Piloting Private Service Provision to Refugees and Host Communities in Uganda

This blog was originally posted on refileweb.

Summary: Market Systems analyses try to understand what is causing markets to underperform and why they are not more inclusive for workers. Market Systems Development (MSD) projects have the potential to play a crucial role in facilitating the shift towards more sustainable economies. In the framework of The Partnership for Improving Prospects for Forcibly Displaced Persons and Host Communities (PROSPECTS), the ILO is putting this principle into practice in Uganda by working in the sesame value chain, implementing a unique model in private sector engagement that aims to reach 20,000 farmers, concretizing a market-driven win-win partnership with the private sector. This experience has been presented by Stephen Opio of the ILO project team and Robert Anyang from the private sector partner, Ag-Ploutos, in an online conversation, which is the subject of this blog. Reach out to opio@ilo.org to know more about this experience.

Uganda has been long-known for its progressive policies toward refugees. However, worsening security situations and conflicts in neighboring countries have caused Uganda’s refugee population to triple in the last five years, making it the largest hosting country for refugees in Africa with 1.5 million refugees. This recent influx into the West Nile region of Uganda, where two settlements are located, has put significant pressure on local services and market systems. In this context, where government and humanitarian resources run thin, working with the private sector for solutions is imperative to bolster the resilience and economic growth of both refugees and the host population alike. The ILO PROSPECTS Uganda team has done just that. They’ve partnered with Ag-Ploutus, a Ugandan-based agricultural company with access to global markets, to enter the West Nile region, strengthen the food supply chain, and deliver a sustainable source of income to over 20,000 refugee farmers. While this solution presents a sustainable answer to the challenge of responding to increasing numbers of displaced and refugee populations globally, it was not without growing pains within humanitarian or development organizations like ILO. However, as the case in Uganda illustrates, the results appear to be worth the effort.

The Results

Ag-Ploutos is an agricultural company whose core business is strengthening food supply chains through partnerships with public and commercial entities, such as government, cooperatives, farmers, and development farmers. They provide aggregators with genuine inputs, embedded extension services, financing, crop insurance, and secure credible and profitable marketplaces using their tested and proven agent network. Their main goal is to sustain the supply chain. Service provision works by 1) The grower signs contracts with Ag-Ploutos, 2) Banks finance growers’ input costs through Ag-Ploutos, fields are mapped, and mechanization services, insurance, and logistics are secured, 3) Inputs are delivered and planted, and extension services are implemented by value-added services and District coordinators, 4) Harvest is organized, grains are cleaned, packaged, and delivered to buyers/processors by Ag-Ploutos, 5) Processors pay Ag-Ploutos, royalty is extracted, growers are paid, and the bank is paid.

ILO PROSPECTS Uganda partnering with Ag-Ploutus was a win-win. For the ILO, it was about addressing key constraints identified in an assessment conducted in 2019 and improving sustainable employment and economic opportunities for refugees and their hosts. For Ag-Ploutus, they saw an opportunity to extend their scale to new territories and 30,000 farmers, extend BDS service to agri-preneurs, and a commercial value of supplying agro-inputs of over $2M yearly. In Ag-Ploutus’s case, they had already seen the value of expanding into West Nile, the biggest sesame production area in the county, but it was in their mid-range plan. According to Robert Anyang, CEO of Ag-Ploutus, “To develop that network of additional 30,000 farmers would take three years on our own. With ILO intervention, it would take us one year.” This increased timing meant more opportunities for farmers. In one season, Ag-Ploutus mobilized 350 tons of sesame worth $400K. Missing three years would have meant “denying opportunities of improving livelihoods for refugees and host communities,” per Opio.

This partnership is successful because ILO PROSPECTS Uganda and Ag-Ploutos have a mindset of sustainably improving income, not leaning on short-term strategies like direct provision of money, inputs, or equipment. The first key component of the success of this partnership is keeping ILO PROSPECTS Uganda in a facilitator role and finding a partner who was already deeply involved in the sector and value chain. Working with a private sector actor like Ag-Ploutos, who already has linkages within the market and with financial institutions, is essential to long-term impact. The second key component is profit for everyone involved. Ag-Ploutos is making a profit, and refugee and host community farmers are also getting access to new seed varieties, which take a shorter amount of time and have a higher yield and a higher market value. Ag-Ploutos has already built a long-term plan for expanding its network to 60,000 farmers as a company, and ILO’s support is simply expediting this process. The third key component of the success of this partnership is the ability to scale these approaches to other programs and regions.

This partnership is already yielding a sustainable impact:

• Ag-Ploutos signed an agreement of understanding with the local government, denoting specific ways they could mutually benefit from one another, including through extension services.
• Farmers were supplied with appropriate seed varieties to produce sesame, which was linked to improving their earnings.
• Ag-Ploutus has mobilized at least 10 SMEs who are actively involved in this value chain and addressing constraints. A total of 345 tons of sesame worth US $420,000 was procured from 4 out of the 10 SME grantees. The four SME grantees procured sesame from 1,150 farmers mobilized directly through this PROSPECTS initiative.
• Farmers are now able to get loans from financial institutions. Equity bank has so far opened 650 individual bank accounts for farmers with a target of 2,7700 accounts of farmers under 9 SME grantees to be provided with access to input finance in the upcoming season.

ILO and Ag-Ploutus also jointly developed a farmer evaluation tool incorporating international labor standards to understand farmers' production potential and where they are. This tool is now used by banks for due diligence. This partnership with financial institutions is key to sustainability. The team will unlock 15,000 more smallholder farmers with Equity Bank using the same tool. Per Stephen, “We have already increased our supply chain. With [these new farmers], we shall have a reliable and viable supply chain beyond this project.”

The Effort

Working with the private sector to address humanitarian issues has been a growing concept within the humanitarian-development nexus. To move from concept to practice, the ILO and UNHCR have jointly developed the Approach to Inclusive Market Systems (AIMS) for Refugees and Host Communities, which since 2013 has already been implemented and used across several countries where ILO works, including in Uganda under the PROSPECTS Partnership.

AIMS applies a market-based approach to forced displacement settings with the objective of developing holistic and market-based livelihood strategies for refugees and local hosting communities. This approach, which tackles both the demand and the supply sides of the labor market, works with market actors (both private and public) and ensures that interventions are designed to be sustainable versus a direct delivery model, which has the potential to distort already thin markets and make economies aid-dependent. In an initial assessment, teams look at the entirety of the market system (supply & demand, supporting functions, rules, and regulations) to identify what constraints prevent that system from benefiting targetted groups. In Uganda, the PROSPECTS team conducted an assessment in 2019 in the West Nile region of Uganda, looking at two settlements, Rhino Camp and Impevi, with a particular look at Rhino Camp, where most of the refugees are rather recent arrivals because of the latest instability in South Sudan (96.8 percent of refugees are South Sudanese). According to Stephen Opio, Chief Technical Officer PROSPECTS Uganda, their objective was to find interventions that “resulted in employment and economic opportunities for both refugees and host communities at the same time.”

The assessment, which took almost six months as most of the system actors are informal, looked at ten value chains for which sesame scored highest. From there, the team narrowed down and discovered constraints across input supply, production, collection, and aggregation. For input supplies, the variety of supplies that exist were not market-friendly varieties. Second, private sector actors were urban-based and did not extend into rural areas. Third, private sector actors had challenges getting appropriate technology to process such as post-harvest handling. And finally, access to markets was noted as a constraint broadly across all actors. For a successful intervention, ILO PROSPECTS Uganda needed to identify partners that could work with the private sector and government to address most of these constraints. In a market-based approach, “ILO is just a facilitator…. [our role is to] understand the constraints and design an intervention with the appropriate partner to address,” per Opio.

Once completed, the team prepared a Request for Proposal to answer the question: “How do you strengthen the value chain while addressing all the different elements that have been identified, including informality, an extension of service, linkages to the market, the introduction of appropriate seed varieties?” This proposal was responded to by nine different actors. The benefit of the open proposal process, even though they had already identified potential local actors in the original assessment, allowed partners to self-select, uncovered new partners they may have entered since the original assessment, and allowed for an equitable review. For review, the PROSPECTS Uganda team needed to create new evaluation tools, including factors such as presence in the target area, experience in the sesame value chain, good financial management systems, effective governance, and aligned staff background.

While eight of the nine applications were from well-recognized international and local NGOs, one was from a private sector itself, Ag-Ploutus. Using their new evaluation tool, Ag-Ploutus was a clear winner.

The Takeaways

Working with the private sector is highly beneficial, but it comes with its own set of challenges. The tools ILO has in place to create these types of partnerships can take time to develop. These delays can prove to be difficult when working in agriculture. This partnership took 7 months to develop, which is a whole agricultural season and lost opportunities for farmers. However, since Ag-Ploutos is a private sector actor with experience in the region, they understood how the development industry works and knew the commercial viability of the region, they decided to put in up-front investment before the official start of the contract with the ILO. This shared vision allowed the partnership to flourish, even with the presence of obstacles.

This approach has an opportunity to scale across programs and regions. Ag-Ploutus points out that the same structure that this partnership is using now can be used to benefit other value chains like soybeans or sunflowers, though they see continued growth potential in sesame. UNDP is picking up the same approach and is doing AIMS assessments in various regions of Uganda, implementing similar models in 4 refugee-hosting districts. Combining a facilitator with a private sector actor to provide benefits for refugee farmers, host communities, and local governments alike, plus having the ability to scale these practices, ultimately has led to the current success of this partnership between Ag-Ploutos and PROSPECTS Uganda.  The “win-win” nature of bridging business and development work ensures a sustainable impact, even after the project ends. When asked about their exit strategy, Ag-Ploutus made it clear that for them is not about providing subsidized and short-term support to refugees but about staying in the market and generating profit for the farmers and consequently for themselves. “You can see the change in the farmer's income, but there is also more for us to supply to buyers. It improves the farmer's margin and improves our margin.”