A good financing strategy is indispensable for any public private partnership to get through the so-called Valley of Death and start scaling, which is why financing strategies are a central topic in the PPPLab knowledge agenda. At the Africa Works conference (10-11 November 2016), a number of companies active in Africa emphasized the importance of using grants as catalytic first-loss capital, or for investments in system change.
The PPPLab workshop at Africa Works, called ‘It’s the business case, stupid’, attracted a large crowd, offering a “sneak preview” into our findings on the PPPCanvas, scaling strategies, pioneering stages and the Valley of Death (Figure 1). The animated discussions reconfirmed that the topics are indeed key issues for organizations active in PPPs and areas in which navigation tools are much needed. Participants felt that the topics of scaling and financing strategies were indeed very much interlinked. Especially the importance of grants, to get through the risky, early stages of PPPs and to incorporate work on system change was highlighted. However also in the so-called Valley of Death, using grants in a smart(er) way is in the interest of both the grantor and the recipient. Using grants as catalytic first-loss capital or for investments in system change that allow scaling are great ways of leveraging private sector resources.
While the typical investor may only be interested in financial return on investment, the PPPCanvas makes clear that also impact or social return on investment have an important value. This was discussed in the PPPCanvas group session in which some noted potential tensions between social and business objectives, while others emphasized the opportunities that a combination of social and commercial objectives offer. It was good to see that also in several other sessions of the Africa Works conference impact investors, inclusive business was high on the agenda.
The trend of impact investing and blended finance is captured in Figure 3, connecting the earlier separated worlds of grants and commercial investments. One dimensional investment focused on profit only is being increasingly overshadowed by investors that are also influenced by other factors, showing commitment to ‘people and planet’.
The workshop confirmed the relevance of this focus area of the PPPLab: financing strategies for PPPs. A new issue of our “Insight Series” was developed as a sense making booklet on innovative financing mechanisms, and how these could be relevant for PPPs. The booklet builds on our earlier work on business models for which we developed the PPPCanvas. The booklet will be launched and discussed at the PPPLab workshop on 1 December 2016 at the New World Campus.