Dossier

Public-private partnerships

Public-private partnerships are facilitating the transformation of African agriculture, helping farmers’ organisations to become professional businesses that generate higher income for their smallholder members.

A member of a farmer’s cooperative supported by the Farm to Market Alliance sells his maize at the central market in Mbeya, Tanzania © Simon Costa/FtMA
A member of a farmer’s cooperative supported by the Farm to Market Alliance sells his maize at the central market in Mbeya, Tanzania © Simon Costa/FtMA

Thursday, 28 September 2017

The public-private partnership (PPP) concept has recently made inroads in Africa and become a game-changer in the agriculture sector, as it is broadened to fully include smallholder participation.

African youth are increasingly qualified, meaning the continent now has considerable business potential, which just needs to be guided and supported to promote the full development of this vibrant entrepreneurial culture. According to the African Economic Outlook 2017 report, “The entrepreneurial culture is vibrant with about 80% of Africans viewing entrepreneurship as a good career opportunity.” Opportunities are generally exploited once they arise, with 22% of the African working-age population starting new businesses, many in agriculture. This is the highest start-up rate in the world, but few African entrepreneurs are single-handedly able to invest in and develop their business. Could PPPs unlock this huge potential?

Vital alliances

African states, as well as public, national, foreign and international organisations, are increasingly receptive to calls from the African agricultural private sector and are very keen on establishing partnerships with agrifood businesses, financial institutions and other major stakeholders. This could be partly explained by the difficulties African governments encounter in fulfilling their commitment to devote 10% of their budget to agriculture, as pledged in 2003 and 2014 in Maputo and Malabo. The fact that most governments are not respecting this obligation was discussed at the recent African Green Revolution Forum held in Côte d’Ivoire, Abidjan in September 2017.

The PPP concept for agribusiness development emerged against this backdrop after the founding of the Alliance for a Green Revolution in Africa (AGRA) in 2006, with the aim of supporting the development of the agricultural sector. The concept was then spurred by the 2007-2008 food crisis, followed by the launch of the New Vision for Agriculture at the World Economic Forum in Davos in 2009, Grow Africa in 2011, and the founding of the New Alliance for Food Security and Nutrition – in partnership with African governments, development partners, major private groups, NGOs, civil society and farmers organisations – in 2012.

Emerging PPP movement

A PPP for agribusiness development is defined by FAO as, “a formalised partnership between public institutions and private partners designed to address sustainable agricultural development objectives, where the public benefits anticipated from the partnership are clearly defined, investment contributions and risks are shared, and active roles exist for all partners at various stages throughout the PPP project lifecycle.”

There are currently many different examples of PPPs. Some are regional or continental in scope, such as the Farm to Market Alliance, which connects buyers to farmers’ platforms, especially for the maize and bean trade in Rwanda, Tanzania and Zambia (see interview with Simon Costa). Other programmes help farmers to reduce postharvest losses, such as the Rockefeller Foundation supported YieldWise initiative (see Kenya field report). Whilst these partnerships focus on agricultural, industrial and food products, including cassava (see box), with the aim of developing value chains, they are not solely linked with production. In Kenya, since 2013, commercial infrastructures have also been developed via PPPs. The government leases public warehouses to private operators, with the involvement of stakeholders like the Eastern Africa Grain Council (EAGC), farmers and financial institutions. In its first year, EAGC certified 10 warehouses with a raw grain capacity of 63,000 t, while advances totalling €0.83 million in warehouse receipts were granted to more than 12,500 farmers. Four years later, EAGC works with over 88,000 farmers providing grain to 67 warehouses across Kenya, Rwanda, Tanzania and Uganda with a capacity of 175,125 t.  

What lessons can be learned?

FAO – based on its conviction that PPPs are distinctly innovative – published the 2016 report Public Private Partnerships for Inclusive Agricultural Growth, which examines 70 partnerships. By bringing together businesses, governments, farmers and civil society, PPPs are an ideal instrument for enhancing productivity, food security, agricultural investment, as well as for the development of value chains, commercial infrastructures, services for farmers, while also promoting agricultural research and technology. PPPs enable different stakeholders in a sector, including women and youth, to become organised, trained, equipped and gain access to markets and financing.

In Liberia, the IFAD-supported Smallholder Tree Crop Revitalization Project partnered with the country’s Ministry of Agriculture, the private exporting company Liberia Agriculture and Asset Development Company (LAADCO), and around 1,000 farmers to rehabilitate cocoa and coffee plantations. Rural roads were refurbished and cooperatives created, their members benefitting from capacity-building training offered by the Ministry to boost their bargaining power and reduce transaction prices. LAADCO provided farmers with technical and development services (via technicians, agronomists and supervisors), vehicles, pre-financing and guaranteed outlets for their top quality cocoa and coffee at prices at least 50-times higher than those offered by intermediaries.

However, collaboration of PPPs with banks and financial institutions still needs to be strengthened. Of the 70 cases studied by FAO, 40% were funded by private co-equity investments, 23% were funded nationally by public sector-managed PPP programmes (especially in Latin America), 22% by development projects, and 15% by subsidies or tax breaks. Financial institutions were only involved in 14 cases, which highlights the poor linkages with banks and financial markets. In the African cases studied, the most common financing was via development projects.

PPPs also enable risk management, which is especially beneficial in the agricultural sector. The governmental partner may propose agricultural insurance, subsidised inputs or ask its partners to use purchase contracts. Another advantage of PPPs for initiatives (ranging from tens of thousands of dollars to several million) is the structuring of unique partnerships tailored to the specific features of a particular project.

However, with PPPs being such a recent phenomenon, the institutional framework behind the agrifood PPP political concept is often still tenuous. Few agriculture ministries’ services are devoted to PPPs, and there is generally no dedicated regulatory framework or tailored land tenure system. Many coordination challenges between partners remain, especially due to the lack of transparency of some overly ambitious projects. Moreover, some partners often have less influence than others, with in-kind and labour contributions generally not being accounted for.

Finally, although PPPs advocate collective action and capacity building, FAO notes that it is hard to measure the impact of PPP projects on women and youth, or on reducing smallholder poverty.

A 4th essential P

These pitfalls have led to a shift towards public-private-producer partnerships (PPPPs or 4P), introduced mainly by IFAD in 2014-2015. In conventional PPPs, farmers are considered as private stakeholders alongside other partners, despite the fact that they are often smallholders with specificities that should be accounted for to ensure their full effective involvement in agricultural development.

The 4P approach stresses the importance of focusing particularly on price-setting mechanisms in contracts, good contractual performance, payment conditions, transparency, farmer training and assistance. In Ghana, for instance, District Value Chain Committees (DVCCs) have been set up to pool farmers’ organisations, input-supply companies, equipment manufacturers, processors, buyers, ministry representatives and banks. These DVCCs collaborate with elected representatives to manage activities, draw up budgets, oversee loans, select suppliers, while serving as a forum for price negotiations.

PPPs, as well as PPPPs, are still in their infancy but could prove to be a boon for smallholders provided that they are carefully managed.

Cassava – a promising processed product

Cassava, a prominent food product throughout Africa, is hampered by its reputation as a subsistence crop of low commercial value. In Nigeria, 93% of the cassava produced is consumed locally as a staple food, whereas it is a very profitable commercial crop in Brazil, Indonesia and Thailand.

To overcome this situation, the African Agricultural Technology Foundation (AATF) – with support from the UK Agency for International Development and in partnership with governments, equipment manufacturers, cooperatives and other stakeholders – launched the Cassava Mechanisation and Agro-Processing Project (CAMAP) in Nigeria, Uganda and Zambia, prior to rolling it out in Angola, Ghana and Liberia.

CAMAP has been underway since 2013 in Nigeria – the world’s top cassava producer – in a 3,000 ha area in Delta, Kogi, Kwara, Ogun and Oyo states. While prioritising women and youth, 250 farmers’ groups have been set up to date, not to mention those trained by other federal states which have subsequently joined CAMAP.

Abdulrazak Abdulwahid Alghazali, an estate surveyor, launched Path-P Agricultural Enterprises with a group of 15 young people under CAMAP in Oyo State. He explains that AATF supplied a tractor, fuel, equipment and inputs as well as training to use the tools, whilst IITA supplied improved cassava varieties. The young people provided land while benefitting from training courses on cassava-derived commodity products such as starch, flour, pharmaceutical products and ethanol.

Mokk Investments, a cassava processing company involved in CAMAP, is currently building an integrated cassava processing plant in Ogun state to produce flour and starch. The company, in partnership with the German International Cooperation Agency (GIZ) to oversee farmer training, found that many farmers had no land. Joining forces with AATF, and, with the support of Fortis Microfinance Bank and Ogun state, in 2016, the company helped around 100 farmers invest in 4 ha of land. AATF has been involved as a service provider to help farmers mechanise their farms so as to get better crop yields, says Adekunle Abdul, Mokk Investments general manager. “Prior to the launch of the AATF programme, average cassava yields were 8-10 t/ha but, a year later, farmers were already getting 20 t/ha.

Bénédicte Châtel

Other dossiers

The Technical Centre for Agricultural and Rural Cooperation (CTA) is a joint international institution of the African, Caribbean and Pacific (ACP) Group of States and the European Union (EU). CTA operates under the framework of the Cotonou Agreement and is funded by the EU.