The government’s plan to inject $100 million into a new business growth fund will be subject to a Senate inquiry after the Opposition raised concerns over “unanswered questions” and a number of “red flags”.
The Australian Business Growth Fund will provide “patient capital” to local SMEs, aiming to fill an apparent gap in the market for growing companies approaching a Series A round that don’t want to give up control of the business or take on any further debt.
The Coalition announced last year that it would contribute $100 million of Commonwealth money to the fund, with each of the big four banks to also stump up $100 million and Macquarie Group and HSBC to contribute $20 million each.
Legislation paving the way for the creation of a company to become the fund and the government investment of $100 million was debated in the lower house on Wednesday night.
Labor supported the legislation unamended but flagged that it would refer it to a Senate inquiry before passing it through Parliament. The inquiry will focus on the details of how the fund will operate and its investment mandate.
Speaking in Parliament, shadow treasurer Jim Chalmers said concerns were raised when the government only provided a handful of days for consultation on the draft legislation, and with the lack of detail in the actual legislation.
“We think that, if the government were serious about getting this right and making sure that the $100 million injected by the federal government had every chance of being effective and well invested, they should have, as part of the consultation period, given people more than four days to consider it,” Mr Chalmers said.
“The government hasn’t provided enough detail on the governance and operation of the fund, and I think it’s really important that we clarify that given the government’s poor record in recent times when it comes to governance and especially when it comes to integrity.”
The government has said the fund would provide equity capital investments of between $5 million and $15 million to Australian businesses with annual revenue of between $2 million and $100 million along with three years of revenue growth and profitability. The fund would take equity positions in the businesses of between 10 per cent and 40 per cent.
The fund won’t be a Commonwealth business enterprise, but is to be incorporated under the Corporations Act as a private company, with the Commonwealth as a minority stakeholder. It will be regulated by APRA with four independent directors and a chair.
Labor wants the inquiry to delve into more details of the fund, including its investment mandate, its board make-up, how any profits will be used and what the banks will get from being involved with it.
“These are questions that the government has been unable to answer to date, despite attempts by some outside of Parliament and by the Opposition to get those questions answered,” Labor MP Matt Thistlewaite said.
“Yet they expect the Parliament to sign off on a $100 million investment of taxpayers’ dollars basically without doing their due diligence, without providing the necessary information for due diligence to be done to credit whether or not this is a wise investment. That and the fact that the submissions weren’t made public, raised red flags for us on this side of the Parliament about this particular fund.”
Chief government whip Bert van Manen did not address these concerns when speaking on the bill in Parliament, instead spruiking its benefits.
“I’ve talked to a number of businesses recently who are looking to expand their operations. They’ve said to me, ‘I’m not going to borrow any more money, and I’m looking for capital equity investment’,” Mr van Manen said.
“This bill presents the opportunity for these businesses to realise their growth potential without longer term access to equity funding across a range of industries each year, without being a burden on the assets they might already have secured for the loans they currently have.”
But Labor MP Ed Husic suggested that the $100 million would be better spent on increasing access to talent for Australian companies through education.
“When you talk to startups and venture capitalists and angel investors, guess what they say? They say the capital is there, they’re awash with capital. What they’re having problems finding is the type of business they can invest in so they’ll get a return,” Mr Husic said.
“The thing that a lot of small firms want to see is access to talent. Financial capital is available, human capital is not and they are struggling to find people,” he said.
“This government should be investing in human capital and the best avenue for that is education. This is putting more resources into an area where capital is quite plentiful and neglecting the longer-term investment in our nation’s people.”
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