In memory of those who lost their lives in the terrible and unnecessary violent attacks at the Westgate shopping centre in Nairobi, today I thought it would be appropriate to share some good news from Kenya about a business working to transform the sanitation business model in Nairobi slums. Sanergy a company founded by a group of MIT MBA alums has created a sustainable business model to turn “poop into profit” literally turning human waste into biogas and fertilizer and selling it for a profit. The company has earned its share of accolades and press coverage including being profiled in the FT special edition on urban ingenuity and in the most reputable science magazine in the US; the Scientific American. Read on to learn more. WHAT IS THE BUSINESS ABOUT?
Using fancy jargon Sanergy is a vertically integrated waste management system to provide sanitation to slums in Kenya. In simple terms it provides low-cost toilets (they call Fresh Life toilets) as well as transport (fresh life operators) and processing systems to convert human waste into biogas and fertilizer used in Kenya farms or resold to the national grid. For the more visual here is a Vimeo video showing how Sanergy works.
HOW DID IT START?
It was started by a bunch of classmates at MIT Sloan School of Business who took a field trip together to Kenya and decided to use the experience to build a business to address a critical need. They developed the idea through the MIT Legatum Center and pitched it and won the MIT 100K biz plan competition. Since spent their time growing their business and building partnerships to turn the vision into a reality.
WHAT IS THE SOCIAL NEED IT ADDRESSES?
The basic social need the business tries to address is improved sanitation for the approximately 8 million Kenyans living in slums who lack access to basic hygienic sanitation options. Lack of sanitation is a leading source of the spread of disease and causes millions of people to suffer daily and even die from diarrhea caused by human waste entering food and water systems. Thus far they have built 219 fresh life toilets which have more than 10K daily users, removing 1K of waste per day. Through the service they provide they have also created more than 400 jobs to a region with unemployment rates as high as 40%.
WHAT IS THE BUSINESS MODEL?
- Value Proposition – they provide low-cost, high quality sanitation facilities to urban slums.
- Customers/Channels – The principal paying customer is the government who I assume agreed to buy the energy and agreed it was safe to use human waste for agriculture. However the principle user of the service are the slum dwellers who are served through fresh-life operators. The operators work using a franchise model, they acquire the equipment and know-how from Sanergy and then implement the system and are paid back based on the quantity of waste they retrieve.
- Revenue Streams – Revenue comes from the government and/or retailers of fertilizers
- Cost Structure – Costs come from the manufacturing and I am assuming importing of the Fresh-Life toilets and sanitation equipment as well as the training of the franchises on how to use and transport the waste. Costs would also be associated with the building and operating a large waste processing plant (this is a cost I am not really sure how they overcome without some external financial support). Finally there are the staff costs for operating, performing quality control, maintenance and sales/distribution.
- Key Partners/Resources/Activities – They have many partners, principally among them must be the Kenyan government who had to believe that the system worked and was willing to pay for the solution. I am guessing that there are also many other donors and NGOs involved who both help with resources but also with awareness building.
WHAT ARE SOME CONCERNS I SEE WITH THE MODEL?
- Focus – Looking at the website and media coverage it seems too much focus is spent on looking good rather, winning awards and partnerships rather than actually delivering needed services which are culturally appropriate.
- Scale – How will the business go to scale, how easy will it be to transfer the franchise model from Kenyan slums to other regions or other countries?
- Profitability – I wonder with the processing plant costs how the business can be sustainable and competitive with other alternative energy sources or if the Kenyan government has to subsidize the business by agreeing to purchase the energy no matter the cost
- Safety – human fecal matter for fertilizer seems risking, it is fine for flower industry but what about for food? That seems unsavory to say the least.