Supporting good governance through PPPs for transformational change

“What is the potential and place of public-private partnerships (PPPs) to catalyse transformative change in the agriculture and food sector towards the SDGs?” A small group held an open conversation about this at the invitation of the PPPLab recently.

If we are to tackle the big inclusion and sustainability challenges in agriculture and food systems, both private and public sectors have to be effective at their roles and join hands. This is good governance, the focus of the discussion. The public sector needs to play a reliable role in setting and supporting the goals for agrifood system transformation. Private sector is there to set up market-driven initiatives that contribute to necessary transformation and have the potential to scale.

Three main roles of PPPs in working towards good governance were discussed:

  1. Stimulating innovation by private actors with others
  2. Investing in an enabling environment, including effective public institutions and regulation setting and enforcement
  3. Reducing commercial risks in tackling system change.

The first point, the innovation side of PPPs, was undisputed and thus little discussed. Innovation included introducing effective practices from elsewhere.

The ‘hot topic’ was the second point. In creating enabling environment and regulations, the role of PPPs was compared with that of certification bodies for sustainable agriculture / products. Certification was referred to as a (private sector driven) mechanism of assurance that is necessary when other (state) assurance systems do not adequately provide guarantees that the market needs. But experience shows that certification does tend not to get beyond 10-20% of the overall market in a commodity; as a solution it only goes so far. Some PPPs are playing a role in stimulating better governance systems that in the long run provide structural assurance, thus by-passing the need for certification. Examples were given (for example in sugar in India and in cocoa in Western Africa) where, even in fairly dysfunctional state systems, ‘pockets of effectiveness’  are found and used to pursue major changes.

Another example given was of Seafood Task Force in Thailand that brought together fishery companies with local and national governments to tackle a range of issues, including offshore slavery. Norms appropriate working conditions were set, as well as implications of non-compliance. The transformational dimension lies in changing the rules of the game, as well as creating an enforcement mechanism. Enforcement was repeatedly emphasised as essential to transformation: a credible system for assuring compliance can lead to much greater change than worrying about which detailed criteria should be enforced.

The third role of PPPs, reducing commercial risks for companies, was briefly mentioned. For example, the extra risks and costs associated with starting to source from very large numbers of smallholder farmers. However, this was not given much emphasis; it was mainly considered a way to get companies to engage with specific activities that at the start may have a higher investment or reputational risk.[1]

One weakness limiting any transformational potential of PPPs is the skill set of private sector actors to collaborate effectively, with one another and particularly with government. ‘Corporate empathy’ was seen as a quality that needs structural building within companies so that they a) want to collaborate, both with other private companies and with non-private sector actors and b) are able to collaborate.

Moving to transformation often requires a hop, skip and jump. Short-term tangible actions bring parties together and give them a sense of collective progress. PPP driven innovation can provide that first hop. Collective action and progress can then lead to the skip and jump of wider application and broader innovation. An example came from Nigerian agrifood transporters who found their market unstable and stagnant as prices charged were all over the place. Collective action led to private-sector generated cost price calculations, which government used to set up standards for transport costs.

As PPPLab we were struck by the focus on setting up good governance, including regulation, as a key transformation that PPPs can generate. Within the FDOV portfolio there is quite some emphasis on ‘horizontal scaling’ of business models: scaling within the regulations and governance that exist. Looking at other experiences suggests PPPs may need to support ‘vertical scaling’ processes more, that target value chains and sector governance. This could have a deeper impact in the longer run and can connect to instutition building often supported by government-to-government programs.

We look forward to carrying out interviews with several others who showed interest but could not attend the roundtable, and will likely hold a second session.

[1] This is quite different from more infrastructure oriented PPPs, such as discussed in the water domain, where PPPs are often a way to leverage more investments from the private sector and engage in long-term joint engagement / contracts on service delivery.