To attain the ambitious goals set out in the 2030 Agenda for Sustainable Development, all sections of society in every country will need to do their bit, including the private sector. In poor and emerging countries, too, private companies and organisations have a decisive effect on economic, social and environmental development. Partnering with private companies to implement development projects enables the SDC to achieve its development goals more effectively.
Government development cooperation alone is not enough to foster sustainable economic growth in developing countries and reduce poverty. The private sector has a decisive role to play in this respect (alongside civil society, which is also vital). Even in the poorest countries, nine out of ten jobs are created in the private sector. Private companies know that a stable international and national environment is essential if they are to achieve their business objectives. While these objectives may differ from the development goals pursued by public actors like the SDC, they are based on many of the same underlying interests, including good governance, the rule of law, peace and security, healthy and well-educated workers, efficient infrastructure and clean water. These shared interests generally form the basis for project partnerships between the SDC and Swiss companies.
The International Cooperation Strategy 2021–24 sees great potential in private sector engagement. The private sector creates around 90% of all jobs worldwide and has a key role to play in implementing sustainable development. The innovative power, expertise and resources of private-sector companies are necessary for the implementation of international cooperation activities. The SDC is diversifying and strengthening partnerships with the private sector, for example by working with social enterprises, impact investors and grant-making foundations.
Companies contribute specific expertise
The SDC is engaged in around 60 project partnerships with private companies (situation at the end of 2019). Most of these private-sector partners are medium-sized and large Swiss companies with special expertise that can contribute to achieving the specific development goals of the project in question (e.g. boosting food security, reducing water consumption in agriculture or CO2 emissions in cement production).
The following example from the insurance sector shows how these partnerships work. Climate change is increasingly leading to unpredictable crop failures as a result of drought or natural disasters. The SDC helps small, low-income producers to build greater resilience to such events, while insurance companies are interested in putting their expertise in damage mitigation and risk coverage to good use. Taking these shared interests as a basis, the SDC has successfully contributed to a number of effective solutions for insuring against crop failure: a win-win approach that first and foremost benefits smallholder farms in the partner countries. Similar cooperation initiatives are under way in the field of health, for example to develop drugs for tropical diseases.
SDC familiar with local contexts
The primary aim of all these partnerships is to harness the private sector's resources, capacity for innovation and networks to achieve the global Sustainable Development Goals; financing is very much a secondary consideration for the SDC. The added value contributed by the SDC lies instead in its familiarity with the local context and its ability to open doors and promote trust between project partners through its good reputation.
Strengthening the local private sector
In addition to project partnerships with Swiss companies, in recent years more new ways have emerged of attaining development goals directly by financing local businesses, mostly through loans, investments and guarantees. There are several advantages to this approach. Firstly, it makes it possible to build directly on the private-sector dynamics of the businesses themselves, thus strengthening the local private sector. Secondly, if an initiative is successful, the same public funds can be used several times.
Some initial experience has already been acquired with these financing tools, which are new to the SDC. The conclusion is that, while they have considerable development potential, they must be used judiciously because they are often associated with greater contextual risks. With that in mind, the SDC has declared a moratorium on new projects linked to the expansion of such activities until the necessary internal and external expertise can be identified. This does not affect the conventional project partnerships mentioned above.