Indigenous entrepreneurs want a bigger piece of energy contracts

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When Mike Deranger set up his teepee last month at the site of a hunger strike on the side of Highway 63, which leads from Fort McMurray, Alta., to the oil sands, he was protesting what he and others say is an Indigenous procurement system that does little to advance economic reconciliation.

The problem, they say, is a lack of transparency and oversight combined with barriers faced by Indigenous entrepreneurs when trying to access capital and a system that, in some cases, pits individual business owners against large First Nation development corporations.

Ken Coates, a professor emeritus of public policy at the University of Saskatchewan, also points to what he calls “redwashing,” in which firms partner with a First Nation or an Indigenous representative in order to gain contracts from large companies or governments that have mandated minimum Indigenous spends.

“The new procurement requirements in place are designed to give Aboriginal companies a head start,” but there are numerous examples where companies present dubious claims of Indigenous status, Prof. Coates said.

“And that kind of stuff is really, really upsetting.”

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Mr. Deranger calls them “pretendians.” His company, Derantech Welding Ltd., does mechanical work, maintenance and heavy equipment repair in the Fort McMurray region.

He has been in business for more than 20 years. As oil companies have boosted their commitment to contracts with Indigenous companies, he said, he has seen more multinationals pursuing joint ventures to get in on the action. The problem, he said, is that nobody is really policing it.

“In the last 10 years or so, things went off the rails. So the focus is no longer on building Indigenous companies … it went to just getting the job done and hiring these big companies that now self-identify as Indigenous or have become Indigenous partners,” he said.

Mr. Deranger said more and more Indigenous entrepreneurs are being pushed out of the market as a result.

“It’s not working to the benefit of our Nations. They aren’t getting ahead the way they should be,” he said.

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Raylene Whitford, a director of Canative Energy, which works with Indigenous communities affected by the energy sector, has also seen how mandated Indigenous procurement minimums have resulted in “performative partnerships,” in which First Nations see limited financial benefits from resource projects.

Some companies might sign a $100-million contract with an Indigenous joint venture partner and promote the contract in their sustainability report and on their website, she said, “but they don’t acknowledge that only 2 to 3 per cent of that actually flows to the Nation that is a part of that partnership.”

As a result, she said, First Nations don’t receive their expected returns – even as corporations report massive profits.

Jennifer Cooper, spokesperson for Indigenous Services Canada, said in an e-mail that the agency has heard from consultations that joint ventures are a beneficial and effective way for Indigenous businesses to operate when they are thoughtfully and effectively managed.

“Through joint ventures, Indigenous businesses can partner with other businesses, including non-Indigenous businesses, to increase their ability to compete for contracts,” Ms. Cooper said. She added that all businesses on the Indigenous Business Directory must provide documentation demonstrating at least 51-per-cent Indigenous ownership and control, such as shareholder information and corporate governance documents.

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Ms. Whitford worries that the shift toward awarding contracts to community-owned organizations, as opposed to individuals, is being interpreted as a proxy for consent or even support for a project.

But to muddy the concept of consent risks undermining Indigenous people’s rights, she said, which sets a dangerous precedent.

Ms. Whitford believes the solution is to educate industry as to what consent actually is and who can give it, combined with tighter regulations that standardize corporate reporting and make it more transparent.

Both government and industry also need to take a more rights-based approach to major projects, she said.

“In an ideal world, all resource-based companies – and any company that has a footprint on Indigenous lands, whether it’s Canada or South America – would unequivocally commit to obtaining free platform consent. But I don’t know if I’ll ever see that in my lifetime.”

Prof. Coates acknowledged that there can be tension between individual entrepreneurs and First Nation development corporations.

Governments and companies tend to gravitate toward those corporations because of their demonstrable ties to an Indigenous community, even when the terms of an agreement don’t necessarily benefit a First Nation as much as they could, he said.

But some are doing things differently. He pointed to the English River First Nation, outside Saskatoon, which set up the Des Nedhe Development Corp. in 1991.

Jordan Baptiste is the president of Creative Fire, one of a number of companies under the Des Nedhe umbrella. Like Prof. Coates, he has witnessed what he calls the “rent-a-feather” phenomenon of dubious joint partnerships just to secure contracts under Indigenous spends.

Part of it, he said, boils down to companies’ desire to mitigate risk – which also plays into why they tend to lean toward First Nation development corporations instead of individual entrepreneurs.

“English River has always been quite innovative and forward-thinking,” he said. “About 35 years ago, they decided to fully purchase a construction company to put them in control of their destiny.

“Instead of having the relationship be between a construction company and the proponent, it actually becomes a relationship directly between the proponent and the community itself.”