Wednesday, January 20, 2021Canada's Leading Online Business Magazine

Promise and Prosperity – Work in the oil and gas sector has made Aboriginal Business an economic powerhouse

By Anna Guy

Canada’s emergence as a global epicentre for coveted resources has precipitated an under-reported story.

Aboriginals are sharing the bounty, finding more jobs and seeing a rise in their personal and community incomes. Since 2001, thanks to an employment rush in the oil and gas and mining sectors, as well as in construction, total personal income for Aboriginals has grown by an average 7.5 per cent each year, according to a new study from TD Economics.

The study shed new light on Aboriginal business, revealing it as a powerful group with major economic potential.

According to the survey, named Estimating the Size of the Aboriginal Market in Canada, the combined income of Aboriginal households, business and government sectors will reach a staggering $24 billion in 2011 and could eclipse $32 billion by 2016. If so, this income would be larger than the GDP of Newfoundland and Labrador and P.E.I. combined.

“This destroys the myth that Aboriginal people are a drain on the Canadian taxpayer,” says Clint Davis, President and CEO of the Canadian Council for Aboriginal Business (CCAB). “When you talk about $24 billion, that is money going into the Canadian economy and it’s expected to be larger than two combined provinces. We are contributing more than our fair share to the economy.

“There are over 37,000 self-employed Aboriginal people in this country, which translates into 25,000 small businesses across the country and collectively, they will bring in about $974 million in earnings in 2011,” says Davis.

There are 633 recognized First Nation communities recognized in Canada, four major Inuit regions, and five provincial Metis associations with different Metis community locals throughout the country equalling 1.2 million Aboriginal people in the country.

“When you look at Aboriginal communities and the economic arms of these Aboriginal governments, a number of forces have converged which gives remarkable economic leverage to Aboriginal communities,” says Davis.

Economic & Business Development

According to a study done by the CCAB, Aboriginal economic development corporations (EDCs) are important dimension of the Aboriginal business community.

EDCs are the economic and business development arm of a First Nations, Metis or Inuit government, and are a major economic driver in Aboriginal communities. These community-owned businesses invest in, own and/or manage subsidiary businesses with the goal of bene¬fitting the Aboriginal citizens that they represent. Many EDCs have become business success stories, and the dynamism in Aboriginal economic development appears to come as much from community -owned as from privately -owned businesses.

Corporate Social Responsibility (CSR)

The cornerstone of a long-term success in a business relationship is partnership that is beneficial for both parties. That is the foundation of Corporate Social Responsibility, an evolving concept that integrates corporate ethics and strategy with long-term approach to social, environment, and economic benefits.

CSR has been used as an effective tool to improving the atrocious gap between education and employment levels in non-aboriginal and aboriginal communities. By providing a starting point, CSR gives Aboriginal groups the opportunity to build capacity and business acumen that they otherwise are at a tremendous disadvantage to build, before going into the mainstream market.

What was perhaps most interesting about the survey was that the most significant expansion of the overall Aboriginal market is being recorded within the business sector.

That said, [Aboriginal communities] have been beneficiaries of the booms in the resource and construction sectors, particularly in Western Canada, since the early part of the past decade.

“CRS and social entrepreneurialism has enabled Aboriginal people to have tremendous leverage in working with those companies and ensure benefits flows to their communities,” says Davis.

Additionally, says Davis, the Supreme Court has identified a need to consult and accommodate Aboriginal communities if there is development within their territory that could have an impact on a treaty or Aboriginal rights. This duty is primarily with the government, but the government can delegate that to companies that want to go in and develop the territory.

“So companies, even before government requires them to do it, have gone in and not really looked at consultation as what is the basic legal minimum but rather started to forge partnerships. That has done an incredible job in terms of positioning Aboriginal business in this country,” he says.

“Many, if not all Aboriginal communities have an economic arm. It could be a larger holding company that could own 100 per cent in different business or they could also own a different percentage as result of partnership with another company to pursue a venture.

“In situations where startup capital is unavailable, the development corporations have the ability to get access to capital in order to support its businesses and by doing that it will employ its people and hopefully address unemployment, give skills, and promote entrepreneurship.” This is a “vindication” of that business model, says Davis.

Energy and Mining sector boom

Canada’s global commodities boom has propelled resource development in this country and Aboriginal business, helping to double the income of Aboriginal groups and business over the last decade. The TD study cited figures from Statistics Canada that show Aboriginal workers are employed in large proportion in the energy and mining industry either directly or indirectly through support industries such as construction.

Much of that employment is through joint ventures whereby private sector business creates partnerships with aboriginals.

A large proportion of mining is done on Aboriginal territory. Not only is it morally right that those communities should share in the benefits, but the participation of local Aboriginal communities has proven to be beneficial to both parties. Because initiatives like this have now been in place for a number of years, the relationships between corporations and Aboriginal groups has become that of equal partnership, whereby companies choose to work with these groups because they have the highest expertise, most experience and do not require relocation or investment in social infrastructure. This type of employment can enhance a community’s long-term economic future and are a major driver of aboriginal income.

The TD study makes a powerful case that CSR partnerships are succeeding, and in some cases are evolving into powerful, mutually beneficial partnerships. That gives Aboriginal businesses a chance to build capacity before venturing into the mainstream market.

Industry Canada has examples of working partnerships like the ones Davis describes. “Building on years of engagement, Hydro-Québec and the Cree Nation signed nine agreements in 2002 to ensure that Cree people benefit from the development of hydroelectric opportunities in the James Bay area. On a much smaller scale, Eagle Rock Materials Ltd. credits the active participation of two Nuu-chah-nulth communities for much of what it has learned as it has developed new gravel ventures in British Columbia.”

ACFN Business Group is another, and is profiled in this issue of The Canadian Business Journal.

Similarly, Xstrata Nickel, looking to expand its operations in the Raglan Nickel Mine in Nunavik, has announced a $530 million development budget in line with the Plan Nord, one of the biggest social, economic and environmental projects in Canada’s history. Carried out over the next 25 years, $80 billion of investment in the La Manicouagan and James Bay areas, home to a large Innu population, exemplifies how the private sector can develop a skilled workforce.

“Mining companies that seek to develop projects in Northern Québec must forge relationships early on in the process and reach agreements with the Aboriginal communities,” says Jean Masson, Partner, Fasken Martineau, an expert on Plan Nord. “A large portion of the Plan Nord territory is governed by treaties and modern agreements between the Government of Québec and Aboriginal communities that have been concluded over the last 30 years.”

In Plan Nord—What Every Miner Should Know, Masson writes, “Although population density is very low, (124,550 people inhabit a territory of close to 1.2 million square kilometres) the Aboriginal population in the area is growing; nearly 45 per cent of the population is under 25 years of age. The government intends to adapt its programs to reflect the demographic reality of the north by prioritizing access to education, employee training, housing, as well as social, cultural and health services. The Plan’s first five-year plan (2011-2016) has over $382 million earmarked for social housing and other social projects in the territory.”

“The participation of the Aboriginal peoples is essential to the Plan Nord’s success,” says Geoffrey Kelley, Minister responsible for Native Affairs. “The Plan Nord must mean for all Aboriginal communities economic and social spinoff and the enhancement of their living conditions. I am thinking here of the initiatives in the realms of education and training, culture and health that will enhance the quality of life in Aboriginal communities.”

Over the next decade, 400,000 Aboriginal Canadians will reach working age, yet Canada’s Aboriginal peoples continue to be under-represented in post-secondary achievement statistics. In 2006, 42 per cent of First Nations people’s post-secondary education rates were 20 per cent lower than the national average (42 per cent vs. 61 per cent). Improving these outcomes not only increases Aboriginal peoples’ quality of life but the country will also benefit from a highly-skilled, home-grown workforce.

The Canadian Chamber of Commerce cites a study, Investing in Aboriginal Education in Canada: An Economic Perspective, saying it “documents the real economic benefits that could accrue to Canada if—by 2026—Aboriginal youth were to achieve the same educational outcomes as those achieved by the non-Aboriginal population in 2001. It is estimated that the annual economic output of the labour market would be $36.5 billion higher, with increased tax revenues of $3.5 billion and reduced government expenditures of $14.2 billion.”

The CCAB assisted TD with the survey by providing data from two survey of 1,000 Aboriginal entrepreneurs and 50 CEOs of developing corporations to determine the size of the Aboriginal market. The results of the survey show that there is a new generation of Aboriginal business, one that is building on collaborations with private sector business, band-owned business models and the opportunities given to people in remote and rural communities.

“The interesting thing of this study is the expected growth of the Aboriginal market. The proportion of money that is coming from government is expected to get smaller, which is fabulous. It means that individual personal and business income is going to grow and that is what you want to create a stable marketplace,” says Davis.