Public Partnerships with the Private Sector AIP-RURAL

The Partnership Rationale: The Donor Perspective:  The political appeal of coupling development objectives with economic benefits for the business community  The appeal of achieving “value for money” by using donor money to leverage private resources to generate impact  The appeal of not having a project “peter out” when the funding for it dries up or the fad changes  The appeal of reaching some form of real scale through other private sector firms crowding in.

The Partnership Rationale: The Private Sector Perspective:  Accessing initial funds for activities that are pre-commercial but have relevance to existing and future business  Benefitting from new knowledge or technology from more advanced organizations or countries  Harnessing the core “development expertise” of partners familiar with alternative models of farmer productivity and capacity building  Using the existing structure and networks of aid agencies to operate more efficiently in new markets Source: DCEDWorkingPaper_PartnershipsforPSDLearningFromExperience_26Mar2013%20(1).pdf

Common Delivery Approaches  Matching Grants  M4P  Inclusive Business  Public-Private Partnerships Donor Initiated Business Initiated Government Initiated

AIP-Rural (M4P) Key Principles of Intervention Identification:  Start with a measurable target group need  Explore how it can be delivered sustainably  Find a willing and (sometimes) competent partner for delivery  Co-invest with them to reach a reasonable scale

AIP-Rural (M4P) Sounds simple but it is inherently “messy” with lots of variables The problems:  Working with public funds  Limited information about the market and the partners  Partners are either suspicious or want you to fund all their costs  Staff are nervous of the private sector and unsure of their own offer  In weak markets the risk to reward ratio is high for the partner  Partners want exclusive early advantage

AIP-Rural (M4P) Its is a miracle any deals get made! What helps?  Information and analysis on the market, trends, players etc.  Knowledge of what has worked and where and who can solve this  Processes to guide staff through this “minefield” √

AIP-Rural (M4P) What we have to share:  Deal-Making Guidelines  Capacity Building modules for this  Procurement Guidelines

Deal Making:  A grey area with a lot of posturing  A lot of variations and exceptions  Not too much written about the details of how  Left up to the projects mostly to find their way  Balancing flexibility with accounting

PRISMA Deal-Making Guidelines (from tacit to explicit knowledge): s Stage 1: Identify & assess potential partners Stage 2: Make the initial collaboration pitch Stage 3: Agree the business model & broad strategy Stage 4: Agree the detailed activity plan & budget Post-deal: Sign an agreement

PRISMA Deal-Making Guidelines Stage 1: Partner Identification

Deal-Making Guidelines Stage 2: The Pitch  Defining the value proposition  What elements are of interest to the partner  What elements are of dis-interest to partners

PRISMA Deal-Making Guidelines Stage 3: The Business Model & Strategy  How will the partner(s) benefit  How will the farmers benefit  How will it be delivered at scale  Agreeing on the results chain

PRISMA Deal-Making Guidelines Stage 4: The Activity Plan  What needs to be done  In what sequence  By whom  And at what cost

What we pay for…What they pay for… Inputs that are most important to us Inputs that are most important to them Costs that are more “one off” Costs that are more recurrent Cost that diminish investment risks Cost that are typical for any investment Generic demand stimulation Advertising Targeted partner capacity building Staff dedicated to the intervention PRISMA Deal-Making Guidelines

Stage 4: The Activity Plan Proportions:  Aim for ~30%-70%  But is OK  Exceptions for  Special remote areas  Special sectors  Higher risks Expect our portion to reduce as staff become more experienced

PRISMA Deal-Making Guidelines Stage 4: The Activity Plan Partner contributions:  New personnel  Existing but dedicated staff  New assets  New Working Capital  Raw materials  Operating costs  Loans to farmers

Stage 5: The Written Agreement PRISMA Deal-Making Guidelines Model “A” (parallel) PRISMA Partner Intervention Farmers

PRISMA Deal-Making Guidelines Model “B” (3 rd Party) PRISMA Partner Intervention Farmers 3 rd Party Stage 5: The Written Agreement

PRISMA Deal-Making Guidelines Model “C” (Grant) PRISMA Partner Intervention Farmers Grant Stage 5: The Written Agreement

PRISMA Deal-Making Guidelines Model “D” (Outsourced - Parallel) NGO Partner Intervention Farmers PRISMA Stage 5: The Written Agreement

PRISMA Deal-Making Guidelines Model “B” (Outsourced - 3 rd Party) NGO Partner Intervention Farmers 3 rd Party PRISMA Stage 5: The Written Agreement

PRISMA Deal-Making Guidelines Model “D” (Outsourced - Grant) NGO Partner Intervention Farmers PRISMA Grant Stage 5: The Written Agreement

PRISMA Deal-Making Guidelines Conclusion:  Know what you want from the partner  Explore their delivery alternatives  Identifying their “pain point”  Don’t rush the deal  Be firm on principles bur flexible on details