Aboriginal small businesses are on the rise, but much more work must be done to start up firms on reserves, say First Nations business developers.
By Monte Stewart, Business Edge, October 31, 2008. Click here for original story link.
Clint Davis, president and CEO of the Toronto-based Canadian Council for Aboriginal Business (CCAB), says the vast majority of Aboriginal small-business startups are launched outside reserves.
"For the most part, Aboriginal business owners are not in the communities," he says. "They’re actually trying to tap into larger markets, which aren’t on reserves."
According to Aboriginal Business Canada (ABC), a federal government agency, Canada has more than 27,000 First Nations businesses. The CCAB has not conducted its own research, but Davis notes an ABC study in 2002 found 80 per cent of Aboriginal small-business owners lived off reserve.
Most on-reserve businesses, he says, tend to be part of a band’s economic development branch. Ten or 15 years ago, it would not have been feasible for an entrepreneur to start an independent business on a reserve, he says, but joint ventures and globalization are creating many more service-related opportunities at home.
He notes ABC found Aboriginal small-business growth was nine times higher than their non-Aboriginal counterparts. The major hurdles to Aboriginal small-business development are the capacity to do everything that’s required to keep a business thriving and access to capital, he adds.
"Our small-business people are wearing a number of hats and they’re doing a million things all at once," says Davis.
Aboriginal businesses are also hampered because First Nations communities lack decision-making processes and infrastructure, he adds.
Shawn Atleo, B.C. chief for the Assembly of First Nations, says real and perceived political barriers must be removed for Aboriginal small business to thrive.
"Communities want to tackle (challenges), because they desire self-determination," says Atleo. "They desire to be able to afford to pay for social programs. We’re still in a process of healing. One way to do that is to be successful in business."
He calls for chiefs across the country to come together and match entrepreneurs and companies with resources and capital. Atleo contends Aboriginals have desire, access to natural resources and increased political clout, but lack capacity.
Geography also plays a major role in the formation of Aboriginal small businesses, says Leslie Lounsbury, publisher of Winnipeg-based SAY (Spirit of Aboriginal Youth) Magazine.
"If you’re in the (Alberta) tarsands area, there’s all kinds of on-reserve businesses," says Lounsbury. "But if you look at Saskatoon, as an urban reserve in the city, those figures will skew."
Lounsbury says many women and youth are behind the increase in Aboriginal small businesses. "With women, as we become aware of opportunities, we want to be independent and have our own business," says Lounsbury, who is also a former college business instructor and served as chair of the Manitoba Credit Union and Manitoba Deposit Insurance Corp.
First Nations enterprises are increasing, she adds, because Aboriginals in general are becoming better educated, better trained and more aware of opportunities. Federal Aboriginal Human Resource Development Agreements (AHRDAs), part of a $1.6-billion strategy launched in 1999, have also created many small-business spinoffs.
Lounsbury says it has become easier for Aboriginal entrepreneurs to obtain loans for on-reserve projects because federal law now allows creditors to go on reserves to repossess security. The First Nations Finance Authority, which raises capital by issuing bonds on behalf of its member First Nation governments, can also offer bonds like a municipality.
Many First Nations have also succeeded in developing small businesses by examining the ways of their ancestors’ commercial practices.
"We may base our decisions on traditional and cultural things, but we’ve had commerce," says Lounsbury, who is Metís. "The Native people had highly developed political and commercial systems long before any white people came to this continent.
"That’s often forgotten … We have a strong history and it’s not understood by our own people – let alone non-Native people … " But challenges remain for on-reserve Aboriginals in starting their own businesses.
Brenda Kuecks, program director for Vancouver-based Ecotrust Canada, a Vancouver-based non-profit organization that helps develop sustainable businesses in B.C. coastal First Nations communities, says it’s almost impossible for an entrepreneur to obtain a loan to start a business on a reserve. [Note: original story mistakenly referred to "Wendy" Kuecks.]
Traditional lenders have shown no interest in lending money to on-reserve entrepreneurs who lack collateral, she adds, while potential markets are too small.
"The barriers to small-business development are the same, whether you’re Native or non-Native," she says. "Small business is hard to do. Being on a reserve just adds another layer of complexity."
Ecotrust Canada provides loans to independent Aboriginal companies and First Nations government-owned enterprises through an $8-million capital fund. The group also underwrites larger loans from major lenders.
Meanwhile, the CCAB and other First Nations business groups, like the Canadian Indigenous Business Association, are actively pursuing joint ventures with outside companies.
CCAB co-chairman Garry Knox says opportunities are huge, because First Nations lands house 50 per cent of Canada’s commodity wealth.
"There’s so much happening out there that the general public wouldn’t have a clue," says Knox. "They may not own the land, but that’s irrelevant, because you will not do any business on that land without having an alliance with them."
The CCAB has a progressive Aboriginal relations (PAR) program that helps companies measure their commitment to First Nations economic development.
About 20 companies, including Syncrude, EnCana Corp., IBM, SAP and Bank of Montreal, participate in the program. Companies complete self-assessments before being graded by the National Quality Institute of Canada.
"We (the CCAB) started this program a number of years ago, but we need to do a better job of promoting it ourselves … This would be a measurement that everybody has to stand up to," says Knox, who is also chairman of Burlington, Ont.-based Sodexo Canada, a global food-and-facility management firm that has interests in oil and gas and mining and does most of its work with Aboriginals on reserves.
Knox believes it’s as feasible to start a business on a reserve as anywhere else, as long as entrepreneurs have enough desire and willingness to take risks. "It’s the make-up of the individual within the community," he says. "There are people that work in organizations and there are people who are entrepreneurs."
Jay Wright, president and CEO of Toronto-based Vincorp, which has partnered with the Osoyoos in B.C.’s Okanagan Valley on the only First Nations-owned winery in North America, says companies must develop close ties with Aboriginal communities.
He says his firm has provided its business background, while the Osoyoos have taught the company the importance of sustainable practices vital to a successful winery.
"It’s been collaborative in nature," he says of the relationship.
During a recent CCAB gala dinner in Vancouver, HSBC chairman Milton Wong noted past attempts to engage First Nations in economic development have failed because Aboriginals weren’t at the table when programs were designed.
But Supreme Court judgments, which protect Aboriginal peoples’ inherent rights by requiring consultation and accommodation, have set a positive tone for future relationships between First Nations and corporations.
Most firms now know the rules of engagement and have more certainty as they negotiate deals with First Nations.
"I personally see that things are changing," says CCAB’s Davis.