[Editor's note: One of the economic entities envisaged and established for the use of the Crees in the JBNQA was an organization generally known as SODAB (SociÃ©tÃ© de dÃ©veloppement autochtone de la Baie James), or, in English, as the James Bay Native Development Corporation. The organization was to be funded by an injection of $15 million from the Quebec government. Only $4 million has ever been made available, and the organization has undergone certain changes. The following report on SODAB, its past and future, was made for the Grand Council of the Crees in July 1997, by Robert Mainville. It contains 18 important recommendations for the future direction of the organization.]
Resources development in the James Bay Territory remains one of the most important and complex issues facing the Cree Nation. Significant energies and attention have been focused on this issue largely as a result of certain resources exploitation projects relating to hvdroelectricity, forestrv and mining. The awareness of the issue is high and the desire of the Cree communities to focus on new initiatives is well recognized.
The Cree Nation is often unjustly portrayed as being either anti-development or attempting to use the environmental assessment process as a means of achieving meaningful levels of participation in development projects. Many Cree leaders, and in particular the Grand Council of the Crees (of Quebec) leadership, have been requesting that a fair share of revenues derived from resources development in the North be shared with the Cree Nation.
The socio-economic state of the Cree Nation requires that significant and immediate efforts be made to address the economic needs of the Nation. The issues, problems and matters relating to local capacities and development potential have been much studied. The Cree Nation has clearly recognized the need to pursue a new relationship and presence in all matters relating to the development of the Territory both within and outside the boundaries of Category 1A lands.
For example, the Waswanipi and Mistissini Cree Nations have recently taken steps to ensure that the members of their local communities have access to the opportunities that anticipated new development projects in their traditional territories may provide.
Many of the Cree communities have long recognized that community-based economic opportunities will only be maximized once all the economic activities in the Territory have been explored and the Crees have been provided with an adequate opportunity to participate in the development projects of the North, no matter what land category they may be located in.
In fact, the JBNQA specifically contemplates and encourages Cree participation in territorial development projects. In particular, section 28 of the Agreement specifically provides for certain Cree preferences in employment and contracts in respect to the development of the Territory.
Among other mechanisms set out in the Agreement, the James Bay Native Development Corporation was to assist, promote and encourage the creation, diversification or development of businesses, resources, properties and industries within the Territory with a view to stimulating maximum economic opportunities for the Cree people and contributing to their general economic well-being. The James Bay Native Development Corporation was originally envisaged as a joint Cree-SDBJ arrangement and was to particularly develop projects in the fields of outfitting, tourism, native arts and crafts, road maintenance, fuel distribution, forestry and mining.
For various reasons, these Cree-preference provisions and the role of the James Bay Native Development Corporation rapidly became limited to projects located on Category 1A lands.
In order to maximize Cree, economic opportunities throughout the Territory, a mechanism must be established to ensure that Cree entrepreneurs and the workforce have the means of participating in all activities operating within traditional Cree Territory. In this matter, a return to the original intent of the JBNQA is in order.
One of the ways for the Crees to ensure participation in development projects is to act in the capacity of a partner, joint-venturer or developer. In this way, the Crees would be given the opportunity to invest in projects with significant development potential conditional upon meaningful Cree participation in contracts, employment and matters relating to management of such enterprises. The investment parameters could ensure Cree participation at all levels of economic opportunity generated by the projects.
The essence of the new relationship would be that the Crees and developers would work together and invest in the development of the Territory for projects which are deemed acceptable to the Crees.
In order to assist the Crees in investing in acceptable territorial development projects, various funding sources need to be available. The James Bay Native Development Corporation would be restructured to act as one of these funding sources to assist the Crees in participating in major development projects compatible with Cree interests.
The outstanding $11 million of share capital in the Development Corporation would be subscribed by the government of Quebec with the intent of ensuring that the funds would be invested in territorial development initiatives agreeable to the Crees. The investments in such projects would be conditional upon the project proponents satisfying certain Cree requirements which would effectively ensure a meaningful partnership with the Crees.
The return of the investment secured through the Development Corporation would be measured largely on the basis of the success rate of Cree employment objectives and the number of substantial contracts awarded to Cree enterprises, as well as by the extent by which the partnership itself evolves to offer opportunities for future additional relationships.
The actual investment in a project could be carried out by a Cree enterprise or community borrowing from the Development Corporation or, according to circumstances, could take the form of a direct equity participation by the Development Corporation.
Obviously, if the Crees are viewed as investors and partners, then the consideration of the cost of various demands relating to economic participation may be viewed differently by all partners. A new perspective may be brought to these issues both on the part of project proponents and on the part of the Cree parties.
In the past few years, many projects have been realized and/or are planned that have provided real opportunity for the Crees to invest in, and to ensure meaningful participation in, territorial development. Some of the projects include:
Secondary Industry initiatives between Native/non-Native Partners,
As investors in the projects, the Crees will be better positioned to define participation in employment and contracts. This will lead to improved opportunities for entrepreneurship and local business development. The potential growth in wage income from major development projects can very significantly affect the demand for goods and services in the various Cree communities. Only once this is achieved can the Cree Nation benefit from the potential for economic multipliers. The flow of funds and opportunity for the supply of new goods and services at the local level will improve once the wage economy shows the potential to maintain economic enterprises at sustainable levels.
In short, the James Bay Native Development Corporation has the potential to be an engine of economic development in the local communities by ensuring meaningful Cree participation in development projects taking place in traditional Cree Territory. The provision of the required capitalization will ensure that the Development Corporation can identify and pursue opportunities and share in the risks inherent in the development of the James Bay Territory.
Moreover, by acting as a funding source for Cree participation in territorial development projects1 the Development Corporation avoids overlapping its mandate with other local Cree development initiatives. It also allows the Crees to substantially increase their presence in the Territory while maintaining a partnership relation with the government of Quebec.
Under the terms of the JBNQA, the James Bay Native Development Corporation was to operate as a subsidiarv of the James Bay Development Corporation (the SDBJ). The objects of the James Bay Native Development Corporation under the JBNQA are essentially to promote economic development within James Bay with a view to stimulating regional economic opportunities for the Crees, particularly in the areas of tourism, native arts and crafts, road maintenance, fuel distribution, forestry and mining. Furthermore, under the terms of the JBNQA, the James Bay Native Development Corporation was specifically entrusted with the mandate of fostering cooperation between SDBJ and the Crees. The Development Corporation was to act as the vehicle through which SDBJ would develop joint ventures and enterprises with the Crees in the James Bay Territory.
In 1978, the Quebec National Assembly adopted the Act respecting the James Bay Native Development Corporation. This Act incorporated the James Bay Native Development Corporation as a joint stock company and as a subsidiary of the SDBJ. The Act provides for two classes of shares, common and Class A. The common shares have voting powers and were divided 51 % to SDBJ and 49% to the Cree Regional Authority. Class A shares are non-voting and the authorized capital of the Corporation is essentially made up of these shares.
Under the Act, the James Bay Native Development Corporation has a maximum capital of $15 million. In fact, $4 million in Class A shares was suscribed by the Minister of Finance of Quebec between October 1978 and April 1987. An amount of $11 million may still be subscribed by the Minister of Finance.
In 1978, the Government of Quebec appointed Mr. Bernard Matthieu as the President of the James Bay Native Development Corporation. Upon the resignation of Mr. Matthieu in December 1986, the Grand Council of the Crees (of Quebec) and the Cree Regional Authority submitted to Quebec the names of four potential candidates for president of the Corporation. The Minister responsible for the Corporation file did not give any consideration to the Crees' choice of candidates.
In 1986, then Grand Chief Ted Moses met with Mr. Raymond Savoie, Delegate Minister of Native Affairs, requesting the appointment of a new President as well as access to additional funding for the Corporation. Under the terms of the La Grande (1986) Agreement, of Complementary Agreement no.7 to the JBNQA, and of the letter of undertaking dated November 6, 1986 from the Minister of Energy and Resources, the James Bay Native Development Corporation was to become a subsidiary of the James Bay Eeyou Corporation. This was to be effected by a transfer of shares from SDBJ to the James Bay Eeyou Corporation.
This share transfer was eventually authorized by the Government of Quebec under Order-in-Council 11 27-89 of July 12, 1989. SDBJ however resisted this transfer and it was not finally effected until July 15, 1991.
Presently, 51 % of the common voting shares are in the hands of the James Bay Eeyou Corporation, which appoints two directors, while 49% of such shares are in the hands of the CRA, which also appoints two directors. As noted above, Quebec has failed since 1986 to appoint its Director-President.
It was in 1985 that the James Bay Native Development Corporation began to face liquiditv problems. At that time, the Development Corporation needed $2.5 million for loans and $1 .5 million for construction of infrastructure related to the distribution of fuel products and warehousing of goods in the Cree communities. Thus, this liquidity problem required that the Board of Directors decide to temporarily delay approval of all new requests for loans. This also forced the Development Corporation to turn to the bank for a margin of credit and loans to cover its administration expenses, as well as expenses incurred from its own operation of petroleum products and transport services.
In 1987-1988, the newly elected Grand Chief of the Grand Council of the Crees (of Quebec), Mr. Matthew Coon Come, also met with the Minister Delegate to Native Affairs, Mr. Savoie, in order to urge the government to proceed with the appointment of a President and with the subscription of the $11 million capital shares in the Native Development Corporation. The Corporation needed these funds in order to meet the requests for loan assistance from the Cree entrepreneurs of the James Bay Territory. Unfortunately, the Corporation remains without a President and without access to additional funding.
Throughout 1988 and 1989, the Corporation became inactive in the economic development of the Cree Nation of the James Bay Territory. Consequently, the Nation was deprived of an important economic service contemplated by the JBNQA.
The following principal activities were carried out by the James Bay Native Development Corporation:
The following is a summary of the employment created by the enterprises with which the Development Corporation was financially involved from 1978 through December 31, 1985, as prepared by Mr. John Ryan.
|Communitv||Individual Enterprises||Jobs Created|
|Charlie Gas Bar||4|
|Mistassini Lake Motel||2|
|K's Corner Store||3|
|Mistassini Development Corporation||4|
|Meechum Grocery Inc.||5|
|Waswanipi||Waswanipi Gas Bar||1|
|Waskaganish Service Station||2|
|Waskaganish Real Estate (Band Council)||1|
|W. Cowboy Pool Hall||1|
|F. Wiskeychan Transport||2|
|Waswanipi School Bus||1|
|Eastmain School Bus||1|
|Wemindji School Bus||1|
|Waskaganish School Bus||1|
|Chisasibi General & Courier||
|Chisasibi/Val d'Or Kepa Transport||2|
|LG2 Airport and Radisson||7|
|Waskaganish Storage and Gas||2|
|Eastmain Storage and Gas||2|
|Wemindji Storage and Gas||2|
|Val d'Or Head office||1|
|Accounting and Administration||7|
|Petroleum and Transportation||2|
|Cree Small Business assistance||1|
|Waskaganish Cree Small Business assistance||1|
|Kepa Transport Reg'd Transportation services||26|
|Cree Energy Distribution Fuel distribution||28|
As a result, the James Bay Native Development Corporation provided financial and technical assistance to 57 Cree businesses which in turn generated 212.5 jobs.
In 1992, the Board of Directors of the James Bay Native Development Corporation, following a recommendation from the Council/Board of the Grand Council of the Crees (of Quebec)/Cree Regional Authority, took the necessary measures to undertake the review and updating of every single file of the Corporation. This included the Loans Portfolio and several bank accounts which had been left unattended since 1989. Following the above-mentioned decision, the reorganization process began in early 1992 and consisted of the following steps and results. The services of Mr. John Ryan were retained to carry out this review and update.
In order to centralize the Development Corporation's bank accounts into one central account, a new account was opened at the CIBC in Quebec City. Following research in several banks in Montreal and Val d'Or, seventeen (17) bank accounts were found and closed, which totalled $461,875.71. These balances were transferred to the central account and invested in short-term loan deposits.
A review of all the Development Corporation's files from 1978 to 1989 was carried out, which consisted of the examination and listing of the 250 cases (5,000 files) transferred from Val d'Or to Quebec City for the review process.
Also, during the review and updating process of the Loan Portfolio files, thirty-four (34) loan customers who were registered as having a loan with the Development Corporation were met individually by Mr. Ryan for a complete evaluation of their files.
These meetings with the Loan Customers revealed that, since 1988, fifteen Cree entrepreneurs had closed down their businesses for the following principal reasons: lack of business training, lack of technical support, high interest rates on loans and, in some cases, low economic potential and competition. These reasons caused the James Bay Native Development Corporation to write-off fifteen loans, for a total of $110,447.97.
The tangible result of the action taken by the Development Corporation is that, in early 1995, five major loan customers recognized their loans and signed new financing agreements, for a total of $417,939.62 Furthermore, after the updating of one customer's loan, an outstanding balance of $3,023.00 was paid in full and two loans were consolidated.
To complete the review and updating process of the Development Corporation's loan portfolio files, negotiations are well underway with the remaining twelve loan customers. Attempts are being made to find the solution for each individual file which would allow the maximum possible recovery of outstanding balances. To achieve this objective, other meetings will take place between the Development Corporation and its loan customers.
The capital stock of the Development Corporation presently stands as follows:
51 common voting shares to James Bay Eeyou Corporation
49 common voting shares to Cree Regional Authority;
4,000 Class A non-voting shares to the Minister of Finance of Quebec.
Approximately $4 million of capital has been subscribed through the Class A shares. An additional $11 million of capital is authorized under the James Bay Native Development Corporation Act but has not been subscribed.
The present Board of Directors is made up of five seats of which only four have been filled. The Directors are:
The Quebec Government still has not appointed a Director-President.
The last financial statements of the Development Corporation are to December 31, 1996. These statements indicate a total shareholder equity of $617,427 essentially made up of cash and short-term investments amounting to $302,666 and the loan portfolio valued at $314,760. The Development Corporation's investment in Cree Energy is worth very little given that company's decision to wind up its operations.
The difference between the original capital contribution of $4 million and the present shareholder equity of $617,427 is in large part attributable to the following factors:
Since the Development Corporation is essentially inactive, its only real income is generated from interest earned on its short-term investments. Its expenses are relatively modest, being limited to approximately $141,678 in 1996
The Act respecting the James Bay Native Development Corporation provides that the authorized capital of the Corporation is $15 million. Of this amount, the Act obliged the Minister of Finance of Quebec to subscribe $4 million non-voting Class A shares. This subscription was completed in 1987. The remaining $11 million share capital can be subscribed by Quebec under the provisions of section 16 of the Act which read as follows:
"16. The Minister of Finance may, at any time, with the approval of the Government, acquire any part of the Class A shares of the Corporation that he has not already acquired (...).
The Corporation shall not use the amounts paid under the preceding paragraph for purposes other than those agreed by the Minister of Finance (...)"
The Act therefore confirms the political understanding that the James Bay Native Development Corporation will eventually receive an additional $11 million in capital when the Quebec cabinet so authorizes. There is no specific time frame for Quebec to subscribe the additional capital. Obviously, the value of this potential capital contribution is declining with time since it is not indexed to any inflation factor.
This eventual $11 million contribution by Quebec is the principal future asset of the James Bay Native Development Corporation.
Section 28 of the JBNQA originally contemplated that these monies would be used to assist the Crees in participating jointly with non-Native developers in development projects in the James Bay Territory. It is recommended that this original orientation be retained and that Quebec be requested to invest the full $11 million in the Corporation which would then act as one of the funding sources for the Crees to participate in development projects throughout the James Bay Territory.
Resources development remains one of the most important and complex issues facing the Cree Nation. Many Cree communities have recognized that local economic opportunities will only be maximized once all economic activities in the James Bay Territory have been explored and the Crees have been provided with adequate means to participate in all development projects, no matter on what land category they may be located.
In order to maximize Cree economic opportunities throughout the territory, mechanisms must be set up to ensure that the Crees have the means of participating in contracts and job opportunities for all activities taking place in the territory.
One way that the Crees may participate meaningfully in development projects is to act as partners or joint venturers. The essence of a new relationship would be that the Crees and developers would work together and invest in the development of the Territory in projects acceptable to the Crees. In this way, the Crees would be given the opportunity to invest in projects with significant development potential conditional upon meaningful Cree participation in contracts, employment and matters relating to management and the environment.
Such participation would, of course, ensure benefits to the Crees in addition to the environmental and social impact mitigating measures secured through the environmental and social impact review regime set up under section 22 of the JBNQA.
Therefore, the outstanding $11 million of share capital in the James Bay Native Development Corporation would be subscribed by the Government of Quebec in one block with the intent of having the Board of Directors of the Development Corporation invest in territorial development initiatives of benefit to the Crees and to which the Crees consent. Any investment would be conditional on the developer satisfying certain Cree requirements which would effectively ensure a meaningful partnership with the Crees.
The actual investment in a project could be carried out by a Cree enterprise or community borrowing from the Development Corporation or, according to circumstances, could take the form of a direct equity participation by the Development Corporation.
The return on investment would be measured largely on the basis of the success rate of Cree employment objectives and the number of substantial contracts awarded to Cree enterprises as well as the extent to which the partnership itself evolves to offer opportunities for future additional relationships.
Examples of the types of projects which could be funded are numerous. However, two projects with which specific Cree communities have had partnership relationships come to mind: the Waswanipi Saw Mill Project and the Mistissini Troilus Mine Project.
In the case of the Troilus Mine Project, in addition to the remedial benefits secured through the environmental and social impact assessment regime, the community of Mistissini has the opportunity to directly invest in the mining project. With the $11 million additional share capital, the James Bay Native Development Corporation could either loan a certain amount to the Band or the Band's business development corporation or it could directly invest itself in the mine, thus securing a larger Cree voice in the operations and gaining experience for the Crees in the mining development field.
In the case of the Waswanipi Saw Mill Project, the community itself is contemplating investing a substantial amount to carry out this project in partnership with Domtar Inc. Such an investment could obviously have been secured through the Development Corporation had the $11 million of additional capital been at hand.
Since the James Bay Native Development Corporation will be involved in essentially few development projects presenting powerful economic leverage potential for the Crees, there will be no need for a complicated structure, nor a large staff.
First, since most investments will be made in projects which are already provided with an experienced partner, no day-to-day supervision of activities will be required of the Development Corporation.
Second, since the Development Corporation will in no case actually operate business activities, it will not come into conflict or competition with existing or future Cree business initiatives.
Third, the Development Corporation will be limiting its activities to major development projects of potential benefit to the Crees, thus leaving to the local Cree economic development corporations the mandate for investments in community-based small Cree enterprises. This avoids the need for the Development Corporation to maintain a large support staff.
It is imperative, however, that Quebec subscribe the full $11 million in one block to ensure that economic opportunities can be accessed rapidly with a minimum of bureaucratic impediments and to generate enough revenues to adequately support the operations of the Development Corporation from the start.
Obviously, the constitutive act of the James Bay Native Development Corporation will need to be modified accordingly. This may also entail some correlative amendments to section 28 of the James Bay and Northern Quebec Agreement, particularly to recognize the exclusion of the SDBJ from the Development Corporation.
The Crees are very anxious to be involved in commercial and business ventures. Resource development and other opportunities are now available when they were not in the past, and there is an appreciation by Quebec that any project advanced or supported by the Crees simply benefits the economy as a whole and is for the benefit of all.