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Weekly UpdatesA plan by former prime minister Paul Martin to provide Aboriginal businesses across Canada with a $50 million helping hand through a special private investment fund is being met with approval from First Nations in Northern Ontario.
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"This is very good news to me, and although it takes time to build that entrepreneurial capacity, this could be a great thing for our communities," says Constance Lake First Nation Chief Arthur Moore, about the recently announced CAPE Fund.
Moore, whose reserve of 800 has its own hauling and logging company, knows a thing or two about entrepreneurship. Between its various business endeavors, the community generates up to $6 million annually.
"With forestry in a slump, we need all the opportunities we can to foster self-sufficiency and self-reliance to create a better, healthier community."
The Capital for Aboriginal Prosperity and Entrepreneurship, or CAPE Fund, is being launched by Martin and his son, David.
While this unique equity fund will provide investors with a return on their investment, the goals are loftier than mere revenue, according to CAPE Fund managing director Peter Forton.
More importantly, it seeks to provide the broader Aboriginal community with tangible and lasting social benefits through the encouragement of entrepreneurship and the cultivation of high-level management skills, he says.
The fund, which builds on Paul Martin's longstanding passion for Aboriginal issues, is backed by Canada's five major banks as well as familiar Northern Ontario faces such as Xstrata Nickel, Vale Inco and Goldcorp.
It will focus on projects linked through ownership, employment or geographic proximity to an Aboriginal group or community in order to promote Aboriginal business, entrepreneurship and prosperity.
Investments will range from $1 million to $7.5 million, which may occur in one or more rounds of investment.
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However, most are expected to be in the range of $3 million to $5 million, and will last from six to nine years before being sold back to the various Aboriginal owners.
"This model has to work," says Forton, who adds that, since the announcement, his phone has been ringing off the hook with groups and companies looking to be considered for investment.
"It's a very unique model, but we're all very aware that there's going to be a lot of people watching this and I think we have to be successful, and it's very important that this fund is successful."
To be qualified for investment, Aboriginal businesses must be seen by the investment committee to have long-term economic sustainability, a clear and defined market opportunity, as well as an articulate, realistic and complete business plan.
The companies must also have the potential to sell ownership and transfer management to Aboriginal entrepreneurs or communities with in a reasonable amount of time.
This means that non-Aboriginally-owned businesses could be considered, provided there is a plan to eventually transfer management and ownership.
Though the business must have strong potential for growth and profitability, it must also allow for social benefits to be achieved for every dollar that's put into it. As an example of this principle, Forton says a resource company looking to extract material from Aboriginal lands, while providing royalty cheques to the community with no other direct involvement, would not be a target for the fund.
Companies in virtually all market sectors are being considered for this investment, but there are certain "restricted" sectors such as those related to gaming, alcohol, tobacco, firearms and munitions.
The fund will also avoid investing in startups, unless backed by strong and credible operating partners with a long history of success.
Rather than offering a bank financing model, the CAPE Fund is more akin to angel investment, as the investment board will take a proactive approach. With the assistance of the fund, a boards of directors will be established, links will be created with other financial institutions and industry, and proper business planning will be put into place.
Investees will also receive guidance from fund management to ensure their business grows through appropriate governance, management, capital and network resources.
"That's very important, because we're looking to build that capacity in our community," says Moore. "We need every professional help we can get to assist us. That's what's lacking in our community: the education of our young people, and we need to ensure we have young people with good business skills and good life skills."
Given the intensive level of involvement the investors are expected to have, Forton anticipates no more than 10 companies will be selected.
This also means the CAPE Fund will likely wrap up within 12 years, though Forton hopes that preliminary inquiries for potential investors for a second version of the fund could begin in as early as five years.
In time, this will not only help build up Aboriginal prosperity, but deal with some of the growing labour concerns seen across Canada.
"The Aboriginal population is the fastest growing segment of the Canadian population, and it's happening at the same time that labour shortages are expected in any number of industries.
There's a great opportunity to address that here, and if we can help train people to be great entrepreneurs and management, this will help to alleviate the shortage going forward," says Forton.
Other participants in the process, such Xstrata Nickel, have other reasons for participating.
"Fostering strong relationships with the communities in which we operate is crucial to our business," says Dominique Dionne, vice-president of corporate affairs at Xstrata Nickel.
"We have a number of Aboriginal suppliers in Canada and we work closely with our First Nations partners. As we seek opportunities to further our engagement process and identify new ways of building community capacity, we saw the CAPE Fund as a great initiative which supports Aboriginal businesses to develop strong and sustainable practices and expertise."
www.cfln.on.ca
www.capefund.ca
www.xstrata.com
By NICK STEWART
Northern Ontario Business
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