Public-private partnerships — Lessons for successful PPPs
The public-private partnership (PPP) concept has recently made inroads in Africa and become a game-changer in the agriculture sector, as it is broadened to fully include smallholder participation.
African youth are increasingly qualified, meaning the continent now has considerable business potential, which just needs to be guided and supported to promote the full development of this vibrant entrepreneurial culture. According to the African Economic Outlook 2017 report, “The entrepreneurial culture is vibrant with about 80% of Africans viewing entrepreneurship as a good career opportunity.” Opportunities are generally exploited once they arise, with 22% of the African working-age population starting new businesses, many in agriculture. This is the highest start-up rate in the world, but few African entrepreneurs are single-handedly able to invest in and develop their business. Could PPPs unlock this huge potential?
African states, as well as public, national, foreign and international organisations, are increasingly receptive to calls from the African agricultural private sector and are very keen on establishing partnerships with agrifood businesses, financial institutions and other major stakeholders. This could be partly explained by the difficulties African governments encounter in fulfilling their commitment to devote 10% of their budget to agriculture, as pledged in 2003 and 2014 in Maputo and Malabo. The fact that most governments are not respecting this obligation was discussed at the recent African Green Revolution Forum held in Côte d’Ivoire, Abidjan in September 2017.
The PPP concept for agribusiness development emerged against this backdrop after the founding of the Alliance for a Green Revolution in Africa (AGRA) in 2006, with the aim of supporting the development of the agricultural sector. The concept was then spurred by the 2007–2008 food crisis, followed by the launch of the New Vision for Agriculture at the World Economic Forum in Davos in 2009, Grow Africa in 2011, and the founding of the New Alliance for Food Security and Nutrition — in partnership with African governments, development partners, major private groups, NGOs, civil society and farmers organisations — in 2012.
Emerging PPP movement
A PPP for agribusiness development is defined by FAO as, “a formalised partnership between public institutions and private partners designed to address sustainable agricultural development objectives, where the public benefits anticipated from the partnership are clearly defined, investment contributions and risks are shared, and active roles exist for all partners at various stages throughout the PPP project lifecycle.”
There are currently many different examples of PPPs. Some are regional or continental in scope, such as the Farm to Market Alliance, which connects buyers to farmers’ platforms, especially for the maize and bean trade in Rwanda, Tanzania and Zambia (see interview with Simon Costa). Other programmes help farmers to reduce postharvest losses, such as the Rockefeller Foundation supported YieldWise initiative (see Kenya field report). Whilst these partnerships focus on agricultural, industrial and food products, including cassava (see box), with the aim of developing value chains, they are not solely linked with production. In Kenya, since 2013, commercial infrastructures have also been developed via PPPs. The government leases public warehouses to private operators, with the involvement of stakeholders like the Eastern Africa Grain Council (EAGC), farmers and financial institutions. In its first year, EAGC certified 10 warehouses with a raw grain capacity of 63,000 t, while advances totalling €0.83 million in warehouse receipts were granted to more than 12,500 farmers. Four years later, EAGC works with over 88,000 farmers providing grain to 67 warehouses across Kenya, Rwanda, Tanzania and Uganda with a capacity of 175,125 t.
What lessons can be learned?
FAO — based on its conviction that PPPs are distinctly innovative — published the 2016 report Public Private Partnerships for Inclusive Agricultural Growth, which examines 70 partnerships. By bringing together businesses, governments, farmers and civil society, PPPs are an ideal instrument for enhancing productivity, food security, agricultural investment, as well as for the development of value chains, commercial infrastructures, services for farmers, while also promoting agricultural research and technology. PPPs enable different stakeholders in a sector, including women and youth, to become organised, trained, equipped and gain access to markets and financing.
In Liberia, the IFAD-supported Smallholder Tree Crop Revitalization Project partnered with the country’s Ministry of Agriculture, the private exporting company Liberia Agriculture and Asset Development Company (LAADCO), and around 1,000 farmers to rehabilitate cocoa and coffee plantations. Rural roads were refurbished and cooperatives created, their members benefitting from capacity-building training offered by the Ministry to boost their bargaining power and reduce transaction prices. LAADCO provided farmers with technical and development services (via technicians, agronomists and supervisors), vehicles, pre-financing and guaranteed outlets for their top quality cocoa and coffee at prices at least 50-times higher than those offered by intermediaries.
However, collaboration of PPPs with banks and financial institutions still needs to be strengthened. Of the 70 cases studied by FAO, 40% were funded by private co-equity investments, 23% were funded nationally by public sector-managed PPP programmes (especially in Latin America), 22% by development projects, and 15% by subsidies or tax breaks. Financial institutions were only involved in 14 cases, which highlights the poor linkages with banks and financial markets. In the African cases studied, the most common financing was via development projects.
PPPs also enable risk management, which is especially beneficial in the agricultural sector. The governmental partner may propose agricultural insurance, subsidised inputs or ask its partners to use purchase contracts. Another advantage of PPPs for initiatives (ranging from tens of thousands of dollars to several million) is the structuring of unique partnerships tailored to the specific features of a particular project.
However, with PPPs being such a recent phenomenon, the institutional framework behind the agrifood PPP political concept is often still tenuous. Few agriculture ministries’ services are devoted to PPPs, and there is generally no dedicated regulatory framework or tailored land tenure system. Many coordination challenges between partners remain, especially due to the lack of transparency of some overly ambitious projects. Moreover, some partners often have less influence than others, with in-kind and labour contributions generally not being accounted for.
Finally, although PPPs advocate collective action and capacity building, FAO notes that it is hard to measure the impact of PPP projects on women and youth, or on reducing smallholder poverty.
A 4th essential P
These pitfalls have led to a shift towards public-private-producer partnerships (PPPPs or 4P), introduced mainly by IFAD in 2014–2015. In conventional PPPs, farmers are considered as private stakeholders alongside other partners, despite the fact that they are often smallholders with specificities that should be accounted for to ensure their full effective involvement in agricultural development.
The 4P approach stresses the importance of focusing particularly on price-setting mechanisms in contracts, good contractual performance, payment conditions, transparency, farmer training and assistance. In Ghana, for instance, District Value Chain Committees (DVCCs) have been set up to pool farmers’ organisations, input-supply companies, equipment manufacturers, processors, buyers, ministry representatives and banks. These DVCCs collaborate with elected representatives to manage activities, draw up budgets, oversee loans, select suppliers, while serving as a forum for price negotiations.
PPPs, as well as PPPPs, are still in their infancy but could prove to be a boon for smallholders provided that they are carefully managed.