Impact bonds could bring more positive outcomes for indigenous people.
AUSTRALIANS, if they reacted at all, could be forgiven either furious exasperation or resigned disgust at news that the Commonwealth government spends $3.5 billion a year on indigenous programs, for which the outcomes have been "disappointing at best and appalling at worst".
Spare a thought for Australia's Aboriginal and Torres Strait Islanders, who live in what can only be described as a three-speed economy, labouring in the lowest gear on the steepest hill, fanned by ministers and bureaucrats waving money and providing, in the infamous words of former US secretary of state Dean Rusk, "all assistance short of help".
The news is actually worse than the Department of Finance's Strategic Review of Indigenous Expenditure suggests. Ecotrust Australia research reveals that when you add spending by states and territories, the annual tally exceeds $4.2 billion.
That's a lot of government money, but then the government spends a lot of money on all sorts of things. The difference here is that no one else spends any appreciable money on this issue. There is almost zero market capital, and negligible philanthropic money, that makes its way down to indigenous people. And yet most innovation arises either in the marketplace or thanks to donors, who provide early-stage investments in ideas outside the conventions of either the market or government funding streams.
If ever there was a need for innovation, surely it is around creating reliable prosperity for Australia's indigenous people.
There is a popular clamour right now for indigenous people to "get off welfare" and get a job. The reductionist conceit of the resource magnates of this country is that by industrialising an entire class of people, indigenous people will suddenly step out of the shadow of welfare into the bright future - the Bran Nue Day? - that other Australians are cashing in on.
The reality is that many indigenous Australians want to remain on their land. They want to lead productive lives caring for their country, not digging it up. To its credit, the Commonwealth already invests in programs - such as indigenous protected areas (IPAs) and Caring for Our Country - that employ indigenous rangers in recognition of their unique knowledge of the land and its cultural and natural resources.
These investments in people-in-place show positive returns in the very areas that otherwise seem to defy the government's best efforts. In IPA communities, there is evidence of improved diets, more physical activity, greater economic participation, improved early childhood development and reductions in substance abuse among people on country.
The Menzies School of Health Research released a study this year on an Arnhem Land community where health gains and cost savings in reduced treatment of diabetes, renal disease and hypertension were attributed to "maintaining a connection between people and their country. We know it makes sense from a health point of view. This study shows it makes economic sense, too."
Yet Ecotrust Australia research reveals that the government invests minimally in the one area that delivers the most promising returns. Of the $3.5 billion spent by the Commonwealth on indigenous programs, just 3.7 per cent, or $130 million, goes to natural resource, cultural and heritage management. These grant programs have no guaranteed future, and IPAs in particular are under-invested.
Indigenous Australians are capable of producing positive outcomes in environment, health, education, language, housing, criminal justice and business development. The problem is that, in all these areas, the government stands in the way, paving the road to ruin with its good intentions.
We support exploring a radically different option. We propose the creation of an indigenous impact bond, modelled on the early development in England of what are called social impact bonds. An indigenous impact bond, or I2B, wouldn't magically make government go away, but rather would put corporate and philanthropic capital at risk to create positive social impacts, calling upon government to reward investors only if the social impact is achieved.
A simple illustration is a pilot being conducted in Britain by a company that has targeted recidivism among young offenders, whose presence in England's jails costs the state thousands of pounds a year per head. By investing in programs aimed at a target population (youths in custody) and an outcome (lower rates of re-offending), a measurable saving can be delivered to government, which is bonded to pay investors a share of what it saves.
The critical ingredient is finding the intermediary partners to deliver social impacts on the ground. In Australia, it is clear that these intermediaries do not reside in governments and are seldom found among the contractors and consultants who feed at the government trough.
It is our belief that indigenous organisations and entrepreneurs are key to delivering positive social impacts in their own communities - if only they are given the chance.
In Australia, companies and high-net-worth individuals profess an eagerness to invest in better outcomes for indigenous people, but they can't find a way in - or, more to the point, they don't believe there is a way out. An I2B could unlock this pent-up source of capital and goodwill, providing a structure for attracting capital and producing measurable outcomes, while at the same time giving government an opportunity to spend our money on real results.
Indigenous Australians deserve an opportunity to help themselves. Some might want a mining job, most do not. Some welcome the ongoing industrialisation of their country, but many think there must be a better way. An impact bond is one way to offer more control to indigenous people over investments in their future. There is risk, of course, but the greater risk is that we continue down the same sorry path we have been on for decades.
Patrick Dodson and Ian Gill are, respectively, the chairman and chief executive officer of Ecotrust Australia.
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