Federal Labor plans to change the definition of an 'Indigenous business' to help combat companies falsely claiming to engage First Nations Australians in their leadership and workforce to secure government lucrative funding.
The practice of black cladding involves a company being set up to appear First Nations people are involved when really there is little.
An 'Indigenous business' constitutes an organisation with at least 50 per cent First Nations ownership.
But the Albanese government's latest draft national platform, to be discussed at a Labor Party conference in Brisbane this month, has been amended to outline plans to change the definition of an 'Indigenous business', according to a report in The Australian.
"Labor believes what constitutes an Indigenous business should be redefined to protect against 'black cladding' and ensure meaningful employment for Indigenous workers, and will support states and territories to adopt a similar definition," the amended draft says.
"Labor is committed to finding opportunities that ensure Aboriginal and Torres Strait Islander workers have well-paid, secure and ongoing employment."
Labor's national platform also pledged to support elements of the Uluru Statement from the Heart, including a constitutionally enshrined Voice to parliament, a Makarrata commission for agreement-making and a national process of truth-telling.
Supply Nation – which has more than 4300 verified Indigenous businesses on its database – said it had long advocated for changes to federal Indigenous procurement policy.
"In the past 12 months we have removed over 250 businesses from our database for criteria noncompliance, including insufficient Indigenous ownership," a spokesperson said.
The powerful CFMEU construction union said earlier this year black cladding was "the biggest rort" and called for the establishment of a government-funded First Nations integrity unit to stamp it out.
What is black cladding and how can we stamp it out?
To put it simply, black cladding is when non-Indigenous companies boost their Indigenous shareholder base or claim to be a First Nation businesses in a bid to win government contracts.
According to the federal government's Indigenous Procurement Policy (IPP), an Aboriginal business is defined as a business with at least 50 per cent Indigenous ownership.
Under the current federal IPP, three per cent of all contracts, and 1.75 per cent of the value of all contracts, must be awarded to businesses that qualify as First Nation businesses.
Since the IPP was introduced in 2015, around $1.6 billion has been awarded to Indigenous companies but many Aboriginal businesses believe the system is being rorted.
Supply Nation co-chair Glenn Johnston said black cladding was of great concern to First Nations people.
"Black cladding is often used to take unfair advantage of Indigenous procurement policies," he said.
Aboriginal lawyer and founder of AMK Law Matthew Karakoulakis, who has advocated for an independent probe into black cladding and its potential impact on the First Nations economy, said the practice was inhibiting the growth potential of Indigenous businesses.
He also stressed further steps to address the issue of black cladding was needed, after a parliamentary report on Indigenous Employment and Business in 2021 suggested Supply Nation refine their criteria for an Aboriginal business, to help prevent such practices.
The Standing Committee on Indigenous Affairs' Report on Indigenous Participation in Employment and Business made 17 recommendations aimed at eliminating black cladding and enhancing the effect of the Indigenous Procurement Policy on Indigenous communities.
