AAF TAF INSIGHTS
2011 – 2018
AAF TAF INSIGHTS
2011 – 2018
TAF PROCESS
1 Scope + Diagnose
2 DESIGN + STRUCTURE
3 LEARN + COURSE CORRECT
4 IMPLEMENT + MONITOR
Identify the appropriate form of technical assistance and source and screen reputable service providers with demonstrable track record delivering similar projects.
5. SUSTAIN + SCALE STRATEGY
6. EXIT + SHARE
STRATEGIC
INSIGHTS
Distinguishing between different objectives of technical assistance is the first step to designing a TA facility. A TA facility can cover more than one objective but the balance of priority should be specified upfront to allow for clear communication with investors and agribusinesses as well as budget allocation.
Under TAF, three core objectives were being pursued. It is very possible and sometimes more efficient for a fund to focus on only one:
• Reducing risk and catalysing growth
• Enhancing impact around the business
• Enhancing impact at systems level
Defining categories and objectives of TA allows for greater clarity between the portfolio company, Fund manager and TAF manager on the types and boundaries of different TA options. Categories also encourage smarter and more standardised impact targets and the indicators to measure performance.
CORE BUSINESS
SUPPORT Reducing Risk
A focus on innovation and growth rather than on standard capacity building BDS support or ‘putting out fires
INCLUSIVE
BUSINESS
Reducing Risk
A focus on innovation and growth rather than on standard capacity building BDS support or ‘putting out fires
ECOSYSTEM
DEVELOPMENT
Reducing Risk
A focus on creating impact in the market system that will enhance the enabling environment for inclusive businesses.
OBJECTIVE: REDUCE RISK & CATALYSE GROWTH
When businesses and funds are small, there is a role for TA facilities to deliver risk-reducing services through core Business Development Support (BDS) to clients. As funds accumulate greater resources/capacity to provide this ‘in-house’, core business innovation projects become more appropriate to catalyse growth of the business. Over time, funds will be capable of funding value creation activities themselves. Performance is measured by business metrics such as food production output, revenue, EBITDA, PAT, cost reductions as well as jobs.
OBJECTIVE: ENHANCE IMPACT AROUND THE BUSINESS
Inclusive business projects seek to enhance direct impact around the investments and are measured by quantitative indicators such as beneficiary numbers, disaggregated by gender, income increases, direct and indirect jobs as well as productivity gains and other outcomes related to economic upliftment.
OBJECTIVE: ENHANCE IMPACT AT THE SYSTEMS LEVEL
Ecosystem development projects seek to strengthen market systems around the investment and are measured by quantitative indicators such as finance mobilised as well as qualitative indicators for market development such as policy change, industry influence and stakeholder learning.
CORE BUSINESS
SUPPORT Reducing Risk
A focus on innovation and growth rather than on standard capacity building BDS support or ‘putting out fires
OBJECTIVE: REDUCE RISK & CATALYSE GROWTH
When businesses and funds are small, there is a role for TA facilities to deliver risk-reducing services through core Business Development Support (BDS) to clients. As funds accumulate greater resources/capacity to provide this ‘in-house’, core business innovation projects become more appropriate to catalyse growth of the business. Over time, funds will be capable of funding value creation activities themselves. Performance is measured by business metrics such as food production output, revenue, EBITDA, PAT, cost reductions as well as jobs.
INCLUSIVE
BUSINESS
Reducing Risk
A focus on innovation and growth rather than on standard capacity building BDS support or ‘putting out fires
OBJECTIVE: ENHANCE IMPACT AROUND THE BUSINESS
Inclusive business projects seek to enhance direct impact around the investments and are measured by quantitative indicators such as beneficiary numbers, disaggregated by gender, income increases, direct and indirect jobs as well as productivity gains and other outcomes related to economic upliftment.
ECOSYSTEM
DEVELOPMENT
Reducing Risk
A focus on creating impact in the market system that will enhance the enabling environment for inclusive businesses.
OBJECTIVE: ENHANCE IMPACT AT THE SYSTEMS LEVEL
Ecosystem development projects seek to strengthen market systems around the investment and are measured by quantitative indicators such as finance mobilised as well as qualitative indicators for market development such as policy change, industry influence and stakeholder learning.
SERVICE PROVIDERS
Service providers should be selected with sustainability in mind from the outset. Where TA interventions are required, a number of options for implementation can be considered. Local service providers can bring insights and understanding into local contexts. International providers can bring innovations and transferable skills from other contexts. Sometimes the business itself is best placed to implement a ‘proof of concept’ pilot with the support of a matching-grant. Regardless of the recipient, all TA interventions must have an exit strategy that leads to full ownership of the model by the business.
MONITORING
Robust M&E systems and quality data play a vital role in helping to convince companies that investments in inclusive business models and smallholder farmers will lead to a tangible return on investment. It is important to have clarity and alignment of all stakeholders on M&E objectives, users and their needs. Whilst an M&E plan supports this, ongoing M&E capacity building and external support is needed in the continuous adoption of best practice standards. Regular reviews are important to support adaptive management and course correction.
COST SHARING
Cost-share should be considered a factor of additionality and risk. TA intervention budgets should allow for flexibility around investee match or cost share based on risk and return analysis. As a guiding principle, businesses should contribute in inverse proportion to the additionality of the project from commercial considerations – that is, higher contributions to projects that have more direct commercial gains, and less to those that have less certain or immediate commercial benefits. Match-funding should be structured in such a way that the subsidy decreases, and the business finances on-going costs.
ALIGNMENT
Internal stakeholder alignment between the fund manager, company and TA provider needs to be a continuous focus, since setting a strategic direction is only possible when the company is fully bought-in. Achieving buy-in is a hands-on process linked to good management and governance. A TA manager needs to ensure ownership by the company at each stage of a TA cycle, from the scope of work, evaluations, letters of commitment, and contracting, to steering committees and exit strategies. Throughout this process, the TA manager can assist in establishing alignment through a direct form of technical assistance in which management support is provided for delivering TA on a company’s growth path. This process can and should include external support, with the recognition that adoption of the intervention is closely tied to the service provider’s performance.
TA DELIVERY INSIGHTS
AAF TAF found that it is important to conduct a diagnostic holistically, targeting a new business model vision rather than TA ‘project’ design. Understanding business needs and opportunities is often cited as the most important aspect of non-monetary support; a core value add is being able to propose a new or improved business model with multiple stakeholder inputs that speak directly to commercial and development objectives. The model should stack up in commercial terms but may not be sufficiently interesting to merit investment at meaningful scale in the short-term. When TA intervention areas are identified and required to achieve the vision, these should be clearly broken down with individual intervention outputs, outcomes, and cost-share and exit strategies. This process is a critical step to align on a vision and a plan as well as ensure commitment across the principal stakeholders. A team approach to diagnostic is encouraged to allow for the introduction of a variety of skills that are complementary to those within the business. High-level concepts of value and impact are insufficient: inclusive business models require detailed, quantifiable business cases in order to gain traction and ensure that proposed projects are sustainable
DEDICATED PORTFOLIO MANAGEMENT RESOURCING
Portfolio management provided by the TA Facility is critical for TA pipeline development and alignment with fund, company and beneficiary needs. Portfolio managers provide important project steering given the proximity and alignment with key stakeholders. This allows for greater access to information, ongoing consultation and coordination of stakeholders, and responsiveness to the changing nature of portfolio companies and the challenging environments in which they operate.
FLEXIBLE AND STRUCTURED INSTRUMENTS FOR DEPLOYING TA
At the same time, various instruments for deploying TA should be determined for appropriateness since one service provider may not be suitable for all the needs of the TA proposed. A combination of company match-grants and bespoke external support may be needed; and thus TA mechanisms should be flexible and structured in phases.
ADAPTIVE TA
Ongoing assessment of results against planned objectives is critical and there should be subsequent flexibility in the project to amend timings, processes and activities. Many projects for a particular company scheme, implemented by specialised service providers, can be more effective than one large project implemented by a generalist service provider.