From PPPs to PPPPs – producers as equal partners in agribusiness partnerships
Traditional agriculture public-private partnerships (PPPs) still see smallholder farmers as project beneficiaries. In this blog, Floortje Jacobs, PPP Advisor at SNV, explains why we should start with the market reality and work with private, public and producer partners to create co-owned business partnerships.
The diversity of initiatives related to inclusive agribusiness is indeed huge. In my role as PPP Advisor with SNV I have mainly been focusing on PPPs for inclusive agribusiness. In recent years, in areas that are considered public responsibilities (extension services, R&D), governments have been seeking to leverage private sector resources – both technical and financial – and to work with the private sector to secure access to markets especially for smallholder producers[1].
This interest in public-private mechanisms for rural development has been growing, which is reflected in development agencies increasingly promoting private-sector engagement, in the design of country-level PPP policies, and in national agricultural development strategies[2].
As part of the research initiative PPPLab, which has been researching Dutch-funded PPPs for food security and sustainable entrepreneurship, I have been looking at particular aspects such as financing strategies and the scaling potential of PPPs. While many different types of PPPs in agriculture have been identified, such as those developed to collaborate on research and development (R&D) and those to build required infrastructure[3], PPPLab mainly looks at PPPs that create value chain linkages. For example, by either bringing smallholders into new value chains or by improving existing chain linkages through overcoming the risks associated with sourcing from smallholders.
What I found particularly remarkable, is that the majority of those ‘value chain PPPs’ still consider smallholder farmers as beneficiaries of projects rather than as equal partners in a sustainable partnership. To some extent this is understandable – the commonly accepted definition of PPPs is that all partners share risks and responsibilities, and smallholders are not able to share the same risk. But what I have observed is that too often, PPPs offer top-down solutions with smallholders as beneficiaries, rather than co-creators of sustainable partnerships in which all stakeholders find solutions together.
Fortunately, at SNV we had the opportunity to ‘test’ a more inclusive PPP approach. For the Partnering for Value project, IFAD and SNV have added a fourth P to the PPPs: Public-Private-Producer Partnerships (4Ps). The 4P approach starts by looking at the market reality and business relationships that private actors and producers already have. The 4P is used as a “pull” mechanism to finance business plans jointly submitted by private companies and producers, proposing to enter a partnership in which both parties take risks, invest and share the benefits. For these 4P business plans, public funding focuses on the delivery of public or semi-public goods that will not be funded by the private sector company otherwise, and that is necessary to fill the financing gap of viable business plans. Using public resources is justified to address a “market failure” where the perceived high risks and transaction costs of working with small producers are preventing private companies from starting market-based business relationships[4].
So far, Partnering for Value has brokered over 20 4P partnerships in five countries, focusing on a wide variety of value chains. All just had their first partnership review – what are the first reflections?
Up till now, the 4P approach has shown promising results. One major benefit is that the private and producer partners indicate that they have much more confidence in a partnership, now that the public sector is also involved and guiding the process. Sometimes, there is a history of mistrust between the private sector and producers (due to non-compliance of previous contracts from the private sector’s side, or side-selling by producers), but the presence of a third party has given them the opportunity and space to rebuild that trust. In the case of the Partnering for Value project, independent brokers have been involved to support the development of 4P business plans, which has also significantly helped to build confidence.
Secondly, in almost all 4Ps we have seen a slow transition of producers’ mindset seeing ‘farming as survival’ changing to ‘farming as a business’. Being part of writing a business plan together with the private sector has been quite a revealing experience for most producer groups. It not only leads to mutual understanding (how does the private partner come to a certain buying price?) but also instigates enthusiasm for entrepreneurial thinking. At the same time, public partners seem to increasingly realize that to really connect farmers to markets, extension services should not only focus on technical agronomic practices, but also on skills that support the ‘farming as a business’ mindset.
A last major benefit of the 4P approach is that by having all partners at the table, a great sense of co-ownership of the business case is created. In the writing process, the public sector (or an independent broker) makes sure that there is a right ‘balance’ in the negotiation process, meaning that producers have an equal say. This is a major difference from the more traditional PPPs in agriculture where farmers are rather seen as the receiving end. By identifying value chain bottlenecks together, and making plans to address these, both the private and producer partners feel much more responsibility to make the partnership successful. In this sense, the 4P partnership is not just a project – in fact, partners consider it as a long-lasting, sustainable business relationship.
Of course, the 4P approach also has its challenges. The success of a 4P partnership naturally depends on the context in which it is embedded – the particular market structure, local rules and regulations, the enabling environment. Moreover, a question frequently asked about PPPs for development, is also valid for 4Ps: can we really target poor producers? Certainly, the approach doesn’t work for the poorest of the poor – participating producers probably fall more into the ‘stepping up’ category of DFID’s Framework[5], consisting of emergent small scale commercial farmers. Working together with the public sector however enables organizing some sort of pre-trajectory in which farmers, through specialized extension services, will get prepared for participating in 4Ps. For now, the Partnering for Value project is working with ‘mixed’ farmer groups, hoping that the less advanced farmers are able to pull themselves up by being part of a 4P.
Clearly, much is still to be explored and crystallized. But the fact is that public-private mechanisms for rural development remain popular among bilateral and multilateral donors, yet the involvement of public and private actors in itself is not enough to achieve real impact for smallholder farmers. With 4P, we hope to strengthen the “inclusive” part of inclusive agribusiness, and to keep developing the concept in order to achieve real rural development.
Resources
[1] J. Thorpe and M. Maestre, Brokering Development: Enabling Factors for Public-Private-Producer Partnerships in Agricultural Value Chains, IFAD and IDS, 6:2015.
[2] FAO, Public-Private Partnerships for agribusiness development, 2016
[3] FAO, Public-Private Partnerships for agribusiness development, 2016
[4] Public-Private-Producers Partnerships (4Ps) in value-chain development projects, IFAD
[5] DFID distinguishes three types of farmers in its Conceptual Framework on Agriculture: the “Stepping up”, “Stepping out” and “Hanging in” category.
This blog is part of a series on what’s new in inclusive agribusiness from April 2017. The series was created by the Practitioner Hub for Inclusive Business and Inclusive Business Action Network in partnership with Seas of Change, BEAM Exchange, the Global Donor Platform for Rural Development and the Food and Business Knowledge Platform. Part one of the series dives into the details of inclusive business programmes around the world. In part two contributors share how long-standing perspectives on cooperative, corporate strategies, value chain partnerships, market system change, rural livelihoods support, financing, and innovation adoption are beginning to blend, and why.
Read more on key topics in inclusive agribusiness and access over 450 resources on inclusive agribusiness on SearchInclusiveBusiness.org.