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PPPs to ensure food security and agricultural development

Fourth session in the cycle on:

The development of Public Private Partnerships (PPP) for common interest

Click here to view a summary of the event

22 October 2015

Speakers

Regis Meritan
Head of the Sector "Agriculture Growth" in the Directorate General for International Cooperation and Development of the European Commission (DG DEVCO).

Zoé Druilhe
Liaison & Policy Officer with the EU, FAO

Joël Le Turioner
Agri-inputs accessibility and subsidies expert, S.A.S. AfricAgriConsult

Moderator

Nicolas Vincent

Given population growth and rising incomes, the demand for food could rise by 60%(100% in Sub-Saharan Africa) by 2050. To meet this demand, the United Nations estimates that production in developing countries will need to almost double, while at the same time preserving a fragile natural resource base. Therefore, sustainable agricultural development is crucial to feed the world in the forthcoming years.

In this context, Public Private Partnerships (PPPs) are a promising instrument to address the challenges of ensuring food security and developing rural economies. They offer the possibility of modernising agriculture and invigorating rural economies, facilitating smallholder farmer jobs and creating a favourable environment complete with crucial infrastructure. Successful PPPs gather experts which are committed to achieving a common goal and work within a collaborative structure.

An ambitious objective for food production – and its impact on investment
Régis Meritan, from the European Commission’s DG DEVCO, opened the debate with a historical perspective on EU external assistance in the area of food security. “Following the food crisis of 2007-2008”, Mr Meritan said, “there has been a real interest from partner countries, asking the EU to help them reinvest in agriculture”. The emphasis was on food security and food sovereignty. Simultaneously, the private sector was showing a renewed interest to invest in agriculture in developing countries — in Africa more particularly. Mr Meritan also stressed another trend: “the rise of a real pressure from consumers in Europe for what we call ‘sustainably sourced products’ or ‘sustainable supply’”.

Achieving food security for all  by 2050 is a tremendous challenge that “cannot be done without investments in sustainable intensification of agriculture”, said Mr Meritan. But where will the resources be found? “A big part of our cooperation”, Mr Meritan answered, “is aimed at establishing a dialogue with governments on public policies but we all know that public investment will not be enough and we need private investment”.

Looking at agricultural value chains, from the farm to the final consumer, investments are generally very risky for private investors, as they have to deal with small entities which are subject to hazardous and unpredictable events, such as weather conditions. This is when the public sector comes in: “we could try to use public cooperation funds to make these risks more acceptable for investors and farmers”, said Mr Meritan, who presented a relevantEU financial instrument in this respect, called AgriFI (for Agriculture Financing Initiative).

Zoé Druilhe, Liaison & Policy Officer with the EU for the FAO, explained that stimulating private investment was a common concern for the European Commission as well as for the FAO. “Both organisations”, she added, “are trying to catalyse public support so that private investment can be scaled-up”.

Specifics of PPPs in food security and agricultural development
“Why do we have PPPs in food security and agriculture?”, Ms Druilhe asked.  In order to achieve the goals of the international Post 2015-agenda to eliminate poverty and hunger, food insecurity and malnutrition, we must increase investments in agriculture, from public and private sectors as well as civil society engagement: “we need much more investment, better investment – and more coordinated too – this is where PPPs become interesting opportunities because they bring-in additional resources from the private sector”. PPPs also have other benefits: opening up projects to private partners means additional expertise in innovation and technologies which benefit and modernise agro-value chains. Furthermore, PPPs help to share the risks.

Making PPPs sustainable
 “PPPs are very much about tapping into the power of innovation in the private sector while pursuing sustainable development policy objectives”, she stressed. In order to be fully sustainable, PPPs have to achieve economic, social and environmental objectives
There are positive trends in this respect. At the Committee on World Food Security (CFS) in 2015, for the first time, the international community agreed to define what a responsible agricultural investment is. “Those principles are voluntary”, added Ms Druilhe, “they complete the voluntary guidelines on the good governance of the tenure of land, fisheries and forests, another set of guidelines agreed at the CFS”. The latter explains how to deal with tenure rights and the rights of people over natural resources.Ms Druilhe added: “the private sector is now turning its attention very much towards sustainable sourcing and marketing of agricultural products”. So, as developing countries become very important markets for them, they have voluntarily adopted sustainable sourcing strategies committed to sourcing from smallholders and helping them to improve their productivity and integration into modern value chains, putting emphasize on women and youth.

Key ingredients to a successful PPP

The third panelist of the session was Joël Le Turioner, agri-input accessibility and subsidies expert, from S.A.S. AfricAgriConsult. Mr Le Turioner shared his practical experience on the ground “a basic concept for a PPP to work is to create good conditions for the value chain to work and be sure that all the actors in this value chain gain something”. He added, “If one has no interest in the business, you can forget about the partnership.”
This leads on to a critical question in his view: what is the interest and the added value for each stakeholder?

Mr Le Turioner took an example, the case of subsidies for fertilisers, seeds or any other way of trying to improve productivity with the final objective to reduce malnutrition. He explained: “donors will want to know how their money is used, the national government involved wants to know what could be the impact of the programme, the private sector wants to be sure to be paid”. This heterogeneity shows why it is important while implementing such PPPs to work with all actors before designing operations. To which Mr Le Turioner added: “at the farmer’s level you can improve the productivity but are you sure that the price will still be ok after this increase of production? Price could indeed fall as it was the case in Malawi: the subsidy was a great success but the price of corn was too low to continue.”

Examples of best practice
Mr Le Turioner used an example to make an important point: “you have to think about an exit strategy when you start implementing a subsidy programme”, he warned, before showcasing a successful programme in Burundi. “We started working on a national fertilisers subsidy programme three years ago, where a lot of donors contributed to a basket fund and, for this programme, farmers are using vouchers”. Vouchers help guarantee that the subsidy is in the hands of the farmer. When farmers are dealing with distributors they are certain to have fertilisers available and the distributors are sure to be paid. It is a value chain where everyone is involved and sure of having its interest fulfilled.
Régis Meritan stressed the importance of live monitoring, with measuring tools defined at the design stage of such programmes. “When you subsidise fertilisers in Burundi, after 3-4 years you can follow exactly how farmers’ revenue or the price of fertilisers are evolving”, he added. The import-to-export ratio that affects price can also be monitored, and one can therefore monitor the effect on the balance of payments of the subsidised country. Corrective actions are therefore easier and faster to implement: “you can easily make an analysis and see whether subsidies benefit the farmer”, he said, “but also the global macro-economic environment of the country”. Ex-post assessment is interesting too but it comes too late to take the necessary actions, in Mr Meritan’s view.

Ms Druilhe confirmed: “it’s all in the design”, she said. “Programmes are all different but if they are well designed they are going to work much better than the contrary. It involves conducting feasibility studies as much as you can and it involves talking to all the stakeholders and making sure that everyone can have a say”.  Mr Le Turioner added that this design stage needs to include the exit strategy.

PPPs in practice
A question from the floor dealt with the role of NGOs to bridge the gap between the commitments made from new alliances and investments on the ground. Mr Meritan's answer was twofold:

1. The Commission is going to launch a call for proposals by the end of 2015. It intends to allocate grants to partnerships between private sector companies engaged in CSR practices and NGOs, farmer organisations as well as organisations which comply with certain criteria
2. The Commission is granting the European Financial Institutions with a first envelope of €40m to specifically fund this type of partnership reaching this “missing middle”
PPPs usually target infrastructures or energy projects but the tendency could change. Mr Meritan said: “there is a strong willingness from the European Commission side and from our partner countries to invest and push for agricultural growth”. The key remains to convince investors at the inception stage.

The future of PPPs
What is the outlook for PPPs in the sector? Ms Druilhe gave her view on the current trend: “there is a huge momentum in talking about private sector investment and how the public sector can catalyse these investments”, she said. This goes beyond words and promises: financial commitments are underway and greater accountability in the decision-making process will make it happen. Ms Druilhe also sees potential for greater collaboration between partners: “FAO, as well as other UN agencies such as UNIDO,-,have mandates which deal with agribusiness development and we should really work together to make this happen”.

As the session was concluding, Mr Meritan added his final thoughts: “we should as well keep in mind that PPPs are just a tool, not an objective per se”, before reminding the audience the real objectives were stimulating growth and reducing poverty. “For this we need appropriate public policies”, he added. The role of governments is therefore essential, Mr Meritan cautioned.