The majority of food and other agricultural outputs worldwide are produced by smallholder farmers, but they often have problems participating in profitable value chains. Power and information are divided asymmetrically between partners. Producers are often not sure if there will be buyers next season and what the current market prices are, while buyers are not sure that producers will keep their commitment to supply the agreed quantities at the expected quality.
Our experience shows that in order to link smallholder producers to profitable value chains in an inclusive, well-informed and empowered manner, they need to be given special attention and focus in public-private partnerships. For this purpose, the public-private-producer-partnerships (4Ps) approach was developed. Over the last 3 years, the development organisation, SNV, has implemented the Partnering for Value project funded by the International Fund for Agricultural Development with the aim to elaborate the 4P approach. We used independent brokering services in five countries (El Salvador, Mozambique, Senegal, Uganda and Vietnam) to bring producers (and their organisations), private enterprises and public-sector actors together.
During this process, we found that a number of dimensions linked to commitment, trust, governance and capacity contribute to the success and sustainability of these partnerships.
Creating trust and commitment
Partners formulated commitments towards each other, which formed the basis for a 4P arrangement. Through a joint process of business plan development, implementation and review, the partners developed trust and confidence in each other.
Smallholders often complain about the price they get for their products: they don’t know if the price on offer, or the market price, is a fair price which gives them a good profit. Companies, on the other hand, often grumble that producers are not reliable and side-sell their produce despite prior agreements, even when inputs are supplied in advance by the company.
An effective 4P partnership has partners who show a high level of accountability towards each other based on trust, commitment and discipline. If a group of producers signs an agreement to supply 20 t of grain to a processor, they should keep that agreement. The same holds of course for the buying enterprise, who should keep their off-take commitment and pay as agreed.
Through joint action, individual smallholders have shown to be able to empower themselves, make informed choices and negotiate better deals. The neutral broker often had an important role in facilitating this process and making sure that the voice of producers was heard.
Governance of the partnership
In 4Ps, the producers are not only seen as suppliers of raw materials, but as partners who have an equal say in decision-making on important points, such as who will be responsible for post-harvest storage and warehousing, or how input supply will be organised so that producers can maximise time efficiency.
We learned that regular face-to-face review meetings between the partners, facilitated by the neutral broker, are important to avoid friction or conflict. At the same time, misunderstandings, differences of opinion, or false assumptions are inevitable and every partnership goes through such a phase. The role of the broker is essential in these early stages to mediate between partners and hold the partnership together.
A second important learning is that the partnership should be governed by some sort of written agreement. These should, however, not be exclusive agreements in which one partner forces the other partner to only do business with them. Producers should have the liberty to engage in multiple agreements with different buyers, as long as they respect each agreement and vice versa.
Partnership brokering is more than just bringing partners around the table and facilitating the development of a shared business plan and agreement. The business cycle should be supported by a capacity development trajectory, which enables partners to better understand each other’s needs.
This capacity strengthening will, in most cases, be focused on improved business practices and management skills. Many rural farm entrepreneurs and rural agro-enterprises do not yet have an established business culture of record keeping, and therefore do not have the records to inform their decision-making or convince potential financiers to invest in the growth of their business venture.
4P as a tool for development
The bottom line of the 4P concept remains, of course, that such a partnership brings benefits to smallholders, such as their increased confidence to operate in high-value markets. We have seen that producers participating in 4P partnerships get access to better inputs and can thus produce a higher value harvest, which sells at a higher price. At the end of the day, the producer needs to make a profit. The fact that partners are working together and are even continuing the 4P partnership beyond the project is a highly valued result for us, in which the producers of these partnerships are taking part in agricultural markets as real entrepreneurs.