Farmers must harness strategic role in PPPs

PPPs2

Farmers should ensure they are well positioned to play a pivotal role in Public Private Partnerships (PPPs) which will drive the agro-based Fourth Industrial Revolution, said SACAU CEO Ishmael Sunga.

Mr Sunga was addressing the 47th Brussels Briefing in February on the issue of “Involvement of farmers in PPPs: a practical example and perspectives.” He noted that the sector needed to develop a strategy which would maximise the “great potential for PPPs, including the involvement of local companies. We need practical mechanisms to ensure fairness and equity in the sharing of risk and return in PPPs.”

Mr Sunga said farmers needed to be supported to initiate PPPs on their own terms while farmer organisations (FOs), in turn, needed support to develop commercially and trade related capabilities. “We should establish a development facility for farmers’ engagement in PPPs, including investment in the higher value low risk segments of the value chain,” said Mr Sunga.

“We must use PPPs to drive the development of a younger generation of farmers,” he said.

The multi-dimensional nature of agricultural development positioned it for PPPs. “Commercialisation is a key driver of agricultural transformation. However, fragmentation and broken value chains are key impediments to the commercialisation of smallholder farmers,” said Mr Sunga.

He added that “PPPs might offer a solution to smallholder commercialisation.” SACAU has been involved in both the concept, design and implementation of PPP configurations. One example is the Value Chain Initiative (VCI). The VCI, a value chain-based cooperation to unlock value for all actors with financing based on the strength of the chain, was hosted and facilitated by SACAU.  The guiding principle was that risk was shared by all and profit was to be taken by everyone after marketing. “No one should walk away and leave farmers on their own,” said Mr Sunga.

Detailed implementation arrangements were important in the VCI programme. The roles and responsibilities of each partner were agreed in advance and an MOU was signed. About 67 farmers participated in the programme which secured a US$1.4m production loan with pre-financing of US$423,000 for inputs and services prior to the loan approval.

The programme saw productivity over the estimated 2000 hectares increase by more than 200% and gave the participating farmers enhanced access to finance. Other results included increased access to expert technical advice, services and extension as well as access to structured markets. The gross value created was in excess of US$3million.

Mr Sunga said PPPs could be an effective vehicle for smallholder development which is currently underutilised. “PPPs are effective in de-risking production, marketing and of financing smallholder agriculture,” said Mr Sunga. “The current narrative of such programmes are currently focused on global companies and the involvement of local agribusiness is overlooked. Because of this, farmers are missing out on the value they can derive from such partnerships,” he said.

Mr Sunga said trade benefits were not flowing back to farmers due to the imbalances in the governance of value chains.  “Farmers are rarely the initiators of PPP arrangements. The lack of commercial development capabilities is hampering the participation of farmers’ organisations in PPPs,” he said.