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Business insights: Todd Kirkbride, TechnoServe

Investment advising as a catalyst to creating shared value

By Todd Kirkbride29 August 2013

Employees at a tree nursery in Nampula province, Mozambique, load seedlings for shipment to a commercial agro-forestry plantation. NGOs can play an important role in helping investors identify business opportunities that also provide social benefits. Photo: TechnoServe.

When it comes to creating a market-entry strategy, investors don’t know what they don’t know. Investors smart enough to realize this aim to collect as much accurate information as possible about the investment climate, on-the-ground business realities and growth opportunities. To gather this information efficiently, investors must quickly connect with advisors who can help them map out all possibilities—including ones they didn’t know existed.

TechnoServe Mozambique, having been in-country for over 15 years, has positioned itself as a first stop for foreign investors wanting to explore agribusiness opportunities in Mozambique. As part of our global mission to work with enterprising people in the developing world to build competitive farms, businesses and industries, we’ve developed an innovative approach to connecting international investors with local investment opportunities in agribusiness.

Given the difficulties investors face in attracting low-cost capital, advisory services are essential to help investors realize opportunities within the agribusiness sector. TechnoServe’s director of advisory services works directly with these investors. 

Initial conversations between our director and investors focus on the overall investment climate and legal requirements; learning about debt and equity capital raising opportunities; understanding the competitive landscape; receiving advice on optimal balance sheet structures and cash projection models; preparing comprehensive business plans; and building detailed financial models.

Because of TechnoServe’s development mission, however, the conversation does not end there.

In my role as public-private partnerships director, I then introduce investors to a strategy they might not even have known existed: public-private partnerships for development. These partnerships are collaborative arrangements among the private sector, government (donor and national) and civil society that address jointly defined business and development objectives.  

I explain the benefits of using a shared value approach to leverage in-country capital, resources and expertise to further their business objectives while also providing a social good to the communities among which they will operate. These partnerships can not only accelerate an incoming business’ ability to operate successfully in a new country, but also help it draw down risk while capitalizing on other investments.

Rather than focusing exclusively on their own goals, investors are encouraged to see how their goals intersect with those of international donors, national governments, local businesses and civil society. 

So how do investors transition from traditional capital investment to a shared value approach? Based on my experience in the field, here are the three key steps to building effective partnerships for development.

1.      Know thy neighbor

The traditional landscape analysis should be expanded beyond an investor’s usual operating environment. In a shared value relationship, governments can transition from regulators to facilitators. Competitors can become collaborators. NGOs can evolve from antagonists to advocates.

In most emerging markets, the international donor community has programs and investments to address the full range of social issues, from health to education to economic growth to rule of law, and ideally these programs support the national government agenda.  But only recently have donors started to recognize the value of partnering with the private sector to further their own development goals and provide the long-term sustainability that their assistance may not afford alone.

This pursuit of development objectives does not have to come at the expense of business. Rather, it can actually strengthen the private sector’s long-term positioning. To capitalize on these opportunities, it takes an organization with an intimate knowledge of all these programs related to a particular sector – in the case of TechnoServe in Mozambique, that sector includes agriculture, horticulture, livestock, forestry and tourism – and on-the-ground connections within the donor and national governments to draw the linkages and explore PPP possibilities.

The strengthening of the social fabric and enabling environment upon which businesses depend to operate successfully cannot be created in isolation, nor is this social strengthening a core business competency. Yet without it there may be no business at all.

Through the PPP model, companies may join forces to share the challenge of addressing the gaps in the marketplace, whether it is skilled labor, access to capital, or supply chain systems. This space is often best served when larger international companies connect with local businesses to produce a win-win situation of scale and resources balanced with local context, connections and expertise.

Historically, businesses and nonprofit organizations have been at odds with one another. However, this relationship has been evolving over time and through public private partnerships benefits can be realized by both.

NGOs not only serve as strategic implementing partners for donors, national governments and the private sector to manage and execute PPPs, but they can also provide a critical link and insight into the local communities and their challenges.

For example, in Mozambique where access to land is such a critical and controversial issue, TechnoServe has taken a lead on advising investors and communities with land consultation processes. Engaging the public from the outset of a project and continuing to interact with those communities post-investment is a key for the commercial success of large-scale agricultural, forestry and tourism investments.

2.      Talk the walk

Although the goal of any investment or partnership is to “walk the talk” as soon as possible, it’s important at the outset to spend time in conversation with stakeholders to agree on the overall objective and best format for implementing a PPP.

By adhering to three core principles of cross-sector partnerships – equity, transparency and mutual benefit – organizations involved will be able to identify their own goals and motives for participation and thereby accelerate negotiations around the PPP’s common objective.

This does not mean one organization’s objectives have to come at the expense of the other’s; rather, in creating shared value, these goals become complementary.

Sometimes during this process of initial consultation, an organization may fall out of the partnership and new ones may be identified that can contribute to the common vision.  This turnover is all part of “the dance” of building relationships and trust among organizations with very different cultures, operational styles and timelines.

With a common destination now in mind, organizations can figure out the best way to arrive there. 

One of the best tools in this sometimes long and tedious process is drafting a Memorandum of Understanding or partnering agreement. As this is usually a non-legally binding document, the value is more in the process stakeholders go through in order to put the structure and the activities of the partnership down on paper than the document itself. Signing the MOU, however, can provide a nice press opportunity to launch any PPP.

Also, a core team comprised of a representative from each organization should agree to serve as the main governance team. These individuals are responsible for representing their organization to the partnership and, in turn, representing the partnership back inside their own organization – especially to senior management, as their buy-in is critical for successful implementation.

This core team can then define a work plan, which identifies who is responsible for what and according to what timeline. This work plan should include clear milestones that indicate commitment and success, so that each stakeholder can be held responsible by the collective group.

Lastly, do not underestimate the amount of time required for a particular person or organization to be responsible for the partnership as a whole. PPPs are not easy and need constant attention and communication by skilled brokers and managers to ensure success.

3.       Show us the money

Through PPPs, investors and companies can do well by doing good. It is fair to expect a return on financial capital but, in today’s emerging markets, this ROI should also be measured in terms of natural and social capital.

A company’s own investment strategy can run in parallel with its contributions to a shared value partnership – and that strategy may even be furthered by assets leveraged from other stakeholders.

A critical point of differentiation is that shared value partnerships are not traditional corporate social responsibility investments. Although these philanthropic funds are happily accepted and valuable in advancing a company’s PR or community charity work, they are usually unsustainable and not linked to an organization’s core assets. By capitalizing on each stakeholder’s primary business drivers, including products, services, R&D, market access or technical expertise, the partnership becomes greater than the sum of its parts.  

TechnoServe has been applying this approach to its work with numerous international agribusinesses that want to operate in Mozambique as producers, processors or traders. While these companies primarily focus their investments creating or expanding their own operations, the creation of a partnership platform aligned with the national government’s agriculture strategy and international donor programs can help finance out-grower schemes upon which more sustainable and scalable business expansion can be built in the future.

In linking together technical assistance and organizational structures within an extension service program for farmers, which includes access to financial mechanisms, TechnoServe provides a new opportunity for communities to improve their livelihoods by strengthening their enterprises.     

When investors and companies can widen the lens through which they see opportunities in emerging markets, they can create shared value, which not only benefits donors, national governments, civil society and the private sector, but most importantly the people that are trying desperately to make a better life for themselves and their families.

With so much work yet to be done and increasingly scarcer resources available, it is imperative that investors and others with the power and capital to catalyze change consider implementing these type of partnerships. And nonprofits in the field have an important role to play in helping these investors learn about these opportunities. 

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