Ranjan Rajagopal On The Challenges & Opportunities For Employment-Focussed Social Enterprises

Ranjan is a seasoned General Manager and an experienced legal practitioner with over 15 years’ experience in corporate/commercial, engineering and infrastructure industries, including as General Counsel for ASX listed companies.

Ranjan is currently the General Manager of Bama Services (a leading Indigenous owned civil contracting, building and construction and facilities maintenance business) and General Manager of Cape York Enterprises (an investment committee established to originate, develop and incubate Indigenous businesses of scale in order to deliver economic development to the Indigenous people of Cape York).

Ranjan discusses some of the core challenges for Indigenous business in Australia and provides insights into opportunities for social entrepreneurs and government, whilst reflecting on what could be improved.

Highlights from the interview (listen to the podcast for full details)

[Tom Allen] - Could you please share a bit about your background and what led you to working in the social enterprise sector?

[Ranjan Rajagopal] - Sure, Tom. As you mentioned in the opening, my background professionally has been in the legal sphere. I have over 15 years in that sector. Started off in Sydney working for a couple of large CBD firms, moved into the in-house role, working for a couple of ASX listed companies, and then about three years ago I was presented with an opportunity to join Cape York Partnership.

In terms of what led me into the social enterprise sector, as a lawyer, I always loved representing and advocating for the underdog. What I mean by that is really those stakeholders who are in positions of weaker bargaining power, which usually meant less financial capital available, but yet had a stronger moral or a legal position. When the opportunity to join Cape York Partnership came up, it was almost too good to say no.

One of my roles is General Manager of Cape York Enterprises, which is effectively an investment committee, and the mandate is really to provide meaningful and sustainable employment and career opportunity to the disadvantaged and previously long-term unemployed Indigenous people of Cape York.

Bama Services is one of those enterprises which we had established, and when I started, it was very much in a startup phase. The aspect of the opportunity that was most attractive to me was the fact that I would be working with and representing what I believed to be the most marginalised and discriminated demographic of the population, i.e. the true underdog in many respects.

To put things in perspective, Tom…

Indigenous people represent only about 3% of the country's population, and yet are overrepresented in our country's prisons as well as in unemployment statistics. In Cape York alone, 60% of the population in Cape York identify themselves as Aboriginal or Torres Strait Islander, and of that, 62% are unemployed.

Wow. That's a huge statistic, isn't it?

Yeah, absolutely.

It's unacceptable, to be completely honest. But I think that's where the real strength in your role can come out and the opportunity arises for Bama, right?

Oh, absolutely. I guess one of the big things that we focused on is to actually close that unemployment gap, to close that disparity. Like you said, it's unacceptable, so what do we do about it? Cape York Partnership decided that we have to take matters into our own hands—this is from the Indigenous people's perspective—and do something about it rather than waiting for government to act.

So as General Manager then, I'm sure you've come up against quite a few key challenges, but what have some of these been when turning Bama and Cape York Partnership into one of Queensland's social enterprise successes?

The challenges are numerous, but I guess they can be summarised in possibly two streams. The first stream is just commercial. That's probably the biggest challenge. The second one is actually the social impact nature of it.

So, within the commercial context, the challenges again can probably be divided into two streams, and they are really financial capital and human capital. What I mean by that in the context of, say, human capital, is attracting and retaining the right human capital, particularly at a senior management level in terms of skill or experience and remuneration.

Having the right social ethos as well has been very difficult for the business, particularly given that we are in a regional location and the remote nature of our work. This challenge is compounding in circumstances when you have to consider that the senior managers within the business have to meet their financial targets, but they have to do that managing a large pool of unskilled and inexperienced labour force.

One of the things that the business really focused on to tackle this particular challenge is that our philosophy has been to take a top-down approach. What I mean by that is that we concentrated heavily to attract very influential and active board of directors.

To give an example, in Bama, our Chairman is David Stewart. David Stewart has been a civil engineer and had over 35 years experience in that industry. He was a former CEO and Managing Director of Leighton Holdings and John Holland Group, two of the biggest companies in Australia, if not the world. When you start off having a Chairman of that calibre, it gives you the gravitas a social enterprise needs to then attract executives and senior managers and other talent in that respect, and also it helps us to establish networks for commercial opportunities as well.

The other big challenge, Tom, is, without a doubt, the access to financial capital.

For social enterprises, getting financial capital the traditional way, i.e. loans, is extremely difficult, particularly within our industry where we do a lot of fixed price work in construction and civil industry. It is inherently riskier and a lot of our contracts require us to put up upfront financial commitments by way of bonds, bank guarantees, and the working capital requirements are also quite extensive as well.

And as a startup social enterprise, we are very risky for the banks, particularly in the kind of climate as well.

But having said that, I should say that we were pretty fortunate in the early days. We did receive some grant funding from Westpac Foundation to assist us in the initial stages of scaling up. We invested that very wisely in terms of attracting some key personnel and putting some systems into the business so that we could compete in the open market. But by and large, we had to think outside the square in terms of getting the financial capital we needed to grow and be sustainable.

I bet it was a huge challenge.

So, looking at social enterprise and Indigenous business from a policy perspective, what do you believe are the key steps that government need to take to help foster and support an innovative social sector?

From a government perspective, and I'll talk collectively both in terms of Federal and the Queensland State Government, I believe both of those governments have actually put in place policies which actually provides a stimulus or structural tailwinds for Indigenous businesses to start up and grow. I'm talking here specifically about the Commonwealth Indigenous Procurement Policy and its Queensland equivalent. These policies actually mandate a minimum procurement spend on Indigenous businesses across a whole of government basis, so I think from a policy level, the basis is already there. The platform is there.

What these policies have created is a demand for Indigenous enterprises, and it's been a catalyst for growth in the sector, I should say. There's been a plethora of Indigenous businesses, startup Indigenous businesses cropping up, but what it doesn't do, is there isn't yet the supply to meet that demand, so there remains a large capability gap that needs to be bridged.

I think this is an area where I believe the government probably needs to focus on to ensure that there's actually support at every stage of the business cycle and business evolution of the number of Indigenous businesses that are starting up, and I don't think that traditional approach to procurement and contracting will bridge that gap.

It's a strong insight, Ranjan, and it'll be interesting to see how this is addressed moving forward into the future.

So focusing on the specific entrepreneurs themselves, are there any really important traits that you believe are just essential for successful social entrepreneurs?

Yes, I'll certainly make some comments on that, Tom, but I should preface by saying that I myself don't consider myself as being a social entrepreneur. My journey into the sector shows that, but what I can and willing to share with you is things that I've observed, particularly over the last three years.

It's a strong insight, Ranjan, and it'll be interesting to see how this is addressed moving forward into the future.

So focusing on the specific entrepreneurs themselves, are there any really important traits that you believe are just essential for successful social entrepreneurs? [continued]

Really, I think some of the common traits or characteristics that I've observed, I think the first, and probably not in terms of order of priority, but the first thing that I've observed is passion.

It goes without saying that you need to be truly passionate about a particular social problem or cause, and this usually comes from having a deep empathy with that problem or cause.

And then I think equally importantly, and this is something that I personally had to come to terms with, is you've got to really spend a lot of time understanding the problem first.

The common tendency has always been for people to jump straight into solution mode, but I think it is extremely critical to spend a lot of time but truly understand the problem.

At the end of the day, an entrepreneur is a problem solver.

You need to understand the problem first before you can solve it, and in the case of Indigenous unemployment, the starting point for me was to really identify the reasons for that disparity which had its roots really through centuries of disadvantage and racism, creating that social norm which is dependent on passive welfare.

And then I think you've got to be in that frame of mind of paradigm shifting. Once you've identified the problem, the problem continues to exist because the current approaches to try and solve it has either not worked or is ineffective, so therefore social entrepreneurs, in my view, seek to change and challenge that status quo, which may mean changing mindsets, culture or policies.

And equally important, I think you've got to have a business mindset as well.

By definition, an entrepreneur is a person who sets up a business with the intention of making usually financial profit. A social entrepreneur, in my view, is no different. The enterprise that you're trying to create must be sustainable if you're intent on making a social impact over a long period of time.

Lastly, and look, this is by no means an exhaustive list, but lastly I think you need to network and collaborate. You can't do this on your own.

Absolutely. Bama is an employment-focussed social enterprise delivering on key infrastructure projects, so do you have any general advice for entrepreneurs working within that particular area of employment-focused social enterprises?

Yeah, there’s two points I'd like to make. I think the keyword there is "business". It has to be a business, and it sort of goes to what I mentioned just previously.

By definition, businesses exist to make a profit, so if your goal is to provide meaningful, long-term employment to a disadvantaged sector of the demographic, then the enterprise must be sustainable and scalable and must be turning over a profit year in, year out. If it is not a business, if it is not a going concern, then your goal of providing long-term employment is not going to work because those individuals will no longer have a job. I think that's probably the key message that I'd make.

The other thing has really got to do the research on the industry. We chose the construction space, the industrial space and the facilities maintenance space because they're industries where there is a large reliance on human capital, i.e. labour, not so much dependent on machinery, IT, et cetera. I think with those two things in mind, they're probably the two things that I'd recommend or provide general advice on.

Wonderful. Looking a little bit more broadly then, Ranjan, are there any countries that you believe are really leading the charge when it comes to social innovation or similar initiatives or projects that you're running, and if so, what are they doing that you think Australia or other countries around the world could adopt?

To be honest, Tom, I'm not really aware of any standout international successes, but generally, though, I think if you're going to have a really strong and vibrant social innovation ecosystem, I think at a minimum you probably need the following things.

The first cab off the rank obviously is government policy.

Government's got to set the policy, which mandates social procurement and the places of value on social impact which then obviously flows through into the procurement phase.

So not too dissimilar to the Federal Government and the Queensland Government's Indigenous Procurement Policy.

I think if you have a similar social procurement policy that actually mandates some minimum spend, you're going to actually then have really good growth in that sector. I think there needs to be investment in human capital to build capability as well, similar to what I mentioned earlier about the Indigenous challenges we're facing in the Indigenous procurement, and the policy is generally more focused on the demand side, but you then also need to put a lot of investment into the supply side to make sure that there is that capacity and capability to meet that demand.

I think equally important, there needs to be access to patient financial capital. Social enterprises, by their nature, are going to struggle in that respect, so I think there needs to be innovation in the capital markets, as well as from funders or investors who are looking to invest in social enterprises that need to be aware that it needs to be patient in terms of the returns that they're expecting.

Yep, absolutely. So what other inspiring indigenous-owned projects or initiatives have you come across recently that you believe are also creating some great positive social impact?

The one that comes immediately to mind is one in Northern Territory called the Gulkula Mine, which is actually in the Northeast Arnhem Land. It is the first mine in Australia that is completely owned and operated by the Aboriginal people of that land. It provides direct employment to at least 100 Indigenous people.

But I think the greatest impact that this Aboriginal mine has is the broader economic and social benefit that's created by its existence, particularly through the supply chain through other Indigenous small to medium enterprises, not necessarily in the mining sector, but I'm talking about retail, hospitality, tourism, et cetera.

I've read a recent report that there's been some increased school attendance in the region too, particularly Indigenous family moving into the area, thereby kids going to school and really changing the social norms. It's a perfect example, I think, of what's possible when an industry's controlled or materially influenced by the Indigenous people of Australia.

At Cape York, we've always believed in the thesis that an Indigenous controlled industry is more likely to engage or procure services through Indigenous controlled businesses, and Indigenous controlled businesses, like Bama Services, are more likely to then employ Indigenous people. The Gulkula Mine is really proof of that concept.

If you start at the industry level, it'll then filter down into businesses, which will filter down into individuals by creating employment. Therefore that's then going to have an indirect effect on their families and social norms through school attendances and health and various other aspects where currently there's a huge disparity between Indigenous and non-Indigenous Australians.

Some really interesting insights there, Ranjan. Thanks for sharing those.

To finish off then, are there any really interesting books, podcasts or websites that you'd recommend to our audience?

There's probably three that I recommend. In a business/management sense, I always liked the book Good to Great by Jim Collins. It's always a good read, just even as a refresher.

Start-up Nation. I think the actual title is Start-up Nation: The Story of Israel's Economic Miracle is a good book to read too, particularly for entrepreneurs.

The last one which I enjoyed reading recently is called A Rightful Place by Noel Pearson. That last book provides a really succinct history of Indigenous history of Australia, particularly in the present climate of constitutional recognition.