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STANDING COMMITTEE ON ABORIGINAL AND TORRES STRAIT ISLANDER AFFAIRS - 22/07/2009

ACTING CHAIR —Welcome. I remind you that these are formal proceedings of parliament. We ask that everything you say is factual and honest. It is a serious matter to attempt to mislead the committee. Everything you say does assist us in our work to make improvements around the government’s administration of community stores. Everything you say today becomes public and transcripts are available upon request. We have read your submission and the media release. Would you like to make a brief introductory statement about the reasons for addressing us today?

Mr Taylor —Thank you for the invitation. Meertens is a specialist insolvency and reconstruction firm with two offices in Darwin and Adelaide. We have extensive practical experience dealing with stores in financial difficulty. I am presently the administrator of the following stores: Pirlangimpi on Melville Island, an ALPA store; Beswick, Barunga and Bulman in Arnhem Land which Outback Stores manage; and Barunga Council at Elliott, where I formerly operated the store and closed it. I am the former ORIC special administrator of Mimili Maku, which is in the APY Lands. I introduced Outback Stores, in conjunction with the community and ORIC, to manage that store.

We have seen stores at various stages of their life cycle—before they are in trouble, when they are in trouble and when new managers are needed. We have negotiated management agreements in conjunction with the various store committees with both ALPA and Outback Stores. We support community ownership of stores and the ALPA and Outback Stores management models. We understand the nutritional policies of Mai Wiru, Hollows and others. We see that policy as laudable policy but not an answer to the management of stores. We strongly support the further development of stores and are heartened to think that the committee also agrees that they are an essential service in these communities. Well-run stores are more than just a store; they provide significant local employment and they are real jobs, as I noticed ALPA talked about today—and Outback Stores say the same.

These stores should have a takeaway and they should have a bakery. They sell fuel. They are often the financial services centre. They have the only ATMs in communities and they provide EFTPOS facilities. They should make a profit or a surplus; they should not be run on a break-even basis. They need to have reinvestment. In two of the communities we run the club, which is the alcohol outlet—at Pirlangimpi and at Beswick. We have experience with ALPA running Pirlangimpi’s club and with Outback Stores at Beswick. These clubs function well and are profitable, and the community takes great pride in ownership and the stewardship of the alcohol issues associated with them.

ACTING CHAIR —Where are the closest alcohol outlets to those two communities?

Mr Taylor —Pirlangimpi is on Melville Island. It is the only alcohol outlet in the community. The nearest one would be Milikarpiti and then Nguiu over on Bathurst Island. In Beswick, the nearest alcohol outlet would be Katherine. Barunga does not have an alcohol outlet, and that store is very close to Katherine and suffers as a consequence of that closeness. Barunga was interested in developing a club, but there have been philosophical issues with the NTER and also with Outback Stores in that regard. Both ALPA and Outback Stores have issues with selling alcohol; but, where they have inherited a club, they do.

In our experience the major difference between Outback Stores and ALPA is that ALPA is 100 per cent Indigenous owned and it has a significant amount of street credibility when it is invited into these communities. Outback Stores are a fine operation; however, in our experience on the ground they suffer from ignorance and from a taint associated with the emergency response. People see them as coming along as part of that, and it makes life a little bit difficult for them at times. They need to do a bit more explaining than perhaps they might otherwise need to.

The other really interesting issue is that Outback Stores provide financial support for the stores as part of the Northern Territory response. They can only provide that in the Northern Territory. So, for example, in Mimili, which was in the APY Lands, Outback Stores were running that store but they had no financial capacity to support that store, even if it was support in terms of restructuring the store to get it to be viable. As it turned out with Mimili, a way was found around the problem, but it was not at all easy and it took some time.

ALPA have no desire, in our experience, to provide financial support to stores or to restructure them. They are very choosey about the stores that they take on. As you heard today, they have a set of criteria and they stick to the knitting very closely. It is because, as we understand it, they are not prepared to risk their capital and the success of what is a very substantial business propping up a non-viable store.

I am happy to talk to the committee about our experiences on the ground with the store committees, the various operating models and the financial train wrecks that some of these stores are.

ACTING CHAIR —Thank you. If I could kick off, we sketched out some work in Broome yesterday, where a basket survey was done by one of the local cultural health groups, a NACCHO funded organisation, and they were able to look at baskets of prices according to remoteness of the community. From that we derived a structure that effectively, just on a graphic, indicated the diminishing size of a community and the increasing remoteness of a community, with both causing potentially an increase in costs per unit and making running of a store less and less efficient as you become a smaller community and a more remote one. They are able to plot different communities on there and show that some were above the line and some below. Obviously it is a bit more of an aggregated market here in the NT than it is in WA, where you are all over the place doing many different things and applying different models and there are a whole lot more solo stores to be found. Is there any way, from your perspective, we can start to identify and have an early warning of stores falling into distress long before they collapse and lead to significant social pain?

Mr Taylor —I think there are a variety of things that can be done. You have the government business managers, who are closely associated with the activities in these areas. You have all the fine people in FaHCSIA and elsewhere that are providing program funding agreements to these communities and understand what is going on on the ground. You have ORIC. I know the committee has heard from Anthony Bevan, the registrar, about the governance training. ORIC is very actively involved in these issues as well. The issue with ORIC is that not all of the stores are Aboriginal corporations. As the committee is aware, you get incorporated associations, companies, trusts and all sorts of things. There are a number of ways that you can identify impending doom. Probably one of the simplest ways is to talk directly to the creditors. The independent grocers, Metcash, supply a large number of remote community stores. If they are not getting paid they know there is a problem and they stop supply. They just will not put food on the truck if they are not getting paid.

Mr Reid —Another issue might be the lack of statutory reporting. If there are a number of years where they have not lodged financial statements or the like, that can provide evidence of lack of proper governance and that can be a cause for concern. So by the time you actually go in there and get a proper handle on what the financial position is then you can just discover, as you said, a basket case.

Mr TURNOUR —Thanks for coming along today. In your opinion, what is the role of government in community stores? Are they an essential service, are they a commercial operation? What is your thinking, your experience?

Mr Taylor —We think they are an essential service but they should be sustainable as part of that process. We think they can be sustainable in the right dynamic. You correctly identified remoteness and community numbers. There is a real problem with non-viable stores that are small. We saw one in the Kimberley where there are 80 people in the community during the dry season and everybody moves out during the wet. It had a store and it was just not viable. Those stores are just doomed to be financially propped up forever unless somebody can find a way around the problem.

Mr TURNOUR —How is that store being propped up?

Mr Taylor —Through Outback Stores.

Mr TURNOUR —But they are supposedly running a model where they are supposed to be commercially viable. They are getting support through the federal government and through the Northern Territory intervention.

Mr Taylor —We know nothing about the internal operations of Outback Stores but we do know that they have funding certainly within the NTER to support stores financially. Outside of that, it is difficult. What often happens with Outback Stores is that their management fees are not paid. Outback Stores charge a fee to manage these stores. If the store is not viable, Outback Stores is incurring credit with all the suppliers. It pays the suppliers but does not pay itself.

Mr TURNOUR —I am aware of some of these issues that you have touched on. I suppose the issue then comes down in terms of how you get a government policy response to the grey area of where you are stifling innovation and the community’s ability to meet their own needs through effectively providing government support, and then when a community is 200 or 300 they do not get any support because they have got a store that is commercially viable and the whole issue of access, equity and fairness associated with that. Have you got any comments on how we deal with those issues?

Mr Taylor —We have seen in Arnhem Land the bus operation that has just started there. I do not know whether you have caught up with that. The Northern Territory government has a bus running from Beswick through Bulman and Barunga into Katherine. It starts very early in the morning so that people can get into Katherine from the communities for work and then go back in the afternoon. People can do their shopping on the bus. It has got a refrigerated component in it. That is one way of dealing with it.

Mr TURNOUR —But that is a bit different from somebody living in an isolated community out the middle of nowhere of 80 people where you do not get a bus to work anywhere.

Mr Taylor —I would suggest to you that I do not think those communities are viable for a store. Irrespective of whether it is in Indigenous community or a non-Indigenous community, if you have got 80 people there, you cannot expect to have a supermarket. It is just that simple.

Mr TURNOUR —So the expectation that they continue to ask for a supermarket effectively comes to the sustainability of longer-term viability of the community.

Mr Taylor —Yes.

Mrs VALE —In your experience of dealing with this unique area of retail, do you have any messages you would like the government to know? This is being recorded and will be reported upon, and we very much value your guidance.

Mr Taylor —In our view, the ALPA and Outback Stores models are appropriate and should be supported and have continued support. You see some very strange things in these remote communities at times with these stores. I know the committee has heard all about this before, the nepotism that you see there and all the issues that you see. Some of these stores are run appallingly because good people will not go to these remote areas and you get this boom-bust cycle with these stores. We think that having well-trained, well-resourced store managers like ALPA and Outback Stores is a very good idea. The IT side of it, they both have Grocery Manager, which is an industry standard package, which dovetails in with the ALPA food card that the committee heard about. As I am sure you have heard, some of the stores are just terrible and it is a good thing that ALPA and Outback Stores are addressing these issues.

Mr TURNOUR —And you would support a continuation of licensing in remote community stores?

Mr Taylor —I am not sure that necessarily licensing is the answer. What happens as part of the licensing process is that there is an inquiry into the financial status and standing of the store. I think that is the value that is obtained, not necessarily the licence per se.

Mrs VALE —It is the process, is it?

Mr Taylor —It is a process of having an independent person. In the case up here I think Deloitte did a lot of the work where they seconded professional accountants who went out and looked at these stores.

Mrs VALE —I suppose the licensing does offer a very clear and transparent benchmark.

Mr Taylor —That is true.

Mr TURNOUR —I suppose the issue, though, ALPA is a different story but Outback Stores are getting support from government to provide services into some non-viable areas at the moment. The issue is about when they are expanding into direct competition with other operators who may not be getting any government support. The issue is around government intervention through licensing to ensure that stores are meeting their obligations rather than necessarily providing a subsidised system to a corporate model, whether that is like Outback Stores. Do you see what I am getting at? Concerns have been raised in terms of, for example, in Queensland where there are other people operating a corporate model and Outback Stores having government support and then coming into communities and seeming to be potentially competing against stores that do not have any government support.

Mr Taylor —It gets to the issue of competitive neutrality and such other issues. But some of these stores that are privately run, and I cannot speak of any in Queensland, are run very badly. They do not have an appropriate food mix, there is no food for children in some of the stores. They are full of high sugar cola.

Mr TURNOUR —Is the appropriate way if they can turn around and say, ‘Well, if you gave me the subsidy you give to Outback Stores on improved my operation.’ Is the appropriate way to address that through a licensing framework which says, ‘You are not up to scratch and therefore you are not going to get a licence’? You effectively said you did not necessarily think that licensing is the way to go, Outback Stores is the way to go. If Outback Stores are getting government subsidies to deliver an improved store service in certain situations through infrastructure subsidies for refrigeration improvements and those sorts of things and these other community stores do not have the option to access that, is that an unfair playing field?

Mr Taylor —On one view of it it might be, but on the other view the policy outcomes in terms of nutrition and the benefits that accrue to the community from having a well functioning store I think outweigh those considerations.

Mr Reid —That situation would probably apply in the larger areas like an Elliott, where there are three or four businesses and they can do that. But typically the communities that we have dealt with have just had an Indigenous owned store enterprise without any real competition other than the less remote, where the major population centres can provide the competition.

ACTING CHAIR —Our understanding is that 86 of 92 community stores in the prescribed area are now licensed. When you say that there are still privately run stores that are of concern, they are unlicensed?

Mr Taylor —The licensing is only part of the NTER. For example, in the APY land the stores are not licensed.

ACTING CHAIR —I might have missed this, but you would support the extension of the process leading to licensing throughout that region.

Mr Taylor —Yes, I think that the sound financial functioning of these stores is absolutely critical. These are essential services and they need to be run properly. The inquiry that goes with the licensing is the benefit, in my view, not necessarily the licence per se.

ACTING CHAIR —Together with Grocery Manager you are fairly confident that within those 86 stores currently being licensed there are not glaring degrees of corruption, mismanagement, embezzlement, standover tactics—all the things we used to associate with community stores?

Mr Taylor —I cannot speak for those stores. I do not know. We can only speak for the ones we have seen. I do not know about the others.

ACTING CHAIR —Were you seeing that when you arrived at some of these stores that were already licensed and in theory should have been okay?

Mr Reid —Some of the stores we have been into have already been licensed but we have not been involved in the actual process of how they go about making the assessment, so it is hard for us to say whether they should have formed a different conclusion. Certainly they have been licensed stores but they have had financial difficulties, which has led to our appointment.

Mr Taylor —So I do not think the licensing is necessarily a guarantee of financial viability.

Mrs VALE —Sometimes it can be the exigencies of the moment, and how people respond to them at any given time.

ACTING CHAIR —Thank you very much. We appreciate your time out of your busy schedule.

Resolved, on motion by Mr Turnour:

That the committee authorise the publication of the evidence given to us today, including publication of the proof transcript.

ACTING CHAIR —I thank everyone for their attendance at our hearing. I declare the meeting closed.

Committee adjourned at 5.16 pm