Public-Private partnerships are all the rage lately, and at SNV, in the context of agriculture value chains, we think they hold huge potential for alleviating poverty.
In general, value-chain PPPs consist of private companies that provide agricultural inputs, land preparation and credit to local farmers, who in turn agree to supply those companies with reliably produced raw materials, from nuts to grain to vegetables. To reduce private partners’ risk, public partners – governments – provide resources to support these arrangements. Well-managed value chain PPPs have been shown to create jobs, boost incomes and increase food security for communities, as well as provide more and better materials to businesses, improving their bottom lines and helping the businesses grow.
A win-win, right?
But SNV thought something was missing – a fourth P, representing local producers. Many value-chain PPPs see smallholder farmers only as beneficiaries, not as equal partners. While it’s understandable to an extent – in general, these producers are not able to share the same risks as private partners – we’ve seen that this top-down approach misses out on the many benefits that smallholders can bring to partnerships as true co-creators.
SNV decided to try a more inclusive PPP model as part of our Partnering for Value project. With funding from the International Fund for Agricultural Development (IFAD), SNV is brokering mutually beneficial partnerships among private companies, governments and small-scale rural producer organizations across multiple value chains in five countries – El Salvador, Senegal, Uganda, Mozambique and Vietnam.
We call these partnerships 4Ps (public-private-producer partnerships), as they incorporate producers as equal partners. In 4Ps, public resources support business plans that are co-designed by private companies and producers, and fill in where companies cannot, providing capacity building and training services to producers to ensure their successful entry into formal markets. Private partners better tap the contextual knowledge of producers, which means 4Ps are better aligned with local market realities. The co-ownership established through this model means all parties are more invested in each other’s success, so they are more likely to work together to find solutions to problems.
The need for this new approach became especially clear to us after the government of Mozambique asked SNV to study what had gone wrong in a PPP it had supported to strengthen the country’s sesame value chain. The plan had seemed solid. Global demand for sesame was rising, growing conditions were right and smallholders were willing to make the transition to sesame. But several problems arose.
SNV also discovered that because the local sesame value chain was not yet well developed, the private partner ended up in a powerful position as both the sole input supplier and eventual buyer of the crop. To reduce its risk, the private partner provided inputs to producers and then tried to recover these costs by lowering buying prices. The producers, who were used to receiving donated inputs rather than paying for them, saw the low prices as an enormous incentive to side-sell at normal market rates. Because there were no other input suppliers in the market, the private partner couldn’t stop providing them, despite their losses.
It was clear that an inclusive, 4P approach could have incorporated the producers’ unique insights and perspective, leading to a more realistic and sustainable partnership for all.
The Mozambique arrangement ended in failure, but its lessons, along with additional SNV research and experience, were put to good use, helping us develop and refine our 4P model. To date, across the Partnering for Value project, SNV has brokered more than 20 successful 4Ps.
In Vietnam’s Ben Tre province, for example, SNV is supporting a 4P that involves local coconut producers and Betrimex, a leading manufacturer and supplier of coconut products. We saw it as a great opportunity: Organic coconut production is increasingly profitable in Vietnam and demand is rising in the United States and Europe. But low production quality and limited market information and technical support for growers has hindered development of Vietnam’s coconut sector.
Under the 4P we brokered, Betrimex, which was investing in a new factory to export organic coconut water and milk, agreed to provide inputs, training and quality verification to small-scale producers, enabling them to significantly improve their production quality and become certified organic. Vietnam’s government signed on to provide a matching grant for production inputs as well as support for farmers going organic.
Ben Tre’s coconut farmers were consulted and included as full co-creators, allowing the partnership to thrive by avoiding mistakes we’d seen in the past.
For Betrimex, the partnership has helped the company develop and expand its supply of high-quality organic coconuts to respond to increasing international demand. And because Betrimex has committed to buying coconuts at a fair price, producers no longer have to worry about access to markets, allowing them to concentrate on production and increasing their incomes.
“Previously, I only sold coconuts to traders. Prices fluctuated a lot,” explains Nguyen Van Kinh, a participating farmer. “Because of agreed prices in the contract, we are not affected by those kind of fluctuations anymore.”
Producers have also gained technical knowledge and critical experience in organizing as a group and managing contracts with traders. And Vietnam’s government has gained valuable experience in identifying and supporting future 4P opportunities.
For now, SNV continues to provide project management, monitoring and evaluation, and technical support to this 4P, but soon, when the partnership is strong enough, we will depart, leaving it to continue on its own.
Beyond Vietnam, across the 20-plus established 4Ps, partner reviews in spring 2017 showed that producers’ thinking has transitioned from ‘farming as survival’ to ‘farming as a business.’ Writing a business plan in partnership with the private sector has led not only to mutual understanding – regarding, for example, how buying prices are calculated – but has also inspired an entrepreneurial spirit among all partner types.
We’ve seen that including producers as equal partners also steers partnerships toward governance structures in which partners hold each other accountable for their commitments. Our reviews revealed instances in which partners challenged each other on delays and difficulties, but also celebrated successes together.
Through the Partnering for Value project, public partners are also seeing that to truly connect farmers to markets, extension services must not only focus on technical agronomic practices but also on skills that support the ‘farming as a business’ mindset; when smallholders are equal partners, public services need to treat them as such.
Much remains to be explored when it comes to 4Ps, but we are sure now about the value and potential they hold for achieving real rural development for all. 4Ps are more than just temporary projects with temporary results. They are long-lasting business partnerships with sustainable impact.