Transcript Slide 1

Sustainable Public Private
Partnerships for the cocoa market
– FCC proposal
Presentation by
Philip Sigley – Chief Executive
Federation of Cocoa Commerce Limited
Put the record straight
• “Cocoa - a force for good in a
challenging world”
• 2-3 million farmers
• 20 million dependent on cocoa
• Significant contribution to a
largely neglected rural economy
West Africa
• 1.5 million family farms (2 to 5 ha.)
• 10 million+ live on family farms
• Struggling with poor infrastructure
and access to vital public services
• Backbone of some economies – has to
help sustain transition/diversification
Objectives for all
• Need to emerge from the poverty trap
• Achieve healthy, educated and vibrant
communities with hope for the future
• Economic growth focused on urban
problems and diversification of
economy
Consumption
Economic
Growth
Population
Growth and
Depreciation
Negative
Household
Income
Household Savings
Tax Payments
Capital Per
Person
Public Investment
Public Budget
Mechanics of Capital Accumulation
The Poverty Trap
Basic Needs
Impoverished
Household
Zero Savings
Decline
in
Capital
per
person
Negative
Economic
Growth
Zero Tax
Zero
Public
investment
budget
Negative
Population growth
and Depreciation
Role of ODA in Breaking Poverty Trap
Basic Needs
Poor
Households
Humanitarian
Relief
Official
Development
Assistance
Savings
Capital
per
person
Economic
Growth
Microfinance
Public
Investment
Public
budget
Budget
Support
Negative
Population growth
and Depreciation
What is actually happening in cocoa communities
Negative
Economic
Growth
Basic Needs
Rural
Minimal Savings
Capital
per
person
Household
Public
Investment
Official
Development
Assistance
Urban Sector
Budget
Support
Public
budget
Economic
Growth
Negative
Population growth
and Depreciation
Role of Development Partnership helping break
the Poverty Trap in cocoa communities
Basic Needs
Poor
Household
Development
Partnership
Minimal Savings
Cocoa
Community
Support
Public
budget
Official
Development
Assistance
Budget
Support
Capital
per
person
Public
Investment
Economic
Growth
Negative
Population growth
and Depreciation
Challenges
• For the rural communities it is clear
• For the cocoa trade and industry it is how
we can provide effective assistance without
assuming the role of government
• How we ensure that we support the market
sustainably without artificial pricing
schemes and interference in commercial
issues
Why?
• Governments /NGOs focus on niche markets
• Niche markets will not deliver poverty
alleviation for the vast majority of farmers
• Issues much deeper
• Public opinion of cocoa could be better
• Chocolate industry would like to raise a fund
across the whole market to address issues of
corporate social responsibility
Other considerations
• Donors – G8/G20 – have made “millennium
promises” – commitments to Developing
Countries and are falling short
• Chocolate is “mediagenic” and the cocoa
supply chain stands criticised for not doing
more – public ignorance of market
complexity – we are an easy target
• Creative but careful intervention is possible
The cocoa farmer
• Why does he not invest in his own
community?
• Income/ Means to invest?
• Structure of local government of his
community?
• Other – free riders on the back of his hard
work?
Basis of proposal
• Raise funds over whole market
• Not a direct tax on farmers
• Do not interfere in market prices or with
individual company projects targeted at
farmers
• Do not seek to assume responsibilities
which are not appropriate i.e. Not
responsible for things which are
government responsibility
Focus of proposed system
• Create a fund in partnership with origin
governments and donors
• Fund to be used for social infrastructure in
cocoa communities eg Health, education,
water, sanitation, roads
• Such plans to be fully coordinated with
National Plans
Outcomes
• Cocoa communities strengthened in those areas
which have appeared to be the domain of niche
markets and in respect of which consumers have
expectations
• Funds will go to cocoa communities – local
authorities – enabling them to deliver services on a
sustainable basis going forward
• Create a framework within which rural
communities can develop sustainable livelihoods –
achievement of MDGs
Current FCC project – infrastructure
funding system
• Working with origin producers, trade,
processing industry, chocolate industry
• Currently discussing technology
implications
• Thereafter brainstorming on
government/development agency support –
Overseas Development Institute and
Chatham
Working Title
• “Facilitating the New Paradigm for
Development Partnerships in Commodity
Dependent Countries
• Using technology to deliver Win Win Win
Sustainable Solutions for agricultural
commodities”
Why is this being developed?
• from the cocoa market and its attempts to
find workable solutions as to how public
private partnerships could be made to
operate on a larger scale in developing
countries in contrast to the huge raft of
perennial pilot and small scale projects
which never seem to shift the development
curve along the “real progress” axis.
What is it intended to achieve 1
• Connects consumer to farmer through funding
support for social infrastructure provision
• Provides a fair funding mechanism for the supply
chain and establishing a development partner fund
• Essential that private sector does not replace
government responsibility for provision of
community services
• Private sector is a funding partner with
governments and other institutions. Does not
implement but is entitled to expect its partners to
implement jointly agreed plans where the
sustainability of cocoa and cocoa communities is a
key consideration
What is it intended to achieve 2
• Addresses the imbalance of developmental
support by which rural communities have
lost out in government/donor priorities – a
problem caused by current budgetary
assistance focus of western development
partners and priority setting
• Represents a blend of budgetary assistance
with some precise but related targets –
effectively budgetary assistance to local and
district authorities tasked with the provision
of public services to rural communities
EU and China
• Budgetary assistance maybe strengthening
governance but many in rural communities do not
see benefits delivered on the ground
• Chinese approach is to deliver the infrastructure in
return for commercial contractual returns less
involved with good governance
• We need a blend of approaches – world expects
delivery of clear and tangible improvements in
quality of life in developing countries and world
systems that engender peace
Overarching project principle
• Help to empower rural communities – in
our case cocoa communities
Cocoa Trade and Industry - status
• We have a number of modest initiatives addressing CSR
concerns but with no material linkage with governments
and development partners on a scale which can make a
significant difference.
• Some programmes such as Farmer Field Schools, whilst
significant compared to what has gone before, struggle to
scale up because of social infrastructure issues.
• The culture of farmers investing in their own communities
is at best patchy but in general is non existent and there is a
general absence of leadership in such issues. It would
appear that apathy has set in and a belief that conditions
cannot improve
“Reinventing the wheel” and
“Not invented here”
• when pilot projects reach completion
another organisation sets out to prove
exactly the same result in another country or
region.
• Between all concerned we have a lot of
people interested to deliver results but
constrained by the framework in which we
operate
PPP
• Pilot Projects in Perpetuity
Think Global act Local sounds
good - but how to achieve it?
• Why win win win?
• Win 1 is that the producing country should have a
clear incentive to participate and not to feel that
the contribution to any new system becomes a tax
on the farmers and that the sustainable solution in
which they will engage can deliver real
improvements in living standards for the rural
population without creating any divisions within
the country.
Win 2
• Win 2 is for the international private sector which can
address on a major scale the challenges posed by civil
society and consumers in relation to Corporate Social
Responsibility and Global Citizenship within the very
difficult smallholder farmer environment beset by many
problems arising from poverty and lack of social
infrastructure.
• If the cocoa trade and industry and in particular the major
chocolate manufacturers can succeed with the
communication of real change in cocoa communities and a
major contribution to MDGs – then rural livelihoods will
benefit in line with the long term health of the markets for
our products
Win 3
• Win 3 is the better and more effective use of the
funding from donors/development partners and an
improved structure to induce collaboration rather
than competing projects – the scale of operation
would allow participation by a broad
representative group as opposed to a large
collection of small initiatives each with overhead,
reporting and management implications. These
institutions will be able to point to meaningful
change and achievement of International
Development Policy
Link between the 3 Wins
• is of course Leveraged Funds – each
getting more for its money than if it tries to
go a separate path seeking to justify its own
successes in competition with the others.
Important Considerations
• there is a real opportunity to work with proper
development partners and country governments in
a joined up way without private sector playing at
being development agents.
• we do need however to have confidence in the
accountability for funds injected and indeed if a
robust system is developed this may provide a way
to attract further funding for these ideas from other
partners.
Target for support plans
• Local government in producing countries
• E.g. District Assembly, Département
• Why? – those structures are responsible for
delivery of community infrastructure (education,
water, health, roads etc) and currently struggling
to match resources with demands
• Private sector engagement and progress made =
delivery against expectations from civil society
and consumers
Caution
• We must however take care that our actions are
not divisive and that the plans are carefully
harmonised with the Government’s funding
formula for local government as a whole. Where
some communities within a district are not
involved in cocoa we should nevertheless look at
the support mechanisms respecting at all times the
need for those communities to live in harmony. It
would be a disaster if our interventions were
otherwise.
Wide Appeal
• The bigger picture of our interventions
could of course lead to wider involvement
by those interested in the progress being
made by the cocoa sector. For example,
schools and local authorities in cocoa
consuming countries linking with their
counterparts in commodity producing
communities
System
• Broadly works on Unique Transaction Numbers
triggering a payment to a fund for matching with
funds from other partners
• Web hosting service and selection of
banks/institutions to facilitate collection, reporting
and audit of funds and disbursement in accordance
with scheme rules
• Community Development fund would feature in
commercial contracts
• Does not raise issues of competition and focus of
funds does not interfere with commercial matters
– recipients are the local authorities in rural sector
Some final thoughts
• Human Rights and Business
• Some quotes from Ruggie Report
Ruggie Report 2008
• “Business is the major source of investment
and job creation, and markets can be highly
efficient means for allocating scarce
resources. They constitute powerful forces
capable of generating economic growth,
reducing poverty….”
Root cause
• “The root cause of the business and human
rights predicament today lies in the
governance gaps created by globalisation –
between the scope and impact of economic
forces and actors and the capacity of
societies to manage their adverse
consequences”
Conclusion
• The cocoa trade and chocolate industry is looking
at creative ways to build development partnerships
to bring new hope to post conflict countries and in
general to rural communities in commodity
dependent countries
• Agriculture continues to deliver a breathing space
whilst governments struggle to restructure and
deliver a more diverse economy to achieve middle
income status and beyond
• We need political will and donor support to make
these plans a reality