Indigenous businesses grow their share of supply contracts by 65pc to $3.8 billion

Indigenous businesses have been buoyed by post-pandemic government spending, with a new report revealing that enterprises registered and certified by Supply Nation recorded a 65 per cent surge in total supply contracts to $3.8 billion in FY22.

This is despite a slowdown in the number of Supply Nation supplier registrations during the year, rising 19 per cent to 3,594 compared with a 30 per cent increase in FY21.

The findings are contained in the latest Supply Nation Research Report No.7, which was compiled for the Indigenous business group by accounting firm EY.

Supply Nation, which was established in 2009 to support a sustainable Indigenous business sector, says the 65 per cent increase in value of total contracts from members over FY22 compares with a 39 per cent rise a year earlier.

Supply Nation has 722 members comprising government bodies, and public and private corporations who seek to engage with the Indigenous businesses registered as suppliers with Supply Nation. Government contracts represented the biggest spend in FY22, accounting for $1.7 billion, or 45 per cent, of the total. This was more than double the government spend in FY21.

However, in another key finding, just over half of Supply Nation suppliers (52 per cent) accounted for all of the contracts secured during the year, with the biggest share of contracts outside of the government sector coming from the construction and mining sectors.

Facilities management and real estate rounded out the top five categories of business revenue, but it was suppliers to the construction sector who represented the biggest share of the revenue pie, accounting for 42 per cent of the total.

Supply Nation CEO Michelle Deshong says the latest report has offered the group insight into the distinction between registered and certified Supply Nation businesses, and whether that influences procurement decisions. A certified Supply Nation business must be at least 51 per cent Indigenous owned.

“Confirming the importance of our certification process, our research shows that members are more likely to procure from certified suppliers over registered suppliers,” Deshong says.

“Certified suppliers accounted for $2.3 billion in contract revenue, 60 per cent of the total revenue reported, and received three times as many contracts as registered suppliers. This sends an important message to the more than 2,000 suppliers with Supply Nation that are classified as registered but have the potential to become certified as they have 51 per cent or more Indigenous ownership.

“These suppliers are potentially missing out on contracts because of a distinct preference by some our members to purchase from certified suppliers.”

The Supply Nation survey also revealed that the industries most affected by COVID-19 in FY20 and FY21 were showing continued signs of recovery in FY22, especially those in the tourism sector, arts and entertainment, events management and food and hospitality.

The Supply Nation report also delved into female participation, finding that although female-led businesses comprised just over a quarter (28 per cent) of the registered suppliers, they represented just 14 per cent of the total $3.8 billion in contracts for FY22.

“The report suggests that a key reason for this relatively low level is that many female-owned Indigenous businesses are based in industries that typically have comparatively low-value contracts,” Deshong says.

The report found that many female-owned Indigenous businesses operate in the education and training, arts and entertainment, and domestic goods and services sectors.

“These Industries typically have a larger number of comparatively low-value contracts,” the report says.

According to Deshong, Supply Nation is looking at ways of supporting female-owned businesses to lift their share of contract revenue.

Meanwhile, despite the solid headline growth reported by Indigenous enterprises, the report reveals that almost half, or 48 per cent, of all suppliers registered with Supply Nation reported no contract revenue for FY22.

The report partly attributes this statistic to the lead time for new businesses being registered and the time it takes to secure supply contracts. It also notes that it may be affected by the low number of certified suppliers, who are more likely to win contracts from members, compared to those that are registered suppliers with Supply Nation.

The report concedes that a more qualitative analysis is needed to determine the reason for businesses failing to record supply contracts.

In a positive for the sector, the 3,594 registered suppliers of Supply Nation employed a total of 40,139 people, with 14,411 of those being of Aboriginal or Torres Strait Island descent.

“Considering that Aboriginal and Torres Strait Islander people make up only 3.8 per cent of the national population, this is a strong representation, supporting existing evidence that Indigenous employers are more likely to employ Indigenous staff,” the report says.

“The findings in this report demonstrate the growing strength of the Indigenous business sector, represented by the record growth in contract revenue, and the growing number of registered and certified businesses.”