Thursday, 23 October 2014

Public Private Partnerships – A recipe for success?

What’s the recipe for success for Public Private Partnerships (PPPs) in agriculture? Our research, together with the International Fund for Agricultural Development (IFAD) and the International Institute for Environment and Development (IIED), has been trying to find an answer, analysing four IFAD supported PPPs.

It’s important to underline that IFAD’s portfolio of PPPs largely aims to develop partnerships between governments (Public), businesses (Private) and the farmers (Producers), hence setting up PPPPs (the fourth P representing the farmers/producers).
To shed some new light on the topic and share this initial thinking, IFAD and IDS jointly organised a workshop in London: ‘Enabling factors for Public Private Partnerships in agriculture’. Attended by 40 representatives – ranging from private sector, donors, governments, farmers groups, civil society, and other experts, coming from Europe and the studied countries among others - the pluralism, richness and dynamism of the discussions was guaranteed; their voices will definitely enrich and directly influence the final research report.

You may remember Jodie Thorpe's blog where she wrote about our initial hypotheses for partnerships. Today, after many interviews, a literature review and, mostly, several months of field work in four different countries – Ghana, Indonesia, Rwanda and Uganda – we now have a better understanding of what we believe to be those key factors that can make PPPs work in agriculture.

What are the enabling factors?

  1. Clear purpose aligning commercial and development objectives: incentives of the partners must be aligned, so that realising the objectives of one leads to realising the objectives of all.
  2. Structure that enables shared governance and clear roles & responsibilities: with mechanisms (formal and informal) for shared planning and decision-making involving companies, farmer organisations and government agencies.
  3. Flexibility to respond to the unexpected: markets are examples of ‘messy’ systems that actors cannot fully comprehend or control, so there is a need for flexibility and adaptation.
  4. Risk and benefit sharing: identification, (mitigation where appropriate) and allocation of risks and benefits, considering distributional aspect.
  5. Transparency and accountability to internal and external stakeholders: reducing information asymmetries, and ensuring engagement with and responsiveness to stakeholders. 
  6.  Building in the transition from PPPP to commercial operation: the PPPPs considered in this research are time-limited mechanisms to overcome market failures and lead to fully commercial relationships.  M&E, learning and considering the exit strategy from the outset are key aspects for long-term commercial viability.  

Discussions and reactions from the roundtables

PPPs are another example of the increasing interaction between business and development. Like other interventions in this area, risks, concerns and dilemmas are present and were widely discussed during the workshop. Some issues raised during the workshop were:
"Are farmers putting their assets at risk to meet the demands of the private sector/ PPP commitments?”, “how does public money add value?”, “is a two phased approach (first targeting the better-off farmers, and then the poor farmers) useful to assure poverty targeting as well as economic viability?”, “is there a risk of negative effects for the livelihoods of a wider community? "

There was a general consensus around the importance of the first three factors. “If interests are not aligned, there will not be a PPP”, stated one participant talking about alignment. It was referred to as interdependence – both business and development must align and depend on each other, and there must be a clear case around how public money adds value in the partnerships.

Governance and structure were also recognised as key, where the challenge lies in creating a governance structure that, while simple, acknowledges partners’ different evolution speeds, represents all voices, allows for shared planning and decision making and is adaptive to changing circumstances.
‘Do not overcomplicate’ was a clear message voiced; however, reality always seems to exceed expectations.

The table discussion around flexibility emphasised how responding to the unexpected requires not only flexibility, but also trust, communication, representation and conflict resolution mechanisms, among other aspects. Even though all these factors are intertwined, it was highlighted how flexibility is particularly linked to others, such as clear purpose (be flexible within an agreed and clear purpose) and structure (simple, adaptive and representative of all actors).

The remaining three factors had more nuanced discussions. With regards to risk and benefit sharing, most participants agreed that unless risks and opportunities are explicitly addressed, market relationships tend to benefit those with more assets, while risks fall disproportionately on weaker actors. Others wondered whether ‘risks have to be perfectly balanced or is it enough that all partners have less risks with the PPP than without?’. Differentiating types of risks (production-related risks, market risks, etc.) and designing benefit sharing mechanisms is a possible way forward.

Transparency and accountability is essential in some key aspects (price, land, non-market public goods, etc.), but it must be borne in mind that the partners may be hesitant about transparency in specific areas (i.e. the private sector about a business strategy). In this area, key measures include providing access to information, engagement with and responsiveness to stakeholders, and clarity on accountability paths.

Regarding the transition from PPPP to commercial operation, participants emphasised that the partnership should not be a way to reduce the cost/risk of an investment, there must be a business case for the farmers as well as for the private sector.

Participants also highlighted some factors that were missing, such as the political economy context, access to finance and the need to develop the ‘skill’ of working in partnership.

In PPPs, there is no one-size-fits-all and specific circumstances play a key role in determining the best fit. This research project aimed to simplify the complexity of PPP by identifying key enabling factors of success. The discussion with experts has brought complexity back, but this time in a way that can enrich and inform the final report.*

*The report will be available in early 2015

Maria del Mar Maestre Morales is a Research Assistant with the IDS Business Markets and Finance Cluster. She is currently working on a project examining 'Public Private Partnerships (PPPs) in Agriculture: Enabling Factors and Impact on the Rural Poor'

Isabel de la Pena is a Research Assistant at IDS who has also been working on the project 'Public Private Partnerships in Agriculture: Enabling Factors and Impact on the Rural Poor'.


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