understanding private sector development c/o profit’s approach june 2007 ewb canada s.africa ltov...
TRANSCRIPT
UnderstandingPrivate Sector Development
c/o PROFIT’s Approach
June 2007 EWB Canada S.Africa LTOV QMSiavonga, Zambia || Chad Hamre, Ka-Hay Law
Solutions
• High Mortality - What are the typical solutions?
PROFIT’s solution is different:– Understand (Value Chain Framework) and
strengthen (Market Faciliation) Zambia’s beef industry’s value chain for the benefit of both Zambia’s economic growth and increased income/security for farmers.
• To be successful, you need unique field staff skills and organizational structures.
Expectations
1. Interested in PSD and value chains2. May be applicable to your work? (technical or
Org)3. You want to pick holes in the idea.
Caveats:– Trying to make resource for EWB
– First time, questions and feedback please!
– Content rich presentation
– Relate to Beef Industry for concrete examples
Specific Objectives
1. Introduce basic PSD concepts and history.
2. Share PROFIT’s Approach to PSD
3. Highlight PROFIT’s Organizational structure,
culture and challenges.
4. Relate to your experience and focus area
Overview
Introduction 5 min
Part 1: Introduction & BIG IDEA 20 min
Part 2: The PROFIT Approach 60 min
Part 3: What’s in it for me? 20 min
Summary/Conclusion 5 min
Part I: The BIG IDEA: PSD
• “PSD is a strategy for promoting economic growth and reducing poverty in developing countries by incorporating private industry and competitive markets into a country’s overall development framework.”
• PROFIT’s rendition: Increased industry growth while assuring meaningful poverty reduction at the household level.
• What is Private Sector Development?
Important Terms
• Value Chain
• SME
• Industry
• Upgrading
• Market Facilitation
• Competitiveness
• Competitive and Comparative Advantage
Demand Supply
SUPPORTING FUNCTIONS
RULESLaws
Info
rmal
rule
s
& no
rms
Standards
Regulations
Information
Infra
stru
ctur
eRelated
services
Business membership organisations
Government
Private sector
Not-for-profit sector
Informal networks
Enabling Environment Players
VALUE CHAINInputSuppliers
Producers Wholesale Retailers
Value Chain
Value Chain Framework
Financial (cross cutting)
Financial (cross cutting)
Sector-specific providers
Sector-specific providers
Cross-cutting providers
Cross-cutting providers
ProducersProducers
Input SuppliersInput Suppliers
WholesalersWholesalers
National RetailersNational Retailers
ExportersExporters
Global RetailersGlobal
Retailers
BuyersBuyers
Global Enabling Environment
Local / National Enabling Environment
Financial (cross cutting)
Financial (cross cutting)cutting)
Financial (cross cutting)
Sector-specific providers
Sector-specific providers
Sector-specific providers
Sector - specific providers
Cross-cutting providers
Cross-cutting providers
Cross-cutting providers
Cross-cutting providers
ProducersProducers
Input SuppliersInput Suppliers
WholesalersWholesalers
National RetailersNational Retailers
ExportersExporters
Global RetailersGlobal
Retailers
BuyersBuyers
• Firms
• Linkages
• Input Markets
• Support Markets
• End Markets
• Inter-firm Cooperation (horizontal and vertical)
• Enabling Environment
Important Terms
• Value Chain– Firms, Linkages ,Input Markets, Support Markets, End
Markets, Inter-firm Cooperation (horizontal and vertical), Enabling Environment
• SME• Industry• Upgrading• Market Facilitation• Competitiveness• Competitive and Comparative Advantage
PSD Today
• 60’s: Broad regional economic strategies and implemented policy
• 70’s: Comprehensive infrastructure projects.• 80’s Competitive advantage vs. comparative only• E90’s: Business development services (BDS) • M90’s: Market facilitation to affect the value chain
minus participating.• 90’s: Micro-enterprise development
Is PSD a new concept in development?
Example and Insight.
Learning of mid nineties
+ Industry wide approach
So is PROFIT entirely innovative?
Value Chain
PROFIT APPROACH
Market Facilitation
+ =
*Innovation
Sustained Competitiveness
Part II: The PROFIT Approach
• Implementation Process• The Two Main Components
– Value Chain Framework– Market Facilitation
• Management Tools– Causal Models– Pathways
• Field Staff– Management Methodology
• Limitations
Implementation Process
Value Chain Potential and Constraints
Analysis
Intervention Targeting Analysis
Sub-sector Selection and Design Phase
Awareness Building and Commercial Relationship
Targeting
Agreements/ Contracts
Finalized and Signed
Relationship Building and Negotiation
Scale up and Exit Phase
Transactions Initiated and Monitored
Expansion and Exit
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Value Chain Framework
• Sub-sector Selection– Lead firm– High number of small holder
participation– Growth potential
• Identifying Competitive Advantage • Value Chain Analysis
– Enabling Environment– End Markets– Inter-firm Cooperation– Support Markets
• Sustaining Competitiveness
ProducersProducers
Input SuppliersInput Suppliers
Wholesalers
National RetailersNational Retailers
ExportersExporters
Global RetailersGlobal
Retailers
BuyersBuyers
ProducersProducers
Input SuppliersInput Suppliers
Wholesalers
National RetailersNational Retailers
ExportersExporters
Global RetailersGlobal
Retailers
BuyersBuyers
Speedy Analysis (BEEF)
• Sub-sector Selection– Lead firm – High number of small holder
participation– Growth potential
• Identifying Competitive Advantage
• Value Chain Analysis– Enabling Environment– End Markets– Inter-firm Cooperation– Support Markets
• Sustaining Competitiveness
Examples:
Vet Services
Outgrower model
Grades based pricing for abbattoirs
YESYES - ZAMBEEF
YESYES
Market Facilitation
• WHY: To build industry competitiveness with a strategy that:– Fosters industry and firm capacity to have effective
relationships, learn and innovate, and encourage rational flow of benefits
– Fosters a greater role for PS and more strategic role for others (gov, donors, etc.) who should not participate
• HOW:– Sequenced interventions ( ‘light touch’ buying
down risks)– Clearly defined exit strategy before entering
Market Facilitation
• Vet Service Functions– Market Research
– Identifying communities
– Linking Vet to Communities
– Business support to vet
– Shared promotional events
– Subsidized training of CLWs
– Vet networking meetings
Management/Planning Tools
• Causal Model – broad planning and donor pleasing.
• Pathway – flexible management tool to guide decision making.
The Causal Model
A causal model provides a vision of a competitive industry and the expected benchmarks along the path to competitiveness.
Impacts Outcomes Outputs Program Activities
Vision of industry competitiveness
Benchmarks
SO5: Increased Private Sector Competitiveness in Agriculture and Natural Resources
IR 1: To increase access of Small and Medium Scale entrepreneurs (SME) to markets, financial and business development services
IR 2: To enhance value added production and service technologies
PR
OF
IT P
RO
GR
AM
C
AU
SA
L M
OD
EL
Objective 1
To Improve Interfirm Cooperation in Selected Industries that Leads to
Improved Productivity and Value Addition
Objective 2
To Improve the Functioning and Responsiveness of Support Markets, that Leads to Greater Innovation and
Increased Industry Capacity to Respond to Market Dynamics
Objective 3
To Improve the Non-Policy Enabling Environment that Leads to Increased Confidence of and Credibility in Market
Mechanisms
•Increased productivity at the SH production level•Increased quality of SH production•Increased value and volume of SH production sold into selected industries•% of SHs entering structured markets•Increased overall productivity for each of the selected industries•% increased employment•Increased value of investment in selected industries
• Increased #’s of service providers being certified/trained •Increased % of SHs sales from certified/trained service providers•Increased # of SH accessing alternative disputes mechanisms•Increased # of SH accessing broad-based market information systems
•Increased value of input and output support market products and services sold to SHs and lead firms•Increased rate of adoption among SHs using improved technologies•Increased value of financial services accessed by SHs•Increased # of SHs accessing market and production information
US
AID
R
ES
UL
TS
F
RA
ME
WO
RK
PROFIT Strategic Goal: To improve the capacity of selected industries in which large numbers of micro and small enterprises (MSE) contribute and benefit to effectively compete over the near,
medium and long term.
Industry Vision
•# SH under formal contract with buyers•# abattoirs with grading/pricing system in place
•# CLW trained•# of SH receiving broadbasedmarket information•# SH accessing alternative dispute mechanisms •# transporters being certified by ZNFU
•# of CLW linked to vets•# of private vets providing services•# SH under vet contract•# of animals on vet contract•Value of Vet services sold to SH•# of Vets. promoting and informing SH via SMS•# of SH accessing auction services•# of SH accessing feedlot services•Value of auction services purchased by SHs•Value of feedlot services purchased by SHs•# of SHs animals going through feedlot services•Value of Animals sold through auction•Value of sales of animals from feedlot facilities (ZMK)•# SH accessing finance (commercial)•# SH accessing finance (value chain)•Value of financial services accessed by SH (commercial)•Value of financial services accessed by SH (value chain)•# of SH accessing non-credit financial services (insurance, savings)•Value of SH accessing non-credit financial services (insurance, savings)
OU
TP
UT
S
•# SH under formal contract with buyers•# abattoirs with grading/pricing system in place
•# SH under formal contract with buyers•# abattoirs with grading/pricing system in place
•# CLW trained•# of SH receiving broadbasedmarket information•# SH accessing alternative dispute mechanisms •# transporters being certified by ZNFU
•# CLW trained•# of SH receiving broadbasedmarket information•# SH accessing alternative dispute mechanisms •# transporters being certified by ZNFU
•# of CLW linked to vets•# of private vets providing services•# SH under vet contract•# of animals on vet contract•Value of Vet services sold to SH•# of Vets. promoting and informing SH via SMS•# of SH accessing auction services•# of SH accessing feedlot services•Value of auction services purchased by SHs•Value of feedlot services purchased by SHs•# of SHs animals going through feedlot services•Value of Animals sold through auction•Value of sales of animals from feedlot facilities (ZMK)•# SH accessing finance (commercial)•# SH accessing finance (value chain)•Value of financial services accessed by SH (commercial)•Value of financial services accessed by SH (value chain)•# of SH accessing non-credit financial services (insurance, savings)•Value of SH accessing non-credit financial services (insurance, savings)
•# of CLW linked to vets•# of private vets providing services•# SH under vet contract•# of animals on vet contract•Value of Vet services sold to SH•# of Vets. promoting and informing SH via SMS•# of SH accessing auction services•# of SH accessing feedlot services•Value of auction services purchased by SHs•Value of feedlot services purchased by SHs•# of SHs animals going through feedlot services•Value of Animals sold through auction•Value of sales of animals from feedlot facilities (ZMK)•# SH accessing finance (commercial)•# SH accessing finance (value chain)•Value of financial services accessed by SH (commercial)•Value of financial services accessed by SH (value chain)•# of SH accessing non-credit financial services (insurance, savings)•Value of SH accessing non-credit financial services (insurance, savings)
OU
TP
UT
S•Industry productivity (Overall industry sales overtime)•Employment created in beef industry•SH gross margin•Value of animals sold by SHs into commercial channels (feedlots, auctions, commercial abattoirs)•% of beef sold as choice by SHsunder vet contract •Value of investment in the beef industry (ZMK)•Vet income from SH contracts•SH yield per animal
•% cost coverage from fees and membership dues for ZNFU SMS service.•%CLW meetings skill standards audit•# of private vets organized into network
•Value of SH investment (crawls, dip tanks)•# Cattle loss among SH cattle in scheme •Calving rates among SH cattle in scheme•# New entrants providing feedlot and auction services to SHs•# New entrants providing financial services to SHs•Improved repayment rateO
UT
CO
ME
S•Industry productivity (Overall industry sales overtime)•Employment created in beef industry•SH gross margin•Value of animals sold by SHs into commercial channels (feedlots, auctions, commercial abattoirs)•% of beef sold as choice by SHsunder vet contract •Value of investment in the beef industry (ZMK)•Vet income from SH contracts•SH yield per animal
•% cost coverage from fees and membership dues for ZNFU SMS service.•%CLW meetings skill standards audit•# of private vets organized into network
•Value of SH investment (crawls, dip tanks)•# Cattle loss among SH cattle in scheme •Calving rates among SH cattle in scheme•# New entrants providing feedlot and auction services to SHs•# New entrants providing financial services to SHs•Improved repayment rateO
UT
CO
ME
S
Benchmarks
Management Tools
• Causal Models nice… but not flexible and hard to understand and guide.
• PROFIT’s Solution, the Pathway is a flexible management tool.
The Pathway
Industry Not Competitive
Competitive Industry
Demonstrate benefits of integrating smallholders into commercial channels ….
Indicator B
Indicator C
Indicator A
Indicator D
Competitiveness Indicators
Demonstration/Buying Down Risk Phase (Intervention)
Scale and Exit Phase (observation)
Intervention B
Intervention D
Intervention C
Intervention A
Actions
Actions
Actions
Actions
Actions
Pathway actions for scale, sustainability
and exit
Beef Industry Pathway
Livestock Not Competitive
Livestock Competitive
Demonstrate benefits of integrating smallholders into commercial channels ….
Vet Service Market Growing
Feedlot Services Targeting Smallholders
SHs Accessing Auction Services
SHs Under contract to Abattoirs
Beef sales growing in
multiple markets
Increasing value from by-
product industries (leather,
horns, etc.)
National herd stabilized
Increasing SH wealth
Competitiveness Indicators
Demonstration/Buying Down Risk Phase
Scale and Exit Phase
Graded purchases at
abattoirs
Certified transport
Smallholders accessing SMS
services SHs utilizing finishing
techniques
Certified Disease Free Zone
Links to by-product markets
Alternative dispute
mechanisms
Vet Services Pathway
Vet Services not Competitive
Vet Services Competitive
Vets identified & HHP developed
Comm
unity identified & awareness
Services and payment delivered
Contract negotiated and signed
Demonstrate benefits of targeting smallholder market….
Diagnostic services
New AI and feed supplement services
in HHP
Financial Services
CLW Standards
Improved networking of
vets
Improved infrastructure
Better managed Vet businesses
New communities
under contract
More Animals Under Contract
New vets enter market
Increasing smallholder productivity
More Services and Providers
Competitiveness Indicators
Demonstration/Buying Down Risk Phase
Scale and Exit Phase
Field Staff
• What do field staff actually do in practice?– Market Research
– Community Organization
– Business Support
– Transaction/Relationship Facilitation
– Learning & Communicating
• Summary:(1) Coach (2) Mediator (3) Investigative Reporter
Special Field Staff Demands
1. Understand the Approach
2. Have Industry Vision
3. Organizational Culture
4. Market Facilitation Abilities
5. Learning Capture
Management Methodology
• Lean, highly skilled team
• Team Based (hierarchy alternative)
• Effective Knowledge Capture
• Continuous Staff Upgrading
The Response
Value Chain Potential and Constraints
Analysis
Intervention Targeting Analysis
Sub-sector Selection and Design Phase
Awareness Building and Commercial Relationship
Targeting
Agreements/ Contracts
Finalized and Signed
Relationship Building and Negotiation
Scale up and Exit Phase
Transactions Initiated and Monitored
Expansion and Exit
Tacit Learning Captured1. PROFIT operating culture2. Activity discussion3. Staff to staff exchanges4. Learning workshops5. Annual facilitated staff retreat
Explicit Learning Captured
1. Monthly field reports
2. Quarterly reports
3. Formal external and internal assessments
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Limitations
• High road principles make for slow progress
• Limits in which sectors you can work in
• Can’t define final results
• Tempting to participate in value chain
• Vulnerable to other Donor programs
• Philosophical disagreement towards market systems and their endpoints.
PART 3: What’s in it for me?
Questions:1. What elements of PROFIT’s approach might
apply to your partner/project?• 10 min – THINK (alone or in pairs)• 15 min – SHARE (2 min each)
A few general lessons
1. Learning Learning Learning
2. Big Things, Small People
3. Failures Rock!
4. Reading and Reacting
5. Incentives
6. System Based Approach
7. Distortions
Summary
• PSD is…
• Value Chains are important because…
• Market facilitation is…and is important for PROFIT because….
• Requires excellent field staff…
• This requiring a creative management methodology…
• Maybe general lessons applicable for you…
THANKS!