How First Nations can achieve financial freedom

Developing their own resources can provide the means to maintain their people, culture and environment for future generations

VANCOUVER, BC, Jul 4, 2014/ Troy Media/ – While the recent Tsilhqot’in court decision giving First Nations more rights on their traditional lands could create revenue for at least some bands, exercising these rights will involve negotiations with corporations and or governments.

But reaching agreements with corporations has a lot in common with reaching treaty settlements with governments. It requires a large amount of financing.

There are many ways that First Nations can obtain the needed initial financial resources. These include, but are not limited to, getting grants, borrowing, or possibly selling assets. All of them have some advantages and some disadvantages. The first two depend upon outside grantors or lenders. Selling assets entails their permanent loss. Also, many nations do not have sufficient assets to sell.

A more advantageous way to raise funds is through the use of businesses that are owned by and operated for the benefit of the Nation. The benefits of such businesses are not limited to funding the various negotiation processes. They can also generate on-going employment and revenues that continue and can be used for other community needs once negotiations have been successfully completed. The advantages First Nation businesses have as a source of funds include the following:

Not subject to arbitrary change by outside bodies

For too long, First Nations have had to go cap in hand to governments and others seeking financial and other support. While dollars are often forthcoming, the amounts may not be sufficient, timing may be slow, and constraining conditions may apply both in the applications process and in the uses to which the funds may be used. Granting and lending processes and practices are subject to arbitrary change or even elimination. This can leave First Nations in a dependent and uncertain position.

No limitations on use of funds

The trouble with using other people’s money (whether loaned or granted) is that they can tell you what to do with it and how and when to do it. In those rare cases where grants are supposedly unconditional, the wise recipient knows that if the grantor is not happy with how the funds are used the flow with stop. However, First Nations has full discretion on how and when to use their own money. They can hire whom they choose, decide on payment levels and are accountable only to their own people.

Capacity building

First Nations face multiple challenges so it is useful if their actions can help them achieve multiple goals. There is the need to build capacity within the Nation for long term, independent viability. Business development generates such capacity. There are at least four components of such capacity building.

  • Jobs

Businesses need people to function. They create jobs. Aboriginal companies, like all other businesses, have to insure that the people they bring on board can do the jobs for which they were hired. Otherwise, the business does not survive. Within this constraint, First Nation firms can look first to their own people to fill positions. Further, they can provide information about openings and training to insure that there is a pool of qualified workers in their communities.

  • Human Capital

The need for financial capital for negotiations and continuing development is obvious, but equally important is human capital. That is the skills, abilities, experience and knowledge of people. Local companies encourage the development of such capital. People learn trades and other basic skills to get the jobs now available in the firm. People skills, sometimes called soft skills, are developed when dealing with customers and suppliers. Executive and management skills are acquired, perhaps by learning from those initially hired from outside. Financial literacy grows. All of this leaves the nation in a better position to generate a prosperous future.

  • Contacts and Expertise

Closely related to the development of human capital is the network of contacts the nation develops both within First Nation circles and beyond. Networks are very important. Business is one way to develop the kind of wide ranging networks that provide the information and expertise that a First Nation might not otherwise have.

  • Reputation

Any good negotiator will tell you that psychology is a major factor. This can work against First Nations. Many non-Aboriginals still harbour old stereotypes about Aboriginals being poor and not very knowledgeable. They are not seen as formidable foes at a negotiating table.

However, some nations are seen as forces to be reckoned with. These are the ones which have used their human and other assets to develop wealth and growing independence. Their names are mentioned with respect and they are cited as examples for other nations. At the negotiating table they are more likely to be seen as worthy opponents. Successful business operations have been the path taken to reach this position.

But there are down sides to using business as a funding source. Developing and operating a successful, lucrative and stable business is not easy, automatic or fast. Revenues can vary from year to year. However, the advantages as described above can outweigh the challenges. Below are some practices that can help First Nation businesses to overcome the challenges and attain success.

  • Within Nations’ guidelines

First Nation businesses should provide an accurate reflection of the Nation and its values. These values may relate to culture, the environment, autonomy and self-sufficiency. They should be clearly expressed as constraints under which the First Nation businesses operate and demonstrate how they are different from other businesses.

  • Independent directors

The business of business is business. Subject to the guidelines as described above, directors need to be free to concentrate on the factors that will make the business successful and enduring. They must be free from the many political and other factors that often influence decision-making in many communities. Mixing politics and economics has often led to the business and economic results being less effective than they could have been.

Independent directors can be brought in from outside the community, at least initially. This can provide the business experience and expertise that may not yet be locally available. However, the boards of all First Nation companies should include some First Nation people representing the company’s owners and beneficiaries. It is up to such board members to make sure they have or acquire the knowledge and skills to direct an effective to the business.

  • Adequate time horizon

Why is there never time to do anything right and always time to do it over? Companies need time to build their human resources, their physical capital and their markets. Owners of Aboriginal corporations can offer their businesses the special advantages of enough time to do things right without the short-term pressure to be immediately producing profits every quarter. Of course, they cannot be losing money and survive in the longer term. But they can begin by reinvesting any earnings and establishing a solid base which will yield an ongoing stream of dividends once the company is established.

  • Of and for the nation as a whole

This follows from the very important point made above to separate politics from business if the latter is to thrive. First Nation businesses should operate for the First Nation as a whole and all the people in it. While no community, village or other sub group should be discriminated against, trying to get an exact balance of benefits can often lead to less than optimal business decisions and hamper long run success.

Two B.C. examples of First Nation’s that are succeeding in generating jobs and revenue through using businesses are the Osoyoos First Nation in the Okanagan with a winery, mining operation, a prison operation, several tourism activities, and the Haida First Nation in Haida Gwaii (formerly the Queen Charlotte Islands) with forestry, fish packing, scallop farming and tourism. Both of these are fairly large communities in attractive locations.

However, even small remote communities can use business to do well and to do good. Arviat is such a small remote Inuit community in Nunavut above the Arctic Circle. It has set up Arviat Community Ecotourism which provides natural and cultural experiences to those seeking an Arctic adventure. This provides jobs for the village’s inhabitants and income to support the community, its culture and its environment.

The time to be developing businesses for the benefit of Aboriginal peoples and nations is now. For too long, there has been little economic activity and/or what there was has been benefitting those outside of the community. The sooner action is taken, the sooner nations will be able to prosper and meet their own needs.

On the other hand, a very long view also needs to be kept in mind. By developing their own human and other resources and becoming economically independent, First Nations can provide the means to maintain their people, culture and environment for future generations.

Troy Media BC’s Business columnist Roslyn Kunin is a consulting economist and speaker and can be reached at www.rkunin.com.

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