corporation: a new approach to enterprise’, Centre for Aboriginal Economic Policy Research Discussion Paper No 113 (Centre for Aboriginal Economic Policy Research, Canberra, 1996), p 16.
[22] (AGPS, Canberra, 1990), Recommendation 2.
[23] Aboriginal Land Rights (Northern Territory) Act 1976 (Cth), s 23 (1)(c).
[24]Removing the Welfare Shackles, op cit, p 4.
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URL: http://www.austlii.edu.au/au/journals/IndigLawB/1998/61.html