Lessons in Implementing Partnerships for Seed Technology Commercialization
This is the second of a three-part series exploring lessons learned on commercializing seed in smallholder markets in sub-Saharan Africa. The first installment looked at the factors that need to be considered for understanding seed markets, such as demand and distribution networks. The next installment will use an example of a partnership in Mozambique to illustrate the lessons presented in the first two installments.
Access to improved seed is an important step in increasing smallholder productivity, and understanding the systems that produce and deliver appropriate seed varieties in a timely manner to farmers and the factors that drive the success of those systems is paramount. Between 2014 and 2016, Feed the Future Partnering for Innovation, a USAID program that invests in private sector partnerships to commercialize agricultural innovations in smallholder markets, has supported six partnerships designed to stimulate commercial seed markets in Feed the Future countries, including Mozambique, Malawi, Zambia, Kenya, Tanzania and Uganda. The value of these partnerships totals $32.5 million, including $20 million in partner leverage. Partnering for Innovation distributes payments to partners in tranches dependent on partners meeting agreed-upon, time-bound, commercial milestones. Each of these partnerships presents valuable context-specific lessons, as well as lessons that are applicable across countries and technologies.
Engaging Private Sector Partners: Private sector partners are absolutely crucial in any commercialization initiative. They are the actors with the market incentive to produce, process and distribute seeds in the marketplace that result in attaining scale and sustainability.
- Commercial actors, from global agribusinesses to local seed companies and rural agrodealers, are the entities that will continue activities beyond the life of the project if and when technologies are determined to be profitable without donor subsidy.
- Aligning development objectives and commercial objectives up front is important. Commercial actors set targets based on volume or value, rather than social indicators. In some cases, development objectives of engaging smallholders in their supply chain may run counter to partners’ commercial objectives of meeting volume targets profitably.
- Commercial partners are often unfamiliar with donor reporting requirements. Narrative written reports and donor-oriented monitoring and evaluation methodologies are often distinct from their internal systems and processes for monitoring their commercial performance. Structure partnership agreements to minimize commercial partner reporting requirements, focusing on their sales and procurement records as means of verifying progress.
Engaging Nonprofit Partners: Nonprofit organizations, whether they are local or international NGOs, are often an important bridge between a global partnership program and the private sector.
- Commercially-oriented seed companies are often unaware of and unconnected with donor-funded procurement processes, so nonprofit partners can play an important role in organizing local private sector consortia and facilitating their initial investments in seed technologies.
- Nonprofit partners bring experience managing donor-funded projects. On the other hand, directly engaging with commercial partners often offers efficiency in lines of reporting and project resource utilization.
- Nonprofit partners do not typically risk their own capital in seed markets. Milestone-based payment mechanisms often work better led by commercial partners than nonprofit partners, because the latter do not expend working capital to support costs prior to accomplishing a target. Commercial partners view these costs as business related investments. Nonprofits may also promote sourcing and distribution arrangements to meet development goals that without a donor subsidy would not be commercially viable.
Setting and Managing Targets: Establishing and overseeing project targets are crucial responsibilities for implementing a successful seed technology commercialization partnership. It is important that targets are reasonably attainable, adaptive and based on commercial projections.
- A milestone payment structure for partner agreements provides a strong incentive for partners to achieve commercial targets on time. Time-bound performance milestones are critical, although flexibility to account for market-related performance delays can be beneficial. For instance, performance milestones may be cumulative over the life of a project to trigger a payment “when attained.”
- Commercial targets are set based on market projections at the time a proposal is written or contract negotiations are taking place, but markets are dynamic and constantly changing. Where environmental events (drought, flood, etc.), political events (conflict, etc.), or market events (output markets dry up, competition increases, currency devalues, etc.) take place unexpectedly, flexibility to modify originally established commercial targets is also important.
- Seasonality is a critical consideration in setting and managing targets. Streamlining processes to complete partnership negotiations within 60 days helps ensure an accurate forecast of project commencement and the alignment of project implementation and milestone due dates with planting/growing seasons.
Partnership Interaction: Milestone-based projects operating in one or more complex market environments require close collaboration between implementing partners, local USAID and other development partner teams, and partnership managers. Below are several lessons learned related to partnership interaction:
- Periodic visits by project staff and lead partners to remote project sites are crucial to understand and rapidly address any practical challenges faced on the ground.
- Commercial sector partners are often unaccustomed to the level of oversight necessary on donor-funded initiatives but recognize and appreciate its utility when interaction is focused on advancing commercial objectives and performance.
- Commercial partners often require support to transition and scale from project support to longer-term financing options, including donor capital, impact investors or traditional credit markets.