DevCorp: a misguided failure

When Sheila Fraser, the auditor general of Canada, appeared before a committee of Nunavut MLAs back in February of 2002, it was like watching a school teacher at work in front of a slow learners’ class.

“You take the total amount of subsidy. Then you take the total number of jobs. Divide the subsidy by the number of jobs. Then you will find out how much each job is costing the government,” Fraser said.

She made those comments about the Nunavut Development Corp., a Nunavut Crown corporation that owns, or partly owns, nine money-losing businesses in various parts of Nunavut. Those businesses, and the 135 jobs that they represent, survive only because the GN pays the corporation more than $3 million a year in subsidies.

It was Fraser’s first visit to Nunavut, shortly after her first report on the Nunavut government’s finances was issued in the fall of 2001. The purpose of her visit was to appear before the Nunavut legislative assembly’s standing committee on government operations, and to answer questions about her report.

The Nunavut Development Corp. did not receive a clean audit in that report. The corporation did not get a clean audit in her second report either.

That’s because the development corporation provided little or no financial information about its nine subsidiaries, and couldn’t even tell the legislative assembly what its getting in return for the $3 million it dumps into it every year.

“The Nunavut Development Corporation has not collected information on jobs or costs per job,” Fraser said in her report. That’s what prompted her little lesson on the practical application uses of Grade 3 arithmetic. And one year later, the DevCorp, as its short form goes, still couldn’t explain what it’s buying every year with the $3 million it gets from the GN.

Not that MLAs did much asking. Over the past five years, we can’t recall any MLA ever asking a single question about the DevCorp.

But it’s about time they did. In the legislative assembly last week, David Simailak, the minister of economic development, tabled a type of document that the DevCorp rarely seems able to produce: a business plan.

The information contained within that business plan shows that, so far, the DevCorp is an unmitigated failure.

Not one of its nine community-based companies is commercially viable. And only two of those, Pangnirtung Fisheries Ltd. and Uqqurmiut Arts and Crafts Ltd., stand even the remotest chance of ever becoming real businesses.

To be fair, the Government of Nunavut did not create the Nunavut Development Corp. It was created by the Government of the Northwest Territories in 1990-91, and Nunavut simply inherited it.

That, however, actually makes the embarrassment even worse. Under the DevCorp’s own guidelines, its subsidiary companies are supposed to be self-sufficient after five years. But its collection of dud businesses, such as Kivalliq Arctic Foods Ltd. and Ivalu Ltd., have actually been in existence for 10 to 15 years. None have ever become self-sufficient.

It’s true that those businesses employ the equivalent of about 135 people every year. But the cost is too high, an average of $27,650 per job.

And that’s not counting the $1 million cost of maintaining the DevCorp’s head office in Rankin Inlet, at another $7,881 per job.

So there lies the answer to Sheila Fraser’s arithmetic question: it’s a subsidy of more than $36,000 per job. That’s a lot to pay for the menial, low-skill, non-union jobs offered by the DevCorp. And there’s little evidence that these workers are learning any transferable skills, other than how to put in enough weeks to get a UI cheque.

The Pinasuaqtavut document, the GN’s cutesy-pie statement of priorities, brags that in economic policy, Nunavut will strive for self-sufficiency. The DevCorp, however, represents the opposite. It represents failure, dependency and humiliation. JB