Aboriginal and Torres Strait Islander people already face systemic barriers when attempting to get their businesses off the ground and concerns about "black cladding" can exacerbate difficulties, an Indigenous group says.
Black cladding occurs when a non-Indigenous business entity or individual takes unfair advantage of an Indigenous organisation to unfairly gain access to opportunities they would otherwise not be entitled to, according to Indigenous business verifier Supply Nation.
The non-profit organisation's chief executive Kate Russell told a Parliamentary inquiry into economic self-determination and opportunity for Indigenous Australians that it was a serious issue.
"But I also believe that it receives an unfair amount of attention," she said on Tuesday.
"The great majority of Indigenous businesses are doing the right thing and I do not want to create a situation where a few bad apples spoil the whole bunch."
Many Indigenous business owners are already at disadvantage because they do not come from a long line of intergenerational wealth or they may not have qualifications like a masters degree due to systemic barriers.
"My concern is that corporate and government organisations will not engage with Indigenous businesses because they are so afraid of black cladding - they don't want to be burned," Ms Russell said.
For an entity to be registered on Indigenous Business Direct, the largest national director of Aboriginal and Torres Strait Islander Businesses, they must be at least 50 per cent owned by Indigenous people, be located in Australia and make the majority of its revenue from a product or service.
This definition represents more than just Indigenous ownership, instead it allows Indigenous people to get actively involved, Ms Russell said.
Supply Nation also noted there was an unreal expectation on Indigenous businesses to contribute higher than average benefit to the community.
"This expectation happens regularly at the pre-procurement stage and can have a detrimental effect on the First Nations business," the organisation wrote in its submission.
The Coalition of Peaks, which represents more than 80 Aboriginal and Torres Strait Islander community-controlled organisations, urged the government review all policies aimed at improving Indigenous economic development and consider a Productivity Commission evaluation of the Closing the Gap agreement.
It also called on the government to fully fund the Indigenous community-controlled sector as a contributor to employment outcomes and economies in regional and remote areas.
