Should government support Indigenous businesses or get out of their way?

We generally espouse the benefits of limited government. However, there are some occasions when more involvement by government is warranted.

When it comes to Indigenous businesses it is difficult to know what role the government should take and whether it should try and support Indigenous businesses – or get out of their way.

Under its new procurement policy, the federal government hopes to stimulate Indigenous entrepreneurship and provide more opportunities for Indigenous Australians to participate in the economy.

But while the aims are laudable – and supporting Indigenous businesses is preferable to sinking more money into yet another poorly designed program – there are always unintended consequences of any government action.

An article in the Australian this week warned of ‘black cladding’ businesses: those that pretend to be Indigenous in order to win contracts under the federal government’s procurement policy.

In many cases, Indigenous businesses are competing successfully in the open market without any support from government. A recent study of 120 Indigenous businesses leaders found on average their businesses had an annual revenue of $2.7 million and employed about 23 workers, of which approximately 60% were Indigenous.

In fact, sometimes when the government tries to support Indigenous economic development it can create an un-level playing field. Since the NSW Government established their own Aboriginal ranger led ‘Discovery Tours’ a private Aboriginal tour business, operating in the same area, has struggled to stay afloat and reduced its employees from seven to two.

However, there are occasions when governments could be doing more to support Indigenous economic development and are not – for example, the NSW Government’s decision not to build a $300 million rail project on Aboriginal land.

It is a difficult tight rope to walk. But the best thing governments can do to support Indigenous economic development is to create an enabling environment for private enterprise to occur by investing in education and removing red tape and restrictions on land use.