Public Partnerships with the Private SectorAIP-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

14

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PRISMA Deal-Making GuidelinesStage 1: Partner Identification

Deal-Making GuidelinesStage 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 GuidelinesStage 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 GuidelinesStage 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

PRISMA Deal-Making GuidelinesStage 4: The Activity Plan

Proportions:

Aim for ~30%-70%

But 50-50 is OK

Exceptions for Special remote areas

Special sectors

Higher risks

Expect our portion to reduce as staff become more experienced

PRISMA Deal-Making GuidelinesStage 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 Inte

rven

tion

Farm

ers

PRISMA Deal-Making Guidelines

Model “B” (3rd Party)

PRISMA

Partner Inte

rven

tion

Farm

ers

3rd Party

Stage 5: The Written Agreement

PRISMA Deal-Making Guidelines

Model “C” (Grant)

PRISMA

Partner Inte

rven

tion

Farm

ers

Grant

Stage 5: The Written Agreement

PRISMA Deal-Making Guidelines

Model “D” (Outsourced - Parallel)

NGO

Partner Inte

rven

tion

Farm

ers

PRISMA

Stage 5: The Written Agreement

PRISMA Deal-Making Guidelines

Model “B” (Outsourced - 3rd Party)

NGO

Partner Inte

rven

tion

Farm

ers

3rd Party

PRISMA

Stage 5: The Written Agreement

PRISMA Deal-Making Guidelines

Model “D” (Outsourced - Grant)

NGO

Partner Inte

rven

tion

Farm

ers

PRISMA

Grant

Stage 5: The Written Agreement

PRISMA Deal-Making GuidelinesConclusion:

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