Output Group 1.1: Equity and Investments

IBA brings together Indigenous Australians and industry capability partners into sustainable commercial ventures which provide for profit distribution, employment opportunities and asset accumulation. (FaHCSIA Portfolio Budget Statements 2008–09)

Overview

IBA provides Indigenous corporations with the means to invest (by providing them with opportunities and access to equity and capability partners) and to succeed (by providing them with ongoing support and training to equip them to manage and grow their investments).

Assets investment provides Indigenous Australians with an avenue to bridge the ‘gap’, because it gives them access to income and capital growth, which can underpin the future financial structure of the Indigenous corporations and communities.

Business model

This area of IBA’s activity is not supported by an annual appropriation. Therefore IBA’s investment portfolio must deliver a positive net return after management and operating expenses. Each investment is selected on the basis that the asset can produce a sustainable benefit to Indigenous groups, organisations and corporations. Indigenous partners benefit from being able to acquire an interest in large, active capital assets with relatively small levels of equity and risk exposure.

IBA ensures that over time its Indigenous partners obtain the industry knowledge and skills they need to manage their investments without the assistance of IBA. Other significant potential benefits include increased economic activity and flow of funds to Indigenous communities that participate in joint ventures with IBA.

IBA’s preferred joint venture business model is one which brings together IBA, Indigenous partners and private sector capability partners. Experience has shown that the inclusion of private sector partners is a critical component of any successful commercial venture as it can provide either equity or capability management services.

The investment is structured to facilitate, over time, the divestment of IBA’s interests to the Indigenous partner, usually relying on the profits from the venture to acquire that equity. During the partnership, IBA’s business model facilitates skill transfer from the industry expert to the Indigenous partner.

IBA and its Indigenous partners also invest in strategic assets such as commercial property to provide low-risk medium returns on capital. This strategy provides for good annual capital growth and dividend flow which the Indigenous partners can then use to finance and support commercial and social activities in their communities.

Capability transfer and ongoing support

IBA maximises opportunities for its Indigenous partners to take up board membership and employment and small business opportunities that may be created by the investment. These experiences help build its Indigenous partners’ capacity in the governance, management and operation of commercial enterprises.

IBA assists its Indigenous partners to gain access to advice and skills development needed to fulfil these roles. This requires IBA to facilitate the relationship between the Indigenous and non-Indigenous partners while ensuring that the investment meets the needs of both parties.

Indigenous partners must have adequate governance arrangements in place. From time to time potential Indigenous partners may not have the cash reserves to take an equity position in an investment; in such circumstances, IBA may lend them the required equity provided the projected cash returns can support the repayment of the investment loan.

In entering into an investment, IBA documents with the Indigenous partner the objectives sought from the investment. Those objectives will include the use of future profits to retire debt, to distribute to other programs managed by the Indigenous organisation or to finance other investment outcomes. IBA will also measure and report on employment outcomes associated with the investment and on any measurable social outcomes that flow from the investment to the community. Indigenous participation in the economy at all levels has the potential to ease some of the social issues that arise from poverty. A number of commercially focused Indigenous corporations are developing the knowledge and skills in the medium to large business sector and are also able to support smaller Indigenous businesses to grow and develop.

Where required, IBA provides ongoing support for its Indigenous partners during the life of each investment and after its divestment. By ensuring that its Indigenous partners have commercial and industry knowledge and skills, IBA equips them to manage the investment without its assistance. It also provides for governance training through programs such as the Indigenous Governance Program developed by the Australian Institute of Company Directors in collaboration with IBA. For more information, see ‘Governance and capability-building programs’, page 84.

An example of ongoing support is the recently developed series of financial literacy workshops titled MoneyTalk, which take into account the varying skills and knowledge base of IBA’s Indigenous partners. For more information, see ‘MoneyTalk workshops’, page 87.

Indigenous employment, training and support

During 2008–09, the investment portfolio created or supported 893 jobs; 262, or 29 per cent, were held by Indigenous Australians. The majority of employment opportunities were in the tourism and hotel accommodation
(53 per cent) and mining and mine
services (40 per cent) asset clusters.

Other significant potential benefits include increased economic activity and flow of funds to Indigenous communities that participate in joint ventures with IBA.

IBA has developed two new profiling tools to measure the broader social and economic outcomes of its investments. The Social Return on Investment (SROI) tool measures the social and economic value of employment, training and dividends to our Indigenous partners. The baseline indexing tool captures indicators considered important to Indigenous economic security and growth prior to the existence of a joint venture within a community. These baseline social indicators are then tracked over time to measure improvement.

Capital base

IBA’s investment portfolio operates within the initial capital base contributed by the Australian Government and from the portfolio’s subsequent growth. IBA’s approach is relatively conservative (compared to that of mainstream investment funds), particularly taking into consideration the size of its investment portfolio and the extent of the need within Indigenous Australian corporations. IBA’s approach is to minimise risks with a view to preserving its capital base.

The growth in IBA’s capital base has been an essential part of being able to support more groups who wish to participate in local ventures. Mining and tourism operators are very keen to ensure Indigenous participation in ventures located on or near local traditional lands, which paves the way for equity negotiations for local groups.

To achieve a positive net return, IBA identifies and manages risk within the portfolio by:

• maintaining an appropriately diversified portfolio by geography, industry and asset cluster
• matching the risk profile of investments to the current and future economic environment
• developing a portfolio that balances risk and return so that a comparable commercial rate of return relative to the cost of capital is achieved
• reducing losses on investments by constant monitoring and early intervention
• releasing capital for reinvestment by active portfolio management through divestments or partial equity selldowns.

Monitoring portfolio performance

IBA actively manages its investment portfolio by considering the following factors throughout an individual investment’s life cycle (Figure 2):

• the investment’s current performance,
  its outlook, management, future investment requirements and any specific factors it needs to consider to determine whether to hold the investment, invest further in it, or seek to divest it
• potential options for IBA to exit the investment and indicative timeframes
• any proposed changes to distributions and continued alignment with original investment objectives
• impacts on the risk profile of the portfolio arising from any proposed investment or divestment, including factors that will trigger certain targets.

Figure 2: Portfolio management: investment life cycle

Performance

The 2008–09 FaHCSIA Portfolio Budget Statements targets were set and published well in advance of the full impact of the global financial crisis, which affected 2008–09 results (Table 1).

Table 1: Output Group 1.1 key performance indicators

Key performance indicators	2008–09 target	2008–09 results
a Calculated as accrued distributions. b The transfer of Outback Stores to FaHCSIA is expected to be finalised by early December 2009.
Profit distribution to partners	3% increase on 2007–08 distribution	135%a
Employment opportunities	3% increase on 2007–08 opportunities	3.1% increase on 2007–08 opportunities
Number of investments with Indigenous co-investors	An increase of three investments on 2007–08 total	Increase of two investments on 2007–08 total
Community stores under Outback Stores Pty Ltd management	An increase of 30 stores on 2007–08 total of 30	Increase of 27 stores on 2007–08 total of 27b

In 2008–09, IBA’s investment portfolio asset value grew by 7.55 per cent, and 893 jobs were created or supported, of which 262, or just under 30 per cent, were held by Indigenous Australians (an increase of 3.1 per cent on the 2007–08 figure of 254). Although a number of the ambitious targets set last year were affected by the general economic downturn, the investment portfolio overall performed strongly during the year, well ahead of the market and investment funds of comparable size. These results reinforced IBA’s strategic direction and the value of the rigorous investment criteria it uses to safeguard against adverse economic conditions.

Notwithstanding the poor economic climate, investment enquiries more than doubled in 2008–09, with 166 proposals received (78 in 2007–08). The increase in enquiries indicates the success of IBA’s promotional strategies and the extent of brand awareness among its potential clients. In 2008–09, IBA:

• presented a series of business forums across Australia to promote awareness of its products and services to high-profile Indigenous business people, key industry leaders and mainstream business leaders
• decentralised its acquisitions team from Canberra to most state capital cities to improve its knowledge of and relationships with local Indigenous and private sector organisations and individuals.

Investment activities

Most of the 166 proposals for investment opportunities that IBA received in 2008–09 were for investments in the property and business services sector (Figure 3).

Appendix A lists IBA’s subsidiaries and trusts at 30 June 2009.

Figure 3: Investment proposals by industry sector (total 166), 2008–09

Text description of Figure 3

The number of enquiries and proposals from New South Wales increased significantly, with 54 received in 2008–09 compared to 15 in 2007–08 (Figure 4). The increase can be partly attributed to the approval of the development application for the Nambucca Heads retail development, an exciting new venture with the Nambucca Heads Aboriginal Land Council.

Figure 4: Investment proposals by geographical location (total 166), 2008–09

Text description of Figure 4

In 2008–09, the IBA Board considered 18 proposals and approved all 18 (Table 2). The number of proposals considered by the Board was 80 per cent more than in
2007–08, when it considered 10 proposals. The increase resulted from the improved deal flow (stream of investment opportunities) and equity changes as well as from a portfolio management approach to the divestment of poor performing assets that had not achieved and could not achieve the financial and social outcomes that IBA and its partners were seeking.

Table 2: Proposals considered by the IBA Board, 2008–09

Status	No.	Investment	Proposal type
Approved and settled	7	Tennant Food Barn	Acquisition
		Inverell Manufacturing Plant	Acquisition
		The Crossing Inn	Divestment
		Centrum Insurance Brokers	Divestment
		Brewarrina properties x 3	Divestment
		29 Wilkinson Street, Alice Springs	Divestment
		Willow Bend Sports Complex	Divestment
Approved but not yet settled	9	Nambucca Heads Retail Development	Acquisition
		All Hallows	Divestment
		Blighty dairy farm	Divestment
		Kings Canyon Resort	Divestment
		Alice Springs Resort	Acquisition
		Wrotham Park Lodge	Acquisition
		Kununurra Apartments Development	Acquisition
		South Hedland Property	Equity change
		Tjapukai Aboriginal Cultural Park	Equity change
Approved but will not proceed	2	El Questro	Acquisition
		Inverell Aggregate Supplies	Acquisition
Not approved	0
Total	18

Acquisitions

In 2008–09, IBA acquired two new investments: the Tennant Food Barn in Tennant Creek, in the Northern Territory, and a manufacturing plant at Inverell, in New South Wales. IBA formed a new partnership with the Julalikari Council Aboriginal Corporation to purchase the Tennant Food Barn and four specialty stores. The new joint venture serves a community of approximately 3,000 residents, most of whom are Indigenous. It is the only grocery retailer in Tennant Creek, and a wholesaler to outlying community stores and stations.

The acquisition of the manufacturing plant in Inverell was an opportunity for IBA to diversify its investment portfolio into a new sector, the production of commercial grade aquaculture feed. IBA is currently negotiating with a national company and industry expert to establish a joint venture and to consolidate management and supply agreements.

IBA is excited about the new joint ventures and is looking forward to the investments delivering positive social and economic benefits to local communities. These investments, in locations with a significant Indigenous population, demonstrate that there are opportunities for the local community to develop the means to engage, invest and participate in their local economy.

Divestments

Subject to the nature of the asset acquired, IBA’s strategy is to divest equity in an investment to its Indigenous partner, through a buyout arrangement. Sometimes, however, the decision to divest is triggered when:

• Economic and market conditions indicate that the realisable price of the asset is greater than the future cash flow expected from the asset.
• IBA’s Indigenous partner is no longer able to participate in the asset and a suitable alternative partner cannot be identified.
• The asset is a non-performing investment and divestment is the most appropriate action to address the continuing impact on the portfolio.
• IBA’s industry partner is selling its equity in the asset, and the prospect of forming an alternative relationship suitable to the needs of the Indigenous partner and IBA is unlikely.

IBA uses the proceeds from the sale of its investments to reinvest and to support its Indigenous partners in acquiring assets, and to create employment opportunities.

In 2008–09, IBA sold, or agreed to sell, its interests in the following investments:

• The Crossing Inn
• Centrum Insurance Brokers
• Brewarrina properties (3)
• 29 Wilkinson Street, Alice Springs
• All Hallows, Bathurst
• Willow Bend Sports Complex
• Blighty dairy farm
• Kings Canyon Resort.

Equity changes

IBA’s ultimate goal in a number of its assets is to sell down its equity to its Indigenous partners so that in time the asset is totally owned or controlled by its partners. In 2008–09, the IBA Board agreed to sell down 50 per cent of its equity in a property in South Hedland to an Indigenous partner, in the expectation that the partner will have 100 per cent ownership of the asset in approximately two years.

Investment portfolio profile

IBA will consider investment opportunities in all industry sectors, except those that represent a level of risk that is considered incompatible with the protection of the capital base of the portfolio or that would lead to undesirable social outcomes. IBA prefers to invest in sectors where there is a clearly identifiable and acceptable level of risk, internal or partner expertise and no prior market failure.

IBA classifies its current investments into the following asset clusters (assets having common attributes):

• commercial property (office accommodation)
• manufacturing
• mining and mine services
• primary industries
• retail
• tourism and hotel accommodation (includes experiences).

IBA also has an opportunity to position itself in emerging sectors such as land management, renewable energy and the carbon market. Investment proposals come from either the private sector or the local Indigenous group, who may have been approached by a prospective developer.

If IBA does not have experience or internal capability in a sector or an investment, it engages industry experts to assist with due diligence and to act as independent and external directors on those particular assets until it develops the internal capability.

In 2008–09, IBA held investments in commercial property, tourism and hotel accommodation, primary industries, mining and mine services, manufacturing and retail. Table 3 shows the asset cluster and location for all investments held for all or part of the reporting year. A map showing the locations of all investments as at 30 June 2009 is at Figure 5.

IBA looks to diversify its portfolio not only by asset cluster, risk and reward, but also geographically on a state and territory basis and a metropolitan, regional and rural basis.

Figure 5: Principal investment sites at 30 June 2009

Commercial property

• 1. All Hallows Bathurst, NSW
  2. Commonwealth Centre South Hedland, WA
  3. Coomanoo Evans Community Centre Leonora, WA
  4. CPS Building Adelaide, SA
  5. Goldfields Building West Perth, WA
  6. Government Centre Katherine, NT
  7. Homestead Centre South Hedland, WA
  8. Huntlee Estate Hunter Valley, NSW
  9. IBA Building Kalgoorlie, WA
  10. Port Botany Transfer Station Matraville, NSW
  11. Scarborough House Woden, ACT

Manufacturing

• 1. Inverell manufacturing plant Inverell, NSW

Mining and mine svices

• 1. Australian Diatomaceous Earth
     joint venture Greenvale, Qld
  2. Carpentaria Shipping Services Bing Bong, NT
  3. Ngarda Civil & Mining Ltd Belmont & Wedgefield, WA

Primary industries

• 1. Blighty dairy farm Moama, NSW
  2. Cummeragunga Farm Barmah, NSW
  3. Indigenous Fishing Trust: abalone licence Port Fairy, Vic
  4. Indigenous Fishing Trust: mud crab licence Darwin, NT

Retail

• 1. Leonora Supermarket and Hardware Leonora, WA
  2. Tennant Food Barn Tennant Creek, NT
  3. Outback Stores Pty Ltd Berrimah, NT

Tourism and hotel accommodation

• 1. Cape Don Experience Arnhem Land, NT
  2. Fitzroy River Lodge Fitzroy Crossing, WA
  3. Gagudju Crocodile Holiday Inn Jabiru, NT
  4. Gagudju Lodge Cooinda Jim Jim, NT
  5. Holiday Inn Townsville Townsville, Qld
  6. Kings Canyon Resort Watarru, NT
  7. Mungo Lodge Mungo National Park, NSW
  8. Tjapukai Aboriginal Cultural Park Caravonica, Qld
  9. Wildman Wilderness Resort Mary River national park, NT

Table 3: Investments by asset cluster, 2008–09

Sector	Activity	Investment	Location
Commercial property	Currently under management	Scarborough House	Woden, ACT
		Port Botany Transfer Station	Port Botany, NSW
		Huntlee Estate	Branxton, NSW
		Katherine Government Centre	Katherine, NT
		CPS Building	Adelaide, SA
		Commonwealth Centre	South Hedland, WA
		Goldfields Building	Perth, WA
		Homestead Centre	South Hedland, WA
		IBA Building	Kalgoorlie, WA
	Divestment approved but not yet settled	All Hallows	Bathurst, NSW
		Coomanoo Evans Community Centre	Leonora, WA
	Divestment approved and settled	Willow Bend Sports Complex	Condobolin, NSW
		Brewarrina properties	Brewarrina, NSW
		29 Wilkinson Street	Alice Springs, NT
Manufacturing	Currently under management	Inverell Manufacturing Plant (new)	Inverell, NSW
Mining and mine services	Currently under management	Carpentaria Shipping Services	Borroloola , NT
		Australian Diatomaceous Earth joint venture	Greenvale, Qld
		Ngarda Civil & Mining Ltd	Pilbara region, WA (operations) Perth, WA (head office)
Primary industries	Currently under management	Cummeragunga Farm	Barmah, NSW
		Indigenous Fishing Trust–mud crab licence	Darwin, NT
		Indigenous Fishing Trust–abalone licence	Western Zone, Vic
	Divestment approved but not yet settled	Blighty dairy farm	Moama, NSW
Retail	Currently under management	Leonora Supermarket and Hardware	Leonora, WA
		Tennant Food Barn (new)	Tennant Creek, NT
Tourism and hotel accommodation	Currently under management	Mungo Lodge	Entrance to Mungo National Park, NSW
		Cape Don Experience	Cape Don, Cobourg Peninsula, NT
		Gagudju Crocodile Holiday Inn	Jabiru, NT
		Gagudju Lodge Cooinda	Jim Jim, NT
		Kings Canyon Resort	Watarru, NT
		Wildman Wilderness Resort	Mary River, NT
		Holiday Inn Townsville	Townsville, Qld
		Tjapukai Aboriginal Cultural Park	Cairns, Qld
	Divestment approved and settled	The Crossing Inn	Fitzroy Crossing, WA
Insurance	Divestment approved and settled	Centrum Insurance Brokers Pty Ltd	Ashgrove, Qld

IBA’s commercial property and tourism asset clusters represent the greatest proportion of its investments (Figure 6), the majority of which are in the Northern Territory, Western Australia and New South Wales (Figure 7).

Figure 6: Current investments, by asset cluster, number and percentage of total, 30 June 2009

Text description of Figure 6

Figure 7: Current investment, by location, number and percentage of total, 30 June 2009

Text description of Figure 7

IBA will consider investment opportunities anywhere in Australia and believes that it is important to ensure that its investments portfolio is geographically spread not only across states and territories, but also in capital cities, regional centres and remote locations. In some cases the presence of an IBA investment might be the only opportunity for Indigenous economic development to exist in that location. Figure 8 shows the proportion of IBA investments in metropolitan, regional and remote regions.

Figure 8: Current investments by geographical region, 30 June 2009

Text description of Figure 8

Commercial property

Commercial property is a key component of IBA’s portfolio. It maintains a balance between the risk and return of the other asset clusters. In the past, the Board had a strategy for IBA to maintain a 100 per cent equity holding in a number of commercial properties for liquidity purposes. With the proceeds from a number of divestments becoming available for reinvestment, that strategy was superseded. An effort is now made to ensure Indigenous co-ownership in all assets.

In 2008–09, property continued to be the mainstay of the portfolio, generating 52 per cent of IBA’s total portfolio earnings before interest and tax.

The forecast for this asset cluster indicates some weakening in yields. However, distressed vendors are expected to put a number of quality assets on the market in the forthcoming year. IBA will actively explore opportunities for investment in locations where it does not have a strong investment presence and where the investment has the potential to meet the development needs of a local Indigenous group or community.

All Hallows

The All Hallows main building is situated on Lloyds Road in Bathurst, New South Wales. The original two-storey structure dates from the 1880s. The property was donated to the former Aboriginal Development Commission in 1984 by deed of trust, and IBA is currently negotiating with various parties on its future development.

Commonwealth Centre

IBA purchased the Commonwealth Centre in South Hedland in 2000 as part of a strategy to invest in remote areas of Australia. The building accommodates the Regional Indigenous Coordination Centre, the local Centrelink office and various local Indigenous organisations. IBA is currently selling down 50 per cent of its equity to a local Indigenous corporation.

Coomanoo Evans Community Centre

The Community Centre in Leonora is tenanted by PEP Community Services and was acquired as part of the Leonora Supermarket purchase. IBA is currently negotiating the sale of the centre to the local council for use as a community centre.

CPS Building

The CPS Building is a modern office building in the City of Adelaide’s core office precinct. It was built in 1988, and IBA acquired the property in June 2003. The building is subject to a long-term leaseback to CPS Credit Union and provides a reliable income to IBA. IBA is currently in negotiations with local Indigenous groups to co-invest in the building.

Goldfields Building

IBA, with the Perth Noongar Foundation and the Noongar Country Economic Foundation, purchased the Goldfields Building in West Perth in November 2002. This asset is currently undergoing an upgrade of its forecourt area, which will enhance its street appeal and reduce ongoing maintenance costs.

Government Centre

Centrally located within the township of Katherine, approximately 300 kilometres south of Darwin, the Government Centre is a commercial property with ground floor and upper-level office accommodation. IBA purchased the building in June 2000 as part of its strategy to increase the geographical coverage of its investments.

Homestead Centre

IBA purchased the Homestead Centre, a retail and office complex in South Hedland, in March 1993, in association with the Port Hedland Regional Aboriginal Corporation. The Homestead Centre, which is operated as a body corporate, caters for 13 tenancies over 1,441 square metres.

Huntlee Estate

Huntlee Estate is a joint venture formed to develop a 1,750 hectare residential, lifestyle, commercial and conservation project in the lower Hunter Valley in New South Wales. IBA has established the Huntlee Estate Indigenous Participation Trust, which will give qualified Indigenous groups an opportunity to acquire a share in the project, and so derive significant long-term financial benefits.

IBA Building

The IBA Building in Kalgoorlie was only partially complete when IBA acquired it in 2003 from the administrator of the Goldfields Medical Fund. In early 2004, the building was completed to meet the requirements of the standards for Australian Government tenants. The local Indigenous Coordination Centre operates from the building.

Port Botany Transfer Station

The acquisition of the Port Botany Transfer Station enabled IBA to have a presence in New South Wales and gave Indigenous groups an opportunity to participate in a local investment.

Scarborough House

Scarborough House is a vibrant commercial building within the busy Woden town centre of the ACT. It is renowned for its eye-catching design and has maintained its NABERS Energy rating of 4½ stars. This asset benefits IBA’s Indigenous partners by providing them with an opportunity to invest in a large, attractive capital asset with relatively low levels of equity and risk exposure. It provides IBA’s partners with access to income and capital growth which can underpin the future financial structure of their corporation and their community.

Manufacturing

IBA’s purchase of the Inverell manufacturing plant was its first investment in manufacturing. Its decision to purchase it was part of a deliberate strategy to diversify the portfolio asset base and to secure an important regionally based asset.

Inverell manufacturing plant

The factory has been successfully manufacturing stockfeeds and pet foods for close to 20 years. The acquisition of this asset provides real employment opportunities for job-ready Indigenous people in the manufacturing and engineering trades.

Mining and mine services

Despite the mining industry being a volatile one and the barriers to entry considerable, IBA believes it can provide opportunities to new partners in this sector. Key success factors will be the engagement of capability partners, access and retention of a skilled workforce and the ability to secure contracts at sustainable and commercial rates at multiple sites. One of IBA’s major strengths is its relationship with Leighton Holdings, which has 56 per cent of the market share. Opportunities with Leightons and other potential capability partners are being pursued to replicate the Ngarda model elsewhere in Australia.

Australian Diatomaceous Earth joint venture

Greenvale, QLD

The Australian Diatomaceous Earth joint venture is a dormant investment. Due to the extensive capital expenditure required to commission a processing plant, IBA is considering its options in relation to this investment.

Carpentaria Shipping Services

Carpentaria Shipping Services is a joint venture between Mawa Riinbi Pty Ltd, representing the four language groups in the Borroloola region, IBA and P&O Maritime Services. Since commencing operations, Mawa Riinbi has used profit distributions to purchase some of IBA’s equity and has steadily increased its ownership level.

The business ships zinc and lead concentrate from the McArthur River Mine; barging it from the port of Bing Bong, in the Gulf of Carpentaria, to ships anchored 30 kilometres offshore.

Ngarda Civil & Mining Ltd

Ngarda Civil & Mining Pty Limited (Ngarda) is a service-based company providing earthmoving, civil engineering and contract mining services to the resources and construction sectors. The company has its headquarters in Belmont, Perth, while most of its business operations are located in the Western Australian Pilbara region, which is dominated by the iron ore, gas and oil industries. Ngarda is owned by the Ngarda Ngarli Yarndu Foundation, IBA and Leighton Contractors Pty Ltd.

While pursuing a commercial rate of return, Ngarda regularly achieves its target of an Indigenous employment rate greater than 50 per cent. This is a big challenge for any business in the remote Pilbara region, where many Indigenous people face significant barriers to education, and where English is often a second language. By upskilling its Indigenous employees, Ngarda creates a problem for itself, with many Indigenous employees leaving to further their new careers with other major mining companies such as BHP Billiton and Rio Tinto.

Primary industries

This industry is subject to more associated risks due to the unpredictable natural elements the industries rely on to prosper.

Blighty dairy farm

Blighty dairy farm, in south-western New South Wales, comprises 460 hectares of high-quality irrigable land able to carry up to 800 head of cattle. IBA is in the process of divesting this property as it has been unable to achieve the desired outcomes from its investment.

Cummeragunga Farm

IBA acquired Cummeragunga Farm in 2005. The property is a 398 hectare, mixed freehold farm adjacent to the Murray River near the town of Barmah in New South Wales. The farm consists of good quality land, part of which is suitable for irrigation through a water allocation from the Murray River. A local Indigenous organisation, Ulunja Incorporated, leases four hectares of the property to support its timber business. IBA has also been working with a local registered training organisation to develop and deliver training in commercial farming operations to the local Indigenous community.

Indigenous Fishing Trust: abalone licence

The aim of the Indigenous Fishing Trust is to acquire and hold quota and associated licences for the benefit of present and future generations of Indigenous Australians wishing to enter the fishing industry.

In December 2004, the Trust acquired its first quota and associated licence. The licence allows for an annual quota of abalone to be fished from the Western Zone of Victoria, which lies between Apollo Bay and the Victoria – South Australia border.

Indigenous Fishing Trust:
mud crab licence

In 2005, the trust purchased a mud crab licence which allows the harvesting of mud crabs in the Northern Territory. IBA currently leases this licence to local Indigenous fishermen.

Retail

Retail is a new asset cluster within IBA’s portfolio. It contains two assets, the Leonora Supermarket and the Tennant Food Barn in Tennant Creek. With the recent purchase of the Tennant Food Barn and associated retail shops, the focus will be on improving the bottom line of both assets, creating employment opportunities for the local Indigenous population and ensuring that the Indigenous partner is an active member of the managing board. IBA will also seek further opportunities in regional and rural centres where commercial rates of return can support Indigenous ownership.

Leonora Supermarket and Hardware

IBA acquired the supermarket in Leonora in September 2007. The township of Leonora, situated 230 kilometres north of Kalgoorlie, supports a population of 1,500 people. The Leonora Shire has a population of 4,190 and is the service centre for the mining industry, the exploration industry and the well-established pastoral industry.

The supermarket also operates a newsagency and sells a small range of hardware. Outback Stores Pty Ltd has been engaged to provide management services to the store. Some refurbishment of the store in 2008–09 enabled it to increase the range of goods for sale and improved its overall presentation.

Tennant Food Barn

In November 2008, IBA and Julalikari Council Aboriginal Corporation acquired the Tennant Food Barn. Julalikari represents 16 Indigenous groups in Tennant Creek and the surrounding Barkly Shire, and actively promotes the local Indigenous community through a wide variety of projects, including arts, tourism, and conservation.

Outback Stores Pty Ltd

Outback Stores is currently a wholly owned subsidiary company of IBA. It was established in 2006 to implement the Federal Budget measure ‘Strengthening Indigenous communities – improving the sustainability of community stores’. Outback Stores has an independent board consisting of recognised leaders in the grocery retail industry. Since its inception it has assumed management of 27 community stores – 22 in the Northern Territory, three in Western Australia, one in Queensland and one in South Australia.

Outback Stores provides store management services to Indigenous-owned community stores and ensures that the stores are able to meet the health and nutritional requirements of Indigenous populations through operational improvements. The company respects, and builds strong relationships with, the communities it works with, resulting in stores that people can take pride in and feel a part of.

During the 2008–09 financial year it was recognised that for Outback Stores to effectively achieve its goals it would require some constitutional changes. Subsequently, it was agreed that the company be transferred to the Department of Families, Housing, Community Services and Indigenous Affairs to facilitate the Government’s broader social objective of food security. The transfer of Outback Stores is expected to be finalised in early December 2009.

Tourism and hotel accommodation

The tourism and hotels asset cluster performed well overall despite the general downturn in tourist numbers, both domestically and internationally. The performance of the Kakadu properties has been particularly encouraging. Fitzroy River Lodge experienced a drop in visitor numbers
that was reflected throughout the Kimberley region.

The sector is volatile and sensitive to seasonal environmental factors: fuel costs, discretionary household spend, and exchange rate movements. The adjusted forecast is for some downturn in the short to medium term, with some destinations expected to hold steady.

All boards and management teams of the various assets are working closely together on cost management initiatives to maintain financial performance for the forthcoming year.

Cape Don Experience

In March 2007, IBA and the Djuldjurd Aboriginal Corporation purchased the business known as Cape Don Experience. The business provides a sports fishing and ecotourism experience in pristine waters off the Australian coastline.

Fitzroy River Lodge

The Fitzroy River Lodge was established in 1989. IBA became involved in the business in July 2001. At the same time, Leedal Pty Ltd, which represents local Indigenous groups, acquired a majority equity holding in the investment, with the remaining equity being held by industry partners. The lodge, which is built in the style of a pastoral homestead, includes 20 hectares fronting the Fitzroy River. It is often referred to as an oasis in the region. The lodge assists Leedal to subsidise the groceries sold at its supermarket, sponsor a children’s education program, supply computers for the school, support local sporting carnivals and provide opportunities for local Indigenous Fitzroy residents to travel.

Gagudju Crocodile Holiday Inn

The Gagudju Crocodile Holiday Inn at Jabiru, a two and a half hour drive from Darwin, is the only four-star accommodation within the World Heritage – listed Kakadu National Park. The hotel’s unique architecture– it is designed in the shape of a crocodile – attracts significant worldwide interest.

Gagudju Lodge Cooinda

Gagudju Lodge Cooinda (Cooinda), located at the southern end of Kakadu National Park, operates the highly successful Yellow Water Cruises. Cooinda also offers gorge and waterfall tours and operates the Warradjan Cultural Centre. IBA is negotiating a further equity selldown to its Indigenous partner. See ‘Gagudju Lodge Cooinda’, page 42.

Holiday Inn Townsville

In June 2008, IBA acquired the Holiday Inn Townsville. IBA has structured the investment to enable Indigenous participation at an ownership level and to leverage supplier, employment and training opportunities. The hotel, which is managed by InterContinental Hotels Group under a management agreement, is branded as a Holiday Inn.

A number of investment objectives have already been achieved for this asset in the short time IBA has owned it. These include an Indigenous trainee group working in the hotel, with several gaining full-time employment in hotel management, and IBA staff working with the local community to provide over 60 beds for a youth hostel. IBA staff, in conjunction with Arts Queensland, commissioned over 200 pieces of artwork to be painted by local Indigenous artists and displayed throughout the hotel. IBA has begun a hard and soft refurbishment of the hotel, which it expects to complete by September 2009. IBA is in discussion with a number of local groups in its search for an Indigenous co-owner.

Kings Canyon Resort

Kings Canyon Resort is located in a loop off the main highway running between Uluru and Alice Springs. The sensitively designed resort is situated seven kilometres from Watarrka National Park, home of Kings Canyon. IBA is looking to divest from this investment to allow for further investment in the Northern Territory.

Mungo Lodge

Mungo Lodge was purchased in October 2003. It is situated adjacent to Mungo National Park, within the Willandra Lakes World Heritage Region of New South Wales. The region was granted World Heritage listing in 1981 in recognition of its Indigenous heritage, archaeological values and natural landscape. The IBA Board’s decision to purchase this asset was motivated by a desire to preserve that significant cultural heritage.

Tjapukai Aboriginal Cultural Park

Tjapukai Dance Theatre was the first Indigenous tourist attraction in Australia. Born of a need to portray Indigenous culture with dignity and pride, the operation opened in a Kuranda basement in 1987. Tjapukai Aboriginal Cultural Park allows visitors to experience every facet of Tjapukai culture, as well as gain a greater understanding of the Tjapukai way of life and traditional practices. Tjapukai is one of the largest private employers of Indigenous people in Australia, employing approximately 80 Indigenous people. Tjapukai has won several state and national industry awards. In 2000, it was inducted into the Queensland Tourism Awards Hall of Fame and in 2004 it was named Australia’s best tourist attraction by the Australian Tourism Export Council.

Wildman Wilderness Resort

In December 2006, IBA acquired Wildman Wilderness Resort, in the proposed Mary River national park. The business requires extensive capital works to lift the property standard to a level that matches the natural beauty surrounding it and several exciting concepts have now been designed and scoped. Plans for the redevelopment are being finalised and works are expected to begin in late 2009.

Future opportunities

A number of emerging industries such as the land management and renewable energy sectors and the carbon market could offer some very positive social outcomes, including employment and skills transfer. IBA has begun to establish an internal capability to provide advice to Indigenous groups seeking information on emerging industries. While IBA’s role to date has been that of facilitator, it is considering whether to allocate a small portion of its investment portfolio to a number of proposals in such sectors.

Outlook

The 2009–10 FaHCSIA Portfolio Budget Statements targets shown in Table 4 will guide IBA’s performance in the next financial year.

As the global economy begins to show signs of recovery, IBA is well positioned to take advantage of several potential investment opportunities. With its proven record of successfully completing transactions, IBA provides the market with a high level of confidence that it remains an active investor. This, coupled with a number of Indigenous organisations having the capacity and willingness to invest, provides for an exciting outlook for the coming financial year.

IBA will continue to foster and further support its existing and potential joint venture Indigenous partners with financial and governance training while continuing its successful business mentoring practices.

Table 4: Output Group 1.1 key performance indicators

Key performance indicators	2009–10 target
Percentage return on investment	7%
Increase in new investments with Indigenous co-investors	3
Percentage increase in profit distribution to Indigenous partners	1%
Increase in percentage of Indigenous jobs created or supported by investment portfolio	1%