Exploring Opportunities for Indigenous MSMEs in Cultural, Creative, and Care Economies - Part 2 #TradeNotes
In the previous article, we highlighted that there is an opportunity in the demographic convergence of an aging general population and a youthful Indigenous population across the APEC region and that demographics will play a crucial role in shaping future interactions between Indigenous Peoples and the regions urban centres. In this article, we look more closely at the opportunities for Indigenous Micro, Small and Medium Enterprises (MSMEs) in that context and the importance of ramping up the cultural, creative and care sectors for the region’s future social and economic wellbeing.
MĀORI BUSINESS IN NEW ZEALAND
Māori entrepreneurship has a rich historical foundation and continues to play a vital role in shaping New Zealand's economy. While challenges remain, the steady growth of the Māori economy and the increasing number of Māori-owned businesses offer promising prospects for the future.
Māori are the earliest entrepreneurs in New Zealand.[1] Before colonization, we engaged in intertribal trade, recognizing the comparative advantages each tribe had based on the resources available in our respective locations across the motu (land).[2] However, our tribal economies were severely devastated by colonization, resulting in their near annihilation.
The Road to Rebuilding
The process of rebuilding our tribal economies has been a long and challenging journey, spanning almost two centuries.
Since 1989, New Zealand has made some progress through commercial redress as part of the Tiriti o Waitangi (Treaty of Waitangi) settlements process,[3] amounting to approximately NZD$3.5 billion.[4] It is essential to note that this sum is only a small fraction of the estimated value of NZD $69 billion in Māori assets.[5]
Growth of the Māori Economy
Despite these challenges, the Māori economy has shown steady growth, increasing by more than 5 percent annually.[6] This growth is attributed to the increase in assets and incomes.[7] Projections from New Zealand Trade and Enterprise (NZTE) suggest that by 2030, the value of Māori assets could grow from NZD$50 billion to an impressive NZD$100 billion. Furthermore, NZTE anticipates that Māori will invest approximately NZD$1.5-$2 billion annually over the next 10 to 15 years.
Iwi and Commercial Activities
Iwi (tribes) have played a crucial role in growing the financial value of their tribal assets through their commercial activities. Along the way, they have also allocated resources for social, cultural, and environmental initiatives, thereby benefiting their communities and the broader society.
Diversification of Māori Businesses
Small business makes up 97 percent of all firms in New Zealand which are dominated by self-employed enterprises (70 percent), followed by small enterprises, which account for 27 percent of the total enterprise count and further followed by medium enterprises which account for 2 percent.[8]
An increasing number of Māori individuals have ventured into entrepreneurship by establishing their own businesses. There are approximately 23,000 economically significant Māori-owned businesses.[9] Of these, 40 percent are owned by wāhine Māori (Māori women), indicating the growing role of women in Māori entrepreneurship.[10] Additionally, the number of self-employed Māori increased by 25 percent between 2013 and 2018. Currently, there are 38,200 Māori sole traders, representing 14.7 percent of all sole traders in New Zealand.[11] This demonstrates that more than 60,000 whānau Māori (Māori families) are generating revenue and income from business activity and that there is a strong entrepreneurial spirit within te ao Māori (the Māori world).
Self-employed Māori mostly operate in Construction (19 percent), and Professional, Scientific, and Technical Services (10 percent).[12] However, the financial and insurance services industry saw an impressive 33 percent increase in the number of Māori businesses from 2020 to 2021.[13] Similarly, the health care and social assistance industry experienced an 18 percent rise in Māori-owned businesses during the same period.[14] This signals that while primary industries remain a core part of the Māori economy, that more Māori are venturing into more diverse sectors bringing with them their cultural worldviews as part of their operating model, and their services.
Access to finance
A report commissioned during APEC21 by Westpac New Zealand, notes that in the course of their development, many small enterprises require financial assistance at various stages of their business journey and that in New Zealand, the avenues for obtaining such funding are somewhat limited, with commercial banks serving as the predominant source of finance.[15] It notes that there are only a few alternative lending institutions that offer affordable financing options and that the equity and angel investment market in New Zealand is relatively undersized. Commercial banks often perceive lending to small businesses as riskier compared to other sectors such as housing. Consequently, they frequently require property to be used as collateral for business loans. However, lower home ownership rates among the Māori population result in fewer available properties to be used as collateral for business lending, further exacerbating these challenges.[16]
The challenges facing Māori MSMEs in accessing finance in New Zealand are multifaceted and rooted in socioeconomic disparities and structural barriers. The inability to access funding or capital severely limits the growth of Māori MSMEs and inhibits them from reaching their full potential.[17] The core challenges identified in the Westpac report reveal the intricate interplay of income, credit options, and home ownership in Māori MSME access to finance and these are summarised below:
Credit Access and Income Levels: Access to credit in New Zealand is categorized into three tiers, encompassing various financial entities such as registered banks, finance companies, and credit unions. However, the income distribution among the Māori workforce poses a significant hurdle. About 15 percent of Māori workers earn below NZD$15,000 annually, a bracket that traditionally does not qualify for any standard credit options.
Credit Options and Income Requirements: Personal loans and mortgages, two crucial forms of credit for MSMEs, have relatively high-income requirements. Personal loans typically require a stable annual income of over NZD$35,000, while mortgages tend to require an income above NZD$60,000. Additionally, lenders also scrutinize credit scores and financial stability. This poses a challenge for Māori MSMEs as only 23 percent of the Māori workforce earns above NZD$60,000, thereby potentially disqualifying the majority from accessing mortgage financing.
Socioeconomic Disparities: The income disparities between Māori and non-Māori further compound the issue. In 2018, 43 percent of working-age Māori earned NZD$20,000 or less, compared to only 33 percent of non-Māori. This discrepancy is attributed to a combination of factors, including the higher representation of young Māori in part-time or entry-level positions and the prevalence of low-skilled labour among the Māori population. Furthermore, only 10 percent of working-age Māori earned above NZD$70,001 in 2018, compared to 18 percent of non-Māori. At every age level, Māori receive a much lower income than non-Māori.[18]
Home Ownership: Home ownership is a critical component of collateral for business loans and is significantly lower among Māori. As of 2018, only 31 percent of Māori owned homes, compared to 55 percent of non-Māori. Despite a 2 percent increase in Māori home ownership between 2013 and 2018, it remains considerably low. Collective ownership of land also prevents Māori from using land as security.
The growth and contributions of Indigenous businesses in Australia and Canada share some key similarities that also resonate with the experiences of Māori. In Australia, there has been a significant increase in the number of Indigenous businesses and their contributions to the economy, amounting to between AUD$8.5 billion to AUD$12 billion. If the number of Indigenous businesses were proportionate to the Aboriginal and Torres Strait Islander population, the contribution could potentially reach AUD$64 billion.[19] In Canada, there are more than 50,000 Indigenous businesses comprising 1.4 percent of all Canadian SMEs, contributing CAD$50 billion to the economy.[20] Like Māori MSMEs most Indigenous business owners rely on personal savings or bootstrapping to start a business rather than bank loans.
Indigenous people in Australia, Canada and New Zealand are making substantial contributions to our respective economies despite facing barriers to funding and resources. The growing presence and success of Indigenous-owned businesses is an encouraging sign for the economic self-determination of Indigenous communities in these countries, but more work is required to empower Indigenous MSMEs across the whole APEC region.
Public Perception
Another challenge confronting Indigenous MSMEs is a prevailing misconception and persistent undervaluing of our businesses that are often dismissed as unsophisticated, or economically “insignificant”. This erroneous perception has detrimental consequences, as the focus of policy and support initiatives remains disproportionately inclined towards larger exporting focused enterprises who possess considerable lobbying power, enabling them to advocate for and secure economic and investment policies that are preferentially tailored to their interests. Consequently, Indigenous MSMEs find ourselves navigating a landscape characterized by unequal access to resources and opportunities, further exacerbating the difficulties we already face. This oversight neglects the richness of our cultures, traditions, and knowledges within our businesses and the goods or services we provide. It's time to shift that narrative.
Public Policy
In New Zealand, our economic policy heavily supports exporters, who benefit from tariff eliminations and broader market access through our Free Trade Agreements and backing from institutions like NZTE and the Ministry of Foreign Affairs and Trade. However, this approach predominantly favours larger exporters in primary industries, sectors where New Zealand already excels. While there's an emerging emphasis on the diverse technology sector with export potential, smaller businesses, particularly working proprietors and sole traders, often feel sidelined.
This export-centric model poses challenges for Māori MSMEs, who operate outside the primary sector. These businesses already grapple with income disparities, restricted credit access, and low home ownership rates, which impact their ability to secure capital to flexibly grow and scale their businesses.
For a more equitable economic landscape in New Zealand and across APEC, it's imperative to adopt a balanced strategy. This strategy should cater to both large exporters and MSMEs, emphasizing the unique hurdles Indigenous MSMEs face. By broadening support to Indigenous MSMEs in cultural, creative, and care sectors, APEC can foster inclusivity, nurture Indigenous business growth across varied sectors, and offer diverse opportunities for aspiring Indigenous entrepreneurs. It would also work toward addressing the challenges confronting the region specifically the demographic crisis of an aging general populace, and the impacts of rapid urbanization.
The Opportunity in the Three C's: Culture, Creativity, and Care
Culture and Creativity: New Zealand's cultural sector spans industries such as film, music, broadcasting, design, digital technologies, built heritage, and the arts. This sector has consistently showcased commendable performance, rivalling, or surpassing other sectors in income, employment, and added value. It plays a pivotal role in forming New Zealand's identity and boosting its economic health.
South Korea's substantial investment in its cultural and creative sectors led to a whopping USD$114 billion in sales. Imagine a similar surge for Indigenous economies with appropriate investment.
Digital Technologies: This sector has been a catalyst for economic growth, expanding at a rate double that of the overall economy and contributing NZD$7 billion to New Zealand's GDP. The sector's growth underscores the importance of investing strategically in digital technologies.
Health Care and Social Assistance: Representing a cornerstone of New Zealand's economy and society, this sector comprises over 12,000 limited liability companies and more than 8,000 individual proprietors. As of February 2022, it remains the country's largest employer with 274,300 workers, marking a 4.2 percent rise from the previous year. Nevertheless, a noticeable data gap exists regarding Māori representation, necessitating deeper exploration, with great potential.
Care Economy and Indigenous Opportunities: Indigenous Peoples can play a significant role in enhancing and transforming the care economy. Our cultures are underpinned by our reverence for our elders and our children. The care economy encompasses caregiving and support services, including childcare, elderly care, healthcare, and other forms of social assistance including related technologies and is pivotal for nurturing compassionate and sustainable economies throughout the Asia Pacific. There's a significant opportunity for New Zealand and other economies to bridge the support gap between exporters and MSMEs services providers by mirroring successful policies such as, in the case of New Zealand Whānau Ora, and investing in the care sector. Such investment, aligned with Indigenous Worldviews, could bolster Indigenous-owned businesses, especially considering their youthful demographic. This approach could also tackle challenges posed by the regions aging population while fostering ties between younger and older generations through diverse, culturally aware care initiatives.
For Indigenous Peoples, these sectors are intertwined. We naturally harness our creativity to address challenges, drawing from our rich experiences across millennia. Our enduring cultural worldviews anchor us, even amidst these challenges, and connect us to our traditional knowledge and values. At our core, we prioritize the well-being of our culture, our environment, and our community. This is fundamental to our identities and perspectives. It is paramount then for policymakers to allocate resources to support Indigenous services sector businesses, promoting a balanced and thriving cultural, creative and care economy. By adopting a holistic strategy, integrating Indigenous Worldviews, and appreciating cultural diversity, we can forge a cohesive society, address demographic challenges, and optimize sustainable economic health both in New Zealand and across APEC economies.
Footnotes
[1] Te Puni Kōkiri (2020) “Te Matapaeroa” <https://www.tpk.govt.nz/en/o-matou-mohiotanga/maori-enterprise/te-matapaeroa-2020>
[2] Hazel Petrie (2002) “Colonisation and Involution of the Maori Economy” <https://news.tangatawhenua.com/wp-content/uploads/2010/10/24Petrie75.pdf>
[3] For information on Treaty Settlements see: <https://www.govt.nz/browse/history-culture-and-heritage/treaty-of-waitangi-claims/settling-historical-treaty-of-waitangi-claims/> and to understand the distinction between s and the two texts of Te Tiriti o Waitangi (te reo Maori text version) and The Treaty of Waitangi (English text version) see: Te Papa <https://www.tepapa.govt.nz/discover-collections/read-watch-play/maori/treaty-waitangi/treaty-close/two-parties-two> ; Waitangi Tribunal <https://www.waitangitribunal.govt.nz/treaty-of-waitangi/meaning-of-the-treaty/>
[4] KPMG, Maui Rau 2022 <https://kpmg.com/nz/en/home/insights/2022/09/maui-rau-2022.html>
[5] KPMG above n 4
[6] KPMG above n 4
[7] KPMG above n 4
[8] Westpac (2021). The Māori Economy: Obstacles and Opportunities prepared by BERL and OpinioNative. <https://www.westpac.co.nz/assets/About-us/sponsorship/documents/The-Maori-economy-obstacles-and-opportunities-Westpac-NZ-Oct-2021.pdf>
[9] TPK above n 1
[10] TPK above n 1
[11] TPK above n 1
[12] Westpac above n 8
[13] Stats NZ <https://www.stats.govt.nz/information-releases/tatauranga-umanga-maori-statistics-on-maori-businesses-2021-english/>
[14] Stats NZ above n 13
[15] Westpac above n 1
[16] Westpac above n 1
[17] Westpac above n 1
[18] BERL see n 1 article
[19] PWC on Indigenous Business in Australia <https://www.themandarin.com.au/211170-the-economic-contribution-of-indigenous-business-sector-is-growing/#:~:text=We%20estimate%20their%20collective%20contribution,of%20Australia's%20GDP%20in%202021>
[20] Jane Daly “Building Trust with Indigenous Businesses” <https://www.edc.ca/en/article/building-relationships-with-indigenous-businesses.html#:~:text=In%20Canada%2C%20there%20are%20more,(Census%20Canada%2C%202020)>
