The Victorian experience
This page was authored by:
Dr Matthew Storey
Acting CEO National Native Title Council, former CEO First Nations Legal and Research Services
There is a common idea that for a PBC to start significant commercial activities it will need to have a significant amount of capital resources behind it. Of course, it helps if there is a large amount in the bank from a land access agreement or a comprehensive regional agreement and the valuable procurement contracts that may accompany these agreements.
However, as the story of the Victorian Traditional Owner Groups shows, PBCs can sometimes start profitable commercial activities with virtually nothing in the bank. What the Victorian experience has shown is that the credibility of being the recognised Traditional Owner Group, particularly when Traditional Owner Groups are working together, is a valuable asset that can be the foundation of very profitable joint ventures with the private sector. Before looking at the lessons from the Victorian experience it is useful to discuss what Victorian Traditional Owners did.
Victorian Traditional Owner Structures
There are (currently) four PBCs in Victoria and one Traditional Owner Group Entity (TOGE) under the Victorian Traditional Owner Settlement Act. In essence a TOGE is a PBC. In addition though, under the Victorian Aboriginal Heritage Act (AHA) even before finalisation of native title settlement a Traditional Owner Group is likely to be appointed to carry out statutory functions under the AHA as a Registered Aboriginal Party (RAP). As a RAP a Traditional Owner Group will have an incorporated structure generally under the Corporations (Aboriginal and Torres Strait Islander) Act (CATSI). A RAP can charge fees for undertaking cultural heritage assessments. There are another five appointed RAPs in the state. With PBCs, TOGEs and RAPs included then there are ten incorporated Traditional Owner Groups in Victoria, all with sufficient resources to employ at least a general manager and often a number of other staff. However, what none of the Traditional Owner Groups have is the large sum of capital that may flow from a mining ‘land access’ agreement.
In 2012 seven of the Victorian Traditional Owner Groups, with the support of the local native title service provider (Native Title Services Victoria – NTSV), started meeting and in June 2013 formed an incorporated peak body – the Federation of Victorian Traditional Owner Corporations (FVTOC). FVTOC is incorporated under the Australian Securities and Investment Commission (ASIC), not CATSI legislation. In combination the members of FVTOC represent Traditional Owner Groups with statutory responsibilities in over 70 per cent of the state. The board of FVTOC comprises two directors nominated by each member organisation. FVTOC has Public Benevolent Institution tax status (see Setting up a PBC). It does not charge its members any membership fees. The inaugural FVTOC strategic plan identified that it would work in three key areas: policy advocacy; protecting country and culture; and, economic development.
In the area of economic development two tasks were identified. The first was to facilitate the economic development aspiration of its individual member organisations. To work on this task an Economic Development Committee was set up. The Committee was successful in getting FVTOC representation on key State Government advisory bodies and in lobbying the State Government to introduce an Aboriginal procurement policy similar to the Commonwealth Government’s Indigenous Procurement Policy. The other task was to work to ensure the economic independence of FVTOC without the need to rely on government funding.
To achieve this task, later in 2013 a ‘for-profit’ subsidiary corporation was set up – Federation Enterprises Pty Ltd (FE). FE is 100% owned by its parent company FVTOC. The one shareholder is the FVTOC Chairperson who, under the constitution, must act in accordance with the directions given to them by the FVTOC Board. The FE board is comprised of four FVTOC directors, one of whom is appointed as Managing Director. When FVTOC and FE were incorporated they had $100 each in their bank accounts.
In late 2013, after becoming aware of the opportunities created through the Commonwealth Government’s Indigenous Procurement Policy (IPP), FE had discussions with Cockram Pty Ltd. Cockram was a management owned second tier construction company, based in Melbourne but with operations across the country as well as in North America and Asia. It specialised in government construction work, defence, education and health. It had just lost a tender to an Indigenous construction company through the operation of the IPP. Cockram and FE negotiated the establishment of an incorporated joint venture construction company which came to be called Barpa (the Dja Dja Wurrung word for “to build”). Barpa was launched in mid-2014. Barpa is 51% owned by FE and 49% owned by Cockram. It has a board with equal representation from both JV partners. The Board Chair is a FE director. The joint venture agreement provided for the profits from Barpa to be divided on the basis of share ownership. The profits are calculated after the parties’ expenses which are calculated at cost The Board appointed another FE director as Managing Director of Barpa. Barpa initially operated on a loan and guarantee facility provided by Cockram. It utilised (at cost) the quantity surveying and other expertise of Cockram.
It took twelve months for Barpa to win its first tender, however eighteen months after that with an annual turnover in excess of $30m it was able to repay its loan to Cockram and obtain guarantee finance in its own right. The profit generated by Barpa now provides the majority of funding for FVTOC. It allows FVTOC to provide scholarships to Victorian traditional Owners and to fund a number of cultural strengthening projects. Barpa now employs approximately twelve staff nationally, all of them Indigenous.
The second joint venture corporation set up by FE was a cultural heritage consultancy. One of the first objectives in setting up FE was the desire for Traditional Owners to derive the benefits that flowed from the Cultural Heritage Advisor industry set up under the Victorian Aboriginal Heritage Act (AHA). A 2013 report estimated this has a value of about $20m a year. The Federation and its members had a wealth of experience in the operation of the AHA and cultural heritage management more generally. However, they did not have the experience to commercialise this knowledge
In late 2016 FE was approached by Terra Rosa (TR) a privately-owned Perth based cultural heritage consultancy company that mainly worked in conjunction with the mining industry. With the fall off in mining work TR was looking for different opportunities.
In December 2016 TR and FE incorporated a new joint venture vehicle – On Country Heritage and Consulting (On Country). On Country is 55 per cent owned by FE. The shareholder agreement allows for FE to purchase a further 5 per cent equity each year after the first three years of operation up to 75 per cent. Like Barpa the profits from On Country are to be divided on the basis of share ownership. The profits are calculated after the parties’ expenses which were calculated at cost.
On Country was officially launched in late February 2017 and by the end of the year had contracts in hand of about $300,000. While many of these contracts are in cultural heritage a number are in more diverse areas such a country planning, Indigenous engagement facilitation and economic consultancies.
The third subsidiary of FVTOC is the Victorian native title service provider (NTSV). Like the Federation NTSV was also was incorporated as company limited by guarantee under the ASIC legislation (not CATSI). Its members were the individual Traditional Owners that were its current or former directors. While this was a stable structure NTSV did not have a direct connection with the Traditional Owner community (other than through the individual directors).
Over 2016 the FVTOC and NTSV had a range of discussions and joint Board meetings regarding closer constitutional integration. The result of these discussions was that in October 2016 the NTSV members voted to amend the NTSV constitution so that there was only one ‘member’, FVTOC. As a result, NTSV effectively became a subsidiary of the FVTOC. The NTSV constitution change also allowed the NTSV directors to have regard to the interests of FVTOC. In 2017 as a result of the FVTOC Group of companies strategic planning process NTSV changed its name to First Nations Legal and Research Services (First Nations). The new name better reflects First Nations’ being a part of the FVTOC Group and also will be a better basis to increasingly commercialise the work of that firm.
What the FVTOC Experience Shows
There is an old saying ‘it takes money to make money’. The experience of FVTOC suggests that this may not tell the whole picture. FVTOC never had money. Yet in its four years of operation it has managed to acquire majority interests in two profitable joint venture companies and ownership of the Commonwealth funded native title service provider for the state.
What is the asset that FVTOC was able to trade on? Since the development of the Commonwealth’s IPP having an Aboriginal company is a distinct advantage. But it is not just its Aboriginality that helped the Federation.
Cockram, First Nations and Terra Rosa were not simply interested in working with an individual Aboriginal person. The real asset that FVTOC had (and has) is the legitimacy that comes from its community ownership. Community ownership provides an advantage when it comes to identifying potential joint venture partners. It also provides a market edge when it comes to the operations of the joint venture. The fact that Barpa profits go back to the Federation to run community projects like an Aboriginal Youth Cultural Strengthening program gives Barpa a market edge when it is competing for tenders. Likewise, for On Country, the fact that Traditional Owners derive the benefits of a proponent’s cultural heritage consultancy is a distinct market edge.
While the native title process may not always generate millions of dollars in mining royalties what it does lead to is a representative organisation structure that has the advantage of community ownership. This is an asset that all native title corporations have.