PPPs: listen to the farmers
These are the outcomes of a three-month dossier and debate initiated by The Broker in cooperation with the Dutch Food and Business Knowledge Forum, a new knowledge platform initiated by the Dutch Ministry of Foreign Affairs. This article captures the second part of the debate. It focuses on addressing the opportunities of PPPs to advance food security through knowledge- and expertise-sharing policies between global and local partners.
PPPs build on the idea that private companies provide capital for investment and technological innovations, while public bodies provide knowledge institutions, distribution services and global networks. To understand the implications of this new development paradigm, The Broker asked how the private sector could be involved in efforts to achieve food and nutrition security policies that are comprehensive and inclusive. Several participants in the debate are optimistic about the potential of PPPs for agricultural development, while others are concerned that the partnerships are too exclusive to benefit the local population. ‘Positivists’ include Stephan Manning, who writes in his blog post that PPPs can contribute to knowledge transfer and up-scaling, Isabelle Ramdoo, who identifies opportunities for economic development, Bruce Byiers, who advocates optimizing value chains through regional collaborations, Bob van der Bijl, who says PPPs serve as a ‘role model’ to small and medium enterprises
One of the first PPP projects launched by the German development agency GTZ launched back in the late 1990s was a partnership with Kraft Foods and the Coffee Chamber in Peru. The project aimed at improving the quality of Peruvian raw coffee beans along with better working conditions for farmers and environmental practices (see GTZ documentation). Kraft benefitted from this PPP by securing the supply of high-quality coffee from Peru. GTZ benefitted from Kraft’s expertise and financial contribution, while helping Kraft establish connections with local institutions. And the Peruvian economy benefitted through an increase in the global market value of Peruvian coffee, which makes coffee growing a more attractive and sustainable business for farmers. Since 1998, the GTZ has launched over 1,300 PPP projects – many of them in agriculture – with different partners.
Stephan Manning, Global PPP networks for sustainable food production, 19/03/2013.
PPPs are increasingly brought in to implement public policy, based on the assumption that the public body benefits from the private company’s expertise and financial contribution, while helping the company establish connections with local institutions. According to Manning, PPPs are ideally global networks of private and public actors, rather than single projects. These global networks have three important advantages: project-based learning, potential for up-scaling, and knowledge transfer across geographical locations and sectors (Stephan Manning). PPPs in the production and trade of cacao are one of the most well-known and widespread forms of public private partnership (see the box ‘Benefitting from PPPs’). Additionally, networks that operate on a global level can address boundary-crossing opportunities and challenges, such as policy frameworks for using common natural resources and for climate change mitigation.
Isabelle Ramdoo argues that the prospects for establishing PPPs extend beyond the food sector. For example, where – as is often the case – agriculture and mining coexist, an integrated policy framework for the two sectors can mitigate the negative impacts of mining on the environment and on food production.“Structuring policies in an integrated manner could benefit both sectors: companies will secure their social license to operate, local communities will have better economic prospects and political elites will gain on both fronts (see the box ‘Partnerships linking sectors: mining and agriculture). In this case everybody could potentially win.“ (Isabelle Ramdoo)
Isabelle Ramdoo elaborates on three ways in which mining companies and agriculture can support the creation of linkages with and for local farmers:
Supporting programmes to encourage farmers to incorporate value chain activities in their existing activities or the development of new, integrated value chain activities.
Companies that operate in regions with high agricultural potential can support linkages between small farmers and larger, market-oriented farming operations, encouraging the small farmers to grow staple food and helping them to sell their surpluses on local, national and regional markets.
Developing spatial agricultural activities along infrastructure corridors (see also Byiers in the next box), which first and foremost serve the needs of the extractive sector. This includes support for storage, warehousing and processing facilities around already existing major infrastructures and for the development of clusters of activities or regional agricultural value chains, in and across countries that are serviced by these corridors.
A number of such private initiatives exist. For instance, in Madagascar, Sherritt’s Ambatovy “buy locally, hire locally” policy is working towards supporting local entrepreneurship and the local economy in general. Similarly, Newmont Ghana Gold’s Ahfo Agribusiness Growth Initiative in Africa, and Cuncashca Agribusiness Development in Peru supported by Barrick Gold, have shown that companies’ support for farmers-based organizations can make a positive contribution to economic activities, productivity and job creation. Outside Africa, notably in Australia and Chile, there are interesting examples of mining companies that have successfully supported the local agricultural sector.
Isabella Ramdoo, Unpacking the linkages between agriculture and the extractives sector, 19/03/2013.
Ramdoo therefore advocates moving beyond corporate social responsibility towards economic responsibilities, in which companies support local communities in developing productive economic activities. Bruce Byiers also supports this form of corporate responsibility along trading routes, known as the ‘corridors approach’.
This strategy to initiate PPPs along trading corridors aims to link agricultural production to infrastructure and regional trade. Byiers cites the example of the Southern Agricultural Growth Corridor of Tanzania (SAGCOT), a corridor project in a pilot phase. SAGCOT links port and transport investment plans with a detailed blueprint to encourage national and international investors. This corridors approach has gained prominence as a strategic tool for value chain integration at national and regional level. Its added value is that it promotes complementary investments, in inputs such as fertilizers, investments in storage and aggregation facilities, improved border crossing transport and mixed finance by donors, governments and the private sector. Whereas the old corridors approach focuses mainly on infrastructure and economic development, Ramdoo and Byiers elaborate on new approaches aimed at strengthening regional markets and linking smallholders to the international market also (see the box ‘Examining the old and new corridor approaches’ below).
Byiers notes in his blog post the main lessons from the old corridors approach(as applied in the Maputo Development Corridor (MDC) in Mozambique), which concentrates on infrastructure and economic development, versus those of new approaches like the Southern Agricultural Growth Corridor of Tanzania (SAGCOT), aimed at strengthening regional markets and linking smallholders to the international market.
Trade flows have improved at the relevant border posts – easing trade flows along both corridors and thereby signifying some degree of success.
Both initiatives relied on presidential support, leading perhaps to their success, but also to a sense of “limited beneficiaries” and criticisms of lack of benefit for the poor.
Complementary policies are necessary to ensure that the corridor approach spreads benefits more widely. For example, in the case of MDC, the transit from Gauteng, South Africa, seems to benefit more from using the port of Maputo than Mozambican goods do from using the South African transit.
SAGCOT is predominantly private sector driven. While offering opportunities in terms of momentum and the long-term potential of the project, this also involves certain risks, given the strong commercial interest in accessing fertilizer and other markets that may override development concerns.
Domestic private sector operators are broadly sceptical of this kind of planned approach, particularly SAGCOT and government-designed (CAADP) Investment Plans, referring more to the need for facilitation in their investment.
It is extremely complex to work with the vast range of different actors involved in a corridors approach, requiring time, patience and flexibility.
Value chain integration between countries still appears to depend to a high degree on behind the border, domestic policy issues.
Remaining challenges relate to how to get investors to actually invest rather than simply signing up to an initiative on paper.
Bruce Byiers, Corridors of power or plenty, 11/03/2013.
The conditions under which PPPs operate determine their contribution to food security. Although these partnerships are motivated to work on a global scale, resolving current and future imbalances in the food supply should rather tap into the potential of existing small-scale farmers, as Heleen Bos argues: “500 million smallholder farms in the developing world account for more than 95 per cent of agricultural holdings and support around two billion people“. However, in all the strategies discussed, PPPs are faced with the challenge of including small-scale farmers and benefitting the poor.
Evidence is scarce that PPPs have had a positive impact on poverty reduction without targeted inclusiveness of smallholders (David Sogge). Top-down market-oriented economic policies for food production have not reduced poverty in Uganda (Lawrence Bategeka). When PPPs operate in a vacuum, overall national incomes might increase, but not to the benefit of the poor. Similarly, the corridor approach should avoid benefitting those in power, instead of the many farmers involved. The effectiveness of global PPP networks is therefore a balancing act – between the potential to bundle resources and create synergies to address global development goals, such as environmentally sustainable food production, and the risk of trade-offs between ecological objectives and interests of powerful business partners (Manning).
The majority of the researchers, NGO practitioners and African entrepreneurs participating in the debate emphasize that developing policies on PPPs and trading corridors should aim at benefitting small-scale farmers and the poorer population, in order to reduce poverty and secure the food supply. They stress that effective approaches should be community-led and farmer-based. For example John Conrood says: “Without a well-organized rural population with accountable, effective, inclusive rural governance, there is very little likelihood that the private sector and value-chain development will contribute to poverty reduction. Economic development yes, poverty reduction no.”
Private sector involvement has mostly been based on competition and exclusion. PPPs pay little attention to unequal asset ownership, including land ownership, or unfair market and trade rules as drivers of food insecurity (Kay). Therefore, in the coming years, PPPs need to develop models that are inclusive, build on trust, and are an incentive to share knowledge and participate. Partners may not only have different interests, but also follow different norms, values and principles of action (Stephan Manning). Additionally, PPPs advised by externally attracted consultants often go for low-risk projects rather than high impact projects, whereas community-led forms of PPPs are more often aimed at community development. These PPPs ideally involve non-hierarchal forms of cooperation (Kay) with elected representatives and grassroots civil society (Conrood), or farmer-to-farmer organizations (Kay). Successes have been made in the farmer-to-farmer movement in Latin America, which is based on a non-hierarchical process of knowledge diffusion and exchange. Also the wide variety of community-supported agriculture (CSA) schemes has shown good results. These link food producers and consumers, sharing the risks of agricultural production through standing orders and forward contracts, farm work, or the creation of local food credit unions (Sylvia Kay). Accordingly, locally owned food systems inherently tackle land grabbing, provide more local employment and better respond to fluctuations in markets, prices and weather from a community perspective (Ina Horlings). Through these different forms of producer organizations or cooperatives small-scale farmers increase their bargaining power and investment opportunities, forming a solid base for food production and trade.
Giving a boost to the relationship with small-scale farmers requires a better understanding of their trading positions. Concepts like market access or linking farmers to markets do not recognize that farmers are often linked to particular customers or companies (Jos Bijman). Farmers organized in Producer Organizations (POs) are evidently preferable as a trading partners for the private sector. As farmers are always much smaller than their trading partners, they can benefit from collective action and improve their bargaining position. Private sector companies prefer to deal with a PO than with farmers individually because it reduces the risk for their enterprise (Jos Bijman). As Bijman explains, farmer and buyer become dependent on each other’s services, they need to understand each other’s requirements and build mutual trust based on delivery of the right quantity and quality. But the effect of POs depends on their scope and focus. Smaller POs are easily established and maintained, but larger POs have a better bargaining position. Also, partners might have different requirements; while some POs aim to promote economic development, others often aim to strengthening the community. There is still little research on the incentives and capabilities of these trading partners, the rate of dependencies that arise in value chains, and the options for reducing these dependencies.
To build inclusive and comprehensive food partnerships with organized communities, the challenge is to use the opportunities wisely. It requires a comprehensive approach, supporting farmers in only one part of the food chain may not lead to much progress if other issues are not tackled sufficiently. Jos Bijman suggests what needs to be taken into account to advance partnerships: “Support for including farmers in value chains has to take the whole farming system as a starting point. A system perspective is needed, as switching to higher value crops requires the coordinated provision of inputs, credit, transport, technical assistance, market information and market access.” This requires coordination. “As these services are usually not provided by a single agency, coordination among several agencies is needed.”
Supportive policy for comprehensive partnerships that addresses food systems as a whole is crucial to ensure development impact. Currently, corporations pay almost no attention to the actual outcomes and impacts of their engagements
The Broker’s debate on food security has heard many critical voices on the inability of PPPs to build new alliances in horizontally integrated, sector-wide approaches with community-based organizations. PPPs that make a positive difference to food security require an explicit commitment to strengthen local social services and the food system and to respond to locally felt needs (for example Claudio Shuftan). Others suggest where potential achievements can be achieved and where efforts need to be extended. Stephan Manning in particular stresses that PPPs have developed and implemented global sustainability standards across food chains, trained local farmers and cooperatives in productive and sustainable farming techniques and expert promotion, and in making food production more marketable by engaging multinational companies. But the participants generally agree that PPPs have a responsibly to address the sector-wide impact (for example Pascal Murasira). It requires the engagement of the community to achieve long-term implementation of comprehensive food security strategies.
Although several PPP strategies are distinguished in the debate, led either by economic growth or by socioeconomic targets for poverty reduction and environmentally sustainable development, only the latter tackles food insecurity. PPP approaches have achieved socioeconomic successes, these seek further improvement to impact food security. The two main preconditions for success are: inclusiveness in horizontally structured partnerships and comprehensive partnerships, addressing the whole food system. Taking inclusive and comprehensive partnerships as a starting point provides a new incentive to understand and work with regional and local trading partners based on local needs. And to work with partners in national, regional and international integrated trading systems to optimize the value chain and address global political, economical and environmental challenges.