How public-private sector partnerships have transformed development in Georgia
In the interview below, Investor.ge sat down with Katy Tchumburidze, Chief of Party of the USAID Zrda Activity in Georgia program, to discuss how public-private sector partnerships have altered the development landscape in Georgia.
Zrda was conceived largely as a platform for donor-government partnerships. When did Zrda start partnering with the private sector, and what was the impetus?
When USAID’s Zrda Activity in Georgia was conceived and began operations in 2016, it did begin largely as a series of strong partnerships with government agencies that were eager to get on board with development projects. And those worked great. Not only did we accomplish much, but we brought capacity building and project models to dozens of government agencies and structures.What we suspected at the time, but didn’t quite know for sure, was whether we could engage the private sector as well, and whether it could prove to be an equally if not stronger partner and offer unique opportunities to donor organizations such as our own.
Our first such partnership came about through a match prompted by the Georgian Farmers’ Association—one of the four organizations implemented by Chemonics International, which is also the USAID contractor for Zrda.
At the time, the Georgian Farmers’ Association was working with the Adjara Group, one of the country’s largest hospitality holdings, to help them source fresh produce for their many hospitality venues. However, the scale of their operations was not enough to meet the needs of the group, which was still sourcing nearly 80% of its produce from abroad.
The GFA, knowing that we were willing to finance apps and electronic platforms, came and pitched the idea of creating an agricultural produce matchmaking platform.
We financed the project and together with the GFA, we produced Agronavti—a match-making application for farmers selling certain kinds of produce to Adjara Group as a guaranteed buyer.
Starting from just five types of products available on Agronavti, there are now more than 250 available, and farmers have made more than 4.3 million USD thanks to the Agronavti application, which allows them to understand what produce is in demand, in what quantities, and the range of prices they can expect for their goods.
So what this partnership did was match up the needs of a hospitality business, a local NGO and a donor organization, us. On our side, we liked the project because it ticked a number of boxes—promoting growth in the regions, it brought new technology to farmers and introduced them to the one-window principle.
Now, Agronavti has gone public and has expanded beyond the Adjara Group, with other restaurants and hospitality businesses signing up as well.
What other projects have come out of Zrda’s public-private sector partnership model?
The next project we took on involved some of our target regions of Samtskhe-Javakheti, Shida Kartli and Kvemo Kartli. BP, which has been in the country for more than 15 years, also works in these regions. We looked at a map and saw that our work and mandate overlapped in 41 villages.
BP has a number of grant and training programs to help locals that live around this pipeline. At the time, we had a small SME assistance program starting. So we went to them and proposed uniting our resources, which would be far more effective than us working in two separate directions. That project worked out great, and after discussions, USAID and BP may expand partnership and cooperation in the future.
Working with multinationals is one thing—working with local companies has been a different experience, and we’re proud to have been able to share our experience in project management with a number of larger companies and organizations here.
The Partnership Fund, a joint stock company, is a great example of this. Its StartUp Georgia program buys equity in local startups, and exits after two years after providing mentorship and guidance.
We offered to match their buy-ins for companies on the administrative borderline territories that meet our criteria. To date, we have helped get five startups off their feet, including a kombucha factory in the village of Karapila, right on the ABL with Tskhinvali; you can see Russian troops stationed just 300 meters away from there. We’ve also helped finance a fertilizer production facility—one of the first in Georgia. Charcoal production, a dairy facility and a used motor oil-recycling factory (another first!) have also received assistance from us via this partnership.
This partnership with the Partnership Fund allowed us to reach larger businesses and create employment opportunities for people in these areas near the conflict zones. The businesses have benefited from larger financial resources, added capacity building offerings and oversight. For us, by partnering with the Partnership Fund, we lower our risks because StartUp Georgia is in charge of the vetting process, which eases our administrative load and allows us to spend our energies more effectively.
What are some of the other advantages of public-private sector partnerships?
In addition to combining funds for projects and doing away with additional project planning and implementation costs, one of the largest benefits we’ve seen from this model is how we can widen the range of the kind of activity we engage in with the help of our private sector partners.
For example, with BP, we had a community development program which had two components: one was a business assistance and support program and the other was an economic infrastructure support program. For Zrda, teaming with BP was a great solution due to the fact that we do not have a mandate to do construction work. We cannot actually build infrastructure, such as roads, bridges, irrigation channels. But we were able to fund the designs and studies for roads, and BP was able to build them through local partner organizations. As for the larger community infrastructure projects, Zrda supported the preparation of such project plans, donated them to local municipalities, that later are funded by the Municipal Development Fund (MDF) or central budget. Such partnerships allow us to effectively connect with other players who can widen our reach and range of activity.
Is financing in these partnerships generally equal? What has been the criteria for Zrda to choose a partner in the private sector?
Generally our financing and what has been brought to the table by our partners has been more or less equal, but it really depends on the project. As for what kind of project we choose to get involved in, we have a very clear mandate—we only work along the ABL and in ethnic minority communities.
Zrda will be ending come December 2021. What will be some of the main takeaways from its experience?
We are hopeful there will be a Zrda follow-up project in the near future. But if not, then we have set a great model of how to experiment, to network and to discover other opportunities. I hope that after us, whether or not there will be a Zrda follow-up initiative, there will be many more projects that will practice this type of partnership, because we’ve seen how effective these results can be.
USAID has appreciated the private-public partnership model we’ve introduced and has always encouraged increased private sector engagement . And though it’s sad for the activity to be ending, it worked on such a large scale that we are confident that the methodology will be used by other donor organizations and work with the private sector will continue. Had someone told me five or seven years ago that this would be the direction that development was heading in Georgia, I would have been very surprised. I wouldn’t have believed it.
Why not? What’s changed?
Private sector organizations have grown and matured. Another fact is that just a few years ago, we didn’t have as many big firms as we do now. Active cooperation from other donor organizations has demonstrated to the private sector what is possible, and they’re open to it.
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