PLASTIC WASTE MANAGEMENT IN AFRICA: LESSONS FROM SOCIAL ENTERPRISES

PLASTIC WASTE MANAGEMENT IN AFRICA:

LESSONS FROM SOCIAL

ENTERPRISES

During the preparation of the present report, ACRA-CCS interacted with the five social enterprises analysed in the document to gather the necessary information.ACRA-CCS acted in good faith, and bears no responsibility for any potential misrepresentation of the data provided by the companies themselves.

Fondazione ACRA-CCSEdited by Stefano Barazzetta

Funded by:

Partners:

PLASTIC WASTE MANAGEMENT IN AFRICA:

LESSONS FROM SOCIAL

ENTERPRISES

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TAbLE OF CONTENTS

Introduction 6Contents and Objectives of the report 6The State of Waste Management in Africa 6

Case studies 9Zanrec 10EcoPost 14Wecyclers 18Proplast 22Taka Taka Solutions 26

Comparative Analysis and Conclusions 30Comparative Analysis 30Conclusions 37

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The present report was elaborated in the framework of the project “Exploiting the value of Municipal Solid Waste in Zanzibar: social enterprises for the improvement of the plastic value-chain”1, co-funded by Fondazione Cariplo and Regione Lombardia, and implemented by Fondazione ACRA-CCS.

The challenge for social enterprises is establishing the social outcomes and objectives which represent their moral commitment and, most difficult of all, measuring them.Measuring their social performance allow them to evaluate what works and what doesn’t, and also consents them to be accountable to their commitment with investors, funders, local authorities and communities.

Contents and Objectives of the report

The report presents 5 different case studies of social enterprises working in the Municipal Solid Waste (MSW) sector, with focus on the collection and treatment of plastic.

The study will analyse and compare the following companies:

• Zanrec (Tanzania)• EcoPost (Kenya)• Wecyclers (Nigeria)• Proplast (Senegal)• Taka Taka Solutions (Kenya)

The study will highlight the key elements that contribute to the effectiveness and sustainability of the selected initiatives; the analysis will specifically focus on the:

• story of the company and stage of development

• operating model• business model• key partnerships• impact/inclusion of vulnerable groups• key results and key challenges• strategy to move forward

The chapter Case Studies describes the social enterprises individually, while the last chapter Comparative Analysis and Conclusions outlines the lessons learnt from the companies’ activities.

The State of Waste Management in Africa

Today, one of the major concerns of many African authorities responsible for overseeing public health and sanitation is the management of Municipal Solid Waste (MSW).

Increased urbanization coupled with inadequate infrastructure, limited financing and lack of clear roles and responsibilities of local authorities have made the task even more difficult. On the other hand, due to uncollected waste in the urban areas and uncontrolled disposal of waste at the city boundaries and suburbs, public health and sanitation are threatened in several growing African cities.

Improper waste disposal in Africa has resulted in poor hygiene and lack of access to clean water and sanitation by the urban poor. Consequently, most of the countries in the region may not be able to meet the Millennium Development Goal target of reducing by half the proportion of people without sustainable access to safe drinking water and basic sanitation by 2015.

IntroductIon

1. At the heart of the project (July 2011 – 2014) is the support to the social enterprise Zanrec Platic Ltd. in enhancing its plastic waste recycling activity in Zanzibar, creating long-lasting positive social and environmental impact. The project supported Zanrec with technical assistance in better structuring its plastic-buying partnerships with local communities, by funding the acquisition of part of the hardware equipment, and implementing an environmental awareness campaign in Zanzibar and Italy.

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In contrast with what happens in the western world, most of the municipal solid waste generated in Africa is made by organic waste.Household waste in Africa mostly contains food waste (such as biodegradable/compostable materials), sand, gravel, paper, plastic, metals (e.g. aluminium) and glass. Batteries and spray cans are found in small - but increasing - quantities.

Exhibit 1 - Links between Millennium Development Goal and Solid Waste ManagementMillennium Development Goals (MDGs) Role of Solid Waste Management in achieving MDGs

Goal 1: Eradicate extreme poverty and hunger Employment Creation

Goal 2: Achieve universal primary education No direct link

Goal 3: Promote gender equality and empower women

Employment opportunities for women in the waste sorting phase

Goal 4: Reduce child mortality Improvement of hygienic conditions, reduction of child diseases

Goal 5: Improve maternal health Improvement of hygienic conditions, reduction of childbirth deaths

Goal 6: Combat HIV/AIDS, malaria and other diseases Improvement of hygienic conditions, reduction of diseases. Risks for people working in the sector.

Goal 7: Ensure environmental sustainability Improved energy efficiency, reduced CO2 emissions, reduced risk of water contamination, improved sanitation, reduced deforestation

Goal 8: Develop a Global Partnership for Development Opportunities for decent and productive relationships between private and public stakeholders

Exhibit 2 - Waste Composition in key African and European cities2

Composition(% by weight)

Accra(Ghana)

Kampala(Uganda)

Lagos(Nigeria)

Nairobi(Kenya)

Dakar(Senegal)

Milan(Italy)

London(UK)

Organic 85% 82% 64% 59% 53% 31% 32%

Plastic 3% 2% 6% 16% 9% 13% 10%

Glass 2% 1% 8% 2% 1% 9% 7%

Metal 3% 3% 10% 2% 2% 3% 4%

Paper 5% 5% 6% 12% 7% 24% 23%

Other 2% 6% 6% 10% 18% 20% 24%

2. “Africa review report on waste management”, United Nations Economic and Social Council – Economic Commission for Africa (2009); “London’s wasted resource – the Mayor’s municipal waste management strategy”, Mayor of London (2011); “Municipal waste management in Italy”, Antonio Massarutto, Ciriec Working Paper (2010)

Waste management problems in Africa are varied and complex, with infrastructure, political, technical, social/economic, organisational/management, regulatory and legal issues and challenges to be addressed.

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In Africa waste is typically disposed without consideration for environmental and human health impact, leading to its accumulation in cities, towns and uncontrolled dumpsites. Co-disposal of non-hazardous with hazardous waste3 without segregation is common practice.Municipal Solid Waste (MSW) is typically disposed in uncontrolled dumpsites, lacking any waterproofing system. Most of the waste is burnt, with a significant production of CO2 and of other hazardous composts that are not adequately treated, with serious threats for the human health and for the environment in general.

Furthermore, the continuous growth in the use of plastic, which is substituting wood and metal, is worsening the situation. When plastics have no recycling value, it ends up in landfills or in the street, in rivers and waterways and becomes a major issue as it damages the environment, clogs drains and causes flooding in the rainy season. Moreover, plastic degradation time is among the longest.

MSW management has become an intractable problem in recent times, beyond the capacity of most municipal/state governments. This has resulted in refuse heaps being dumped in the urban landscape in heavily populated cities, as typically only about 40 to 50% of waste is reportedly being collected by official waste-management companies4.

Waste management in the region suffers from limited technological resources as well as poor funding that collectively result in low standards of waste management. This is exacerbated by the public perception that waste disposal is a welfare service and hence the reluctance to pay for waste disposal services.

Rapid urbanisation exacerbates these difficulties: over a third of Africa’s 1 billion inhabitants currently live in urban areas, but by 2030 that proportion will have risen to a half. Dar es Salaam (Tanzania), Nairobi (Kenya), Kinshasa (DR Congo), Luanda (Angola), Addis Ababa (Ethiopia) will all increase their population by more than 50% by 2025, adding millions of inhabitants to their already over-populated neighbourhoods.

3. Hazardous waste is waste that poses potential threats to public health or the environment. In particular, it is corrosive, toxic or flammable material. A number of businesses generate hazardous waste, such as dry cleaners, automobile repair shops, hospitals and photo processing centres or larger companies such as chemical manufacturers, electroplating companies, and oil refineries.4. Africa review report on waste management”, United Nations Economic and Social Council – Economic Commission for Africa (2009)

Exhibit 3 - Waste degradation timeItem Degradation time

Glass bottle 1 million years

Plastic bottle 450 years

Disposable diapers 450 years

Aluminium can 80-200 years

Rubbed-boot sole 50-80 years

Leather 50 years

Plastic bag 10-20 years

Cigarette butt 1-5 years

Milk carton 3 months

Apple core 2 months

Newspaper 6 weeks

Paper towel 2-4 weeks

Source: U.S. National Park Service

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All in all, across Africa the framework for an environmentally sound management of waste is either lacking or inadequate: the region urgently needs infrastructural, institutional, legal reforms and changes in attitude.

The present report is going to explore how small but growing private initiatives, but with a social mission, are trying to tackle the Municipal Solid Waste problem. As we will see, Social Enterprises are experimenting new and creative models to address the African waste challenge.

case studIesThe case studies present five African social enterprises dealing with municipal waste management. The companies are located in four different countries and are at a diverse stage of development.Of the five companies, only two work exclusively on plastic (EcoPost and Proplast), while the others have a broader focus.

The choice of presenting such a diverse cohort of companies is intentional, as it will allow to identify the challenges that are common to all, but also to compare the different choices that the companies made, the strategies that they implemented and the different partnerships that they adopted in order to achieve their goals.Ultimately, the comparison will identify the social and environmental achievements and the key success factors for each social enterprise.

Private Agents

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Zanzibar

ThE COMPANy

Zanrec (http://www.zanrec.com) is a waste management company that collects all waste fractions; recyclables like plastics and metals are re-sold in East Africa, organic material is composted and sold as fertilizer to farmers, while approximately 15% of the waste is dumped on landfill. The company aims at building a sustainable business while generating maximum social and environmental impact.

Zanrec was started in 2011 by Switch Responsible Ventures, a Swedish company specialized in building sustainable ventures in East Africa. In December 2013 a sister NGO was established to manage the community-engagement and environmental awareness campaign. The Company is currently employing 15 staff members, included 4 managers.

Zanrec operates in Zanzibar, the biggest island of Tanzania, where 260 tons of solid waste are produced every day by its over 1 million inhabitants and numerous tourists.

The organic fraction amounts to roughly 80% of the total and only 30% of the waste produced is collected, while the remaining part is dumped on the island or directly into the Indian Ocean, causing clear negative effects on the environment as well as health problems among Zanzibar residents.

Most inhabitants are unaware of the damage caused to the environment and to their health by uncontrolled waste management, but the level of awareness is increasing among younger generations. Moreover, the degradation of the environment is starting to affect the tourism industry, one of the biggest revenue sectors on the Island. According to a recent survey by Zanrec, four out of five visitors believe that the region is too polluted to be visited again. As a consequence, those engaged in the tourism sector in Zanzibar are starting to take action.

zanrec

© Zanrec 2014

© Zanrec 2014

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Zanrec generates revenues from two sources:• waste collection fees paid by hotels -

roughly 85% of sales• sale of collected materials - 15% of sale

Plastic is currently sold in Zanzibar “as-it-is”, with no further treatment or processing. It could be sold also in Dar es Saalam at an higher price, but the transportation costs would make the activity unsustainable.

OPERATINg MOdEL

buSINESS MOdEL

Zanrec collects all waste from different sources: hotels, private agents and local NGOs/associations. The company is currently collecting 4-5 tons of waste per month.Zanrec original plan was to recycle and process the plastics into value-added products, but decided to switch to a full waste service provider business model, in order to achieve better margins.

hotelsCurrently Zanrec collects all waste from 9 hotels, which pay 450 €/month in average for the service, depending on the hotel size, on logistics, and on other specific conditions.Zanrec is also running a pilot service with 39 hotels, where the Company collects only plastics and metals: at the end of Q2 2014 the pilot will transition into a full waste service. Zanrec usually visit the hotels 3 to 7 times a week, depending on their size.

Private AgentsZanrec engaged 15 existing shopkeepers in the collection of plastic as private agents: the company provides them with a scale and a small working capital fund to start the collection.The agents paint their shop with the “Zanrec” logo, and act as local collection points: they buy plastic from local people, and resell it to Zanrec, applying a mark-up. Zanrec visits the agents to collect the plastic waste once they have gathered at least 500 kg.

NgOs/associationsZanrec is also collaborating with NGOs and Local Associations to collect separated waste at village level, but these organizations have struggled to run the collection so far.Despite the activities of training that have been run at community level, the collection centres have been ineffective so far. A new model is being developed, according which the villages and the NGOs will be paid according to the cleanliness of the village and of the collection points. This model is currently being piloted in 2 villages on Zanzibar and will be scaled up during 2014.

Bureaucratic problems prevented Zanrec from being granted land for handling the waste. However, the Company has recently won a public tender which will allow Zanrec to collect waste in the northern part of Zanzibar, and will also provide the Company with access to a dedicated land plot for waste processing.

© Zanrec 2014

© Zanrec 2014

© Zanrec 2014

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Zanrec is delivering a substantial social and environmental positive impact:

• Employment: 15 full-time employees (2 female, 13 male)• Waste collection: 60 tons / year (increasing rapidly).• Educational and training activities (English and PC lessons):

all the company’s employees, plus additional above 10.000 among the general public within environmentally and waste knowledge.

• Environmental campaigns in schools and communities in 2013-2014 involved more than 2000 students.

• Training to hotel staff and managers on correct segregation and disposal of waste.

Beyond the quantitative dimension, thanks to its activities Zanrec has introduced in Zanzibar the vision of a different, sustainable and more respectful way to manage waste in the island.

IMPACT / INCLuSION OF VuLNERAbLE gROuPS

Zanrec key partners are:• Donors, such as SIDA (Innovation Against Poverty Program),

and ACRA-CCS (Fondazione Cariplo and Regione Lombardia), that supported the company in the start-up phase and in the work with the communities

• Private Investors such as BVBA, The Rylander Foundation and Switch Responsible Ventures that provided investment capital

• Local Communities, that have been involved in the waste collection activities, albeit with limited success so far

• The Local government, whit whom the Company is actively collaborating, also in relation with the set-up of a decentralized waste collection and treatment site

KEy PARTNERShIPS

Zanrec is now exploring the possibility of pressing the plastic and shipping it to China: a general agreement has already been reached with a potential customer, but low volumes have so far prevented the Company from exploiting this opportunity.

Zanrec sales amounted to USD 38.000 in 2013.The Company has not yet achieved breakeven, but it is confident to reach it in Q3 2014.

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ThE WAy FORWARd

Zanrec plans to expand rapidly the collection to a higher number of hotels.This objective will be achieved by approaching each area with an high-density of hotels and selling the waste management services to clusters of hotels.The service to hotels will subsidize the community collection.

Extending the collection also to organic waste, opening several waste collection sites and starting the production of compost will also require a substantial increase of employment creation, as the company will need 40-50 additional staff members for waste collection and for waste treatment.

KEy ChALLENgES

To effectively scale-up, the company will need to ensure that waste separation levels remain satisfactory at scale, as this is vital in order to produce compost and resell plastic and other materials.In order to achieve optimal separation Zanrec will need to work at close contact with its main waste providers, the hotels and the village agents.

From the social impact point of view, the most challenging part of the collection model will be to substantially improve the collection and separation levels at community level, working directly with local authorities, local NGOs and associations.

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ecoPost Nairobi

ThE COMPANy

EcoPost (http://www.ecopost.co.ke) manufactures high-quality fence posts from waste plastic.

EcoPost was founded in 2009 by Lorna Rutto (CEO) and Charles Kalama (Technical Director). In addition to Lorna and Charles, the key management people are a Production and Supply Manager and an Accounting / HR person.Roughly 20 operations persons complete the staff.

EcoPost operates in Nairobi, the capital of Kenya and one of Africa’s largest cities, with over 3 million inhabitants.

Nairobi produces around 1.900 tons of waste per day. While 93% of Nairobi’s waste is potentially reusable, only 5% is actually recycled and composted. Only 33% of waste produced is collected for disposal at Nairobi’s only official dumpsite, Dandora, while the rest is littered on hundreds of illegal dumpsites, next to houses or burned. The official dumpsite, and even more so the illegal ones, is operated in an unsystematic, unplanned and highly unsanitary way. As a result, poorly managed and not properly disposed solid waste pollutes the air, water and soil, causing significant health and environmental problems. This is especially concerning in slums and other lower income areas, where high population density, paired with lack of infrastructure and service provision, aggravates these problems.

Different approaches by various actors have not been able to provide adequate solutions to the problem, with these being entities from the public, private, and informal sector, including non-governmental organisations (NGOs).

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OPERATINg MOdEL

The company collects plastic from Nairobi’s streets through a network of collection yards operated by independently run and owned collection yards, which are operated by 1-2 managers; at each yard, 20-30 collectors pick up plastic and deliver it to the yard. These yards create employment for Nairobi’s poorest, and reduce garbage.

After collection, waste plastic is processed at the EcoPost factory, that in 2013 was operating on 2 shifts and 6 days/week, as the Company was not able to keep up with the demand for its products.The Company is currently about to move to a new facility where a new wood-plastic composite extrusion line will be installed, allowing to scale-up the plastic processing capacity from the current 20 tons/month to over 100 tons/month without significantly modifying the production process.

The new line will increase automation, improving efficiency and reducing human error. The new line will also allow manufacturing new products (i.e. pallets, roof trusses, pellets). All in all, the new line will allow EcoPost to expand the business and to increase its impact, creating more than 100 permanent jobs by 2018, up from the current 24 jobs.

EcoPosts’ main customers include farmers, real estate developers, municipal parks, ranches, hotels and local authorities.So far, about 80% of revenues came from direct sales, mostly thanks to word-of-mouth and personal referrals, while the remaining came from sales through two big wholesalers (for household and farms). The Company is now approaching wholesalers to build long-

term commercial relationships.

EcoPost offers an environmental option for fencing designed to last a lifetime, making it an economical long-term solution.The main applications of EcoPost products are landscaping and fencing. EcoPost products can be used outdoor, where weather resistance and low maintenance are required. EcoPost products are used in both residential and commercial applications.

EcoPost competes against traditional posts for fencing, offering superior quality at higher price. However, currently EcoPost has few direct competitors, as there are few plastic post providers in a large potential market, but this will almost certainly change as market is proven, and new entrants will be attracted by a profitable market opportunity.As the production process is low-tech and reasonably straightforward, barriers to entry in the market are low, and therefore competition may appear quickly; however, the risk is somewhat mitigated by the market size, which is huge: post-investment, after the expansion, EcoPost production capacity would still only amount to 10% of the estimated market demand.

The company recorded sales of USD 150.000 in 2013, and should reach break-even in 2014, when sales might be close to USD 1 Million.

buSINESS MOdEL

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EcoPost leverages on a growing market for fencing posts and sign posts,. to obtain social and environmental benefits such as:

• Eliminating plastic waste from the environment, and at the same time avoiding deforestation. By 2018, it is expected that EcoPost will remove and process over 9,000 tons of plastic waste from the streets of Nairobi. EcoPost will produce over 800,000 posts, most of which would otherwise be produced from local trees. This will lead to saving roughly over 60,000 trees.

• Creating boP jobs both directly (within the Company itself) and indirectly (waste pickers), thus reducing poverty. Today EcoPost directly employs 24 people (including part-time labor) of which 12 women, and indirectly employs roughly 89 people through plastic collection. By January 2018, is expected that EcoPost will directly employ 106 people and indirectly employ 979 people.

IMPACT / INCLuSION OF VuLNERAbLE gROuPS

The key partnership for EcoPost has been the one with a social business accelerator and – above all – with external investors.

In 2012 the company was selected to take part to the unreasonable Institute in Colorado (USA), a 5-weeks mentorship programme specially tailored for social enterprises of developing countries.During the program the EcoPost management had the chance to acquire additional business skills, refine the company’s strategy, and got in touch with blue haven Initiative an American impact-focused family investment company that invests in social enterprises in developing countries.After an initial due diligence, BHI decided to offer EcoPost a pre-investment assistance in the form of a consultancy provided by an experienced investment advisory firm based in Nairobi. The consultancy primary objective was to assist Lorna and Charles in refining EcoPost strategy and in making the Company investment-ready.

The service was successful, and in mid-2013 BHI invested in EcoPost, together with other partners, including Fondazione Opes5. The investment was meant to finance the expansion capacity, both in terms of capital expenditure and working capital. The investors, now represented in the Board of Directors of the Company, continue to provide EcoPost with business advice on a regular basis.

KEy PARTNERShIPS

5. Fondazione Opes is the first Italian initiative that promotes impact investments in developing countries. It was founded by five Italian organizations with a strong social background: ACRA-CCS, Altromercato, MicroVentures, Fem S3 and Fondazione Maria Enrica. Fondazione Cariplo is Opes’ main financial supporter.

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ThE WAy FORWARd

Once the new production line will be in place, EcoPost will mostly focus on expanding sales, identifying new market segments and new customers.

KEy ChALLENgES

The biggest challenges for EcoPost will be:• to efficiently scale-up the production• to secure a much increased waste plastic

supply: the management of the relationship with the collection yards will be crucial

• to identify the best sales opportunities in terms of volumes, marginality and payment terms

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Wecyclers Lagos

ThE COMPANy

Wecyclers uses a fleet of low-cost cargo bicycles and an incentive-based program to offer a convenient household waste collection service in densely populated low-income neighbourhoods.After collection, Wecyclers aggregates the material and sells it to local recycling processors.

The Company was founded in 2012 by bilikiss Adebiyi (CEO) and Jonathan Kola (CTO), two US-educated African entrepreneurs with substantial previous business experience.Wecyclers have created 42 full-time jobs so far, including 20 operators who collect the waste using the Wecyclers.

Wecyclers operates in Lagos, Nigeria, the largest city in Africa with a population that is estimated to be in the 15-20 million range, and rapidly growing.

Lagos produces roughly 10,000 tonnes of waste daily, but only 40-60% of the population is served by a regular waste collection service, leaving large quantities of rubbish blocking gutters and piling up on streets and outside houses, a major health and environmental hazard.According to Wecyclers, of the waste collected only 21% is recycled, while the remaining 79% is disposed at landfill sites.

Low-income neighbourhoods are the least served by waste collection services, and as a consequence people in those communities end up living in a tremendously unhealthy environment.

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OPERATINg MOdEL

Today, Wecyclers works in the densely populated Itire and Ebute-Metta neighbourhoods, which total roughly 2,5 million inhabitants.

Every week, the Company’s cyclists peddle from door to door in these neighbourhoods to pick up recyclable trash from registered households. Items like plastic bottles, aluminium cans and plastic sachets are all weighed on site, and from there are taken to a specific sorting area where they are bagged in order to be sold to recycling factories. In return for the waste material that participating households give to Wecyclers, they receive redeemable Wecyclers points over their cell phones via SMS. Every three months customers can redeem the collected points for goods that they value, such as cell phone credit, basic food items, and household goods. As families receive collection reminders and rewards updates directly on their mobile phones, the benefits of recycling are immediately perceived.

Wecyclers have grown today to having 5,000 households subscribe to its service. The Company has so far collected nearly 300 tons of waste, using a fleet of 16 low-cost cargo bicycles (“wecycles”) that are designed to transport large cloth sacks of trash.

At this stage, each wecycle can collect waste materials from close to 30 households per day / 150 households per week, and 2,250 households per week per hub. The total waste each hub can currently collect is 600 tons per year.

In the long term, the Wecyclers model will be organized by hubs, which will act as mini-transfer stations: they will have space for sorting and aggregating waste, storing wecycles and spare parts.

Every Hub will have 35 wecycles, which will collect from 30 households per day. As every household is expected to generate 5kg of waste per week, every single Hub will collect 1.300 tons/year.

Wecyclers’ current target market is low-income neighbourhoods; 72% of subscribers are female, and the average household size of their subscribers is 5,5 persons.

Wecyclers sources recyclable waste from the households, who are rewarded with redeemable Wecyclers points over their cell phones, and earn revenues selling the collected waste to recycling companies. These companies usually re-sell the recyclables internationally, and do not have long-term agreements with Wecyclers at the current stage. The Company is also exploring the possibility to directly export and resell collected waste.

Wecyclers are also supported by corporate sponsorships, such as:

• donation of goods: companies can decide to donate goods, which can be redeemed by subscribers. This has already taken place for TVs donated by Samsung and for drinks donated by Coca-Cola

• Payment to cover for the cost of incentive program. For example, Coca-Cola sponsored two of Wecyclers redemption events, covering the costs for all the redeemed prizes.

• Cycles sponsorship: companies sponsor wecycles in exchange for recognition and branding (advertisement) on the wecycles themselves.

buSINESS MOdEL

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Wecyclers is delivering impact in several different ways, such as:

• Bringing a reliable waste collection service where no service is available, with benefits in terms of improved and safer living environment. The Company is currently serving 5.000 households

• Offering stable-long term jobs to low-income communities. Wecyclers actively recruit within the communities where they work (42 jobs created so far, 15 women employed).

• In some cases Wecyclers work where alternative waste collection services are available. In these communities, Wecyclers allow households to save up to 1/3 on waste disposal fees (approximately USD 1,2 per household per week).

IMPACT / INCLuSION OF VuLNERAbLE gROuPS

The key partners of the Company include:• Corporate Sponsors, like Samsung and Coca-Cola (see above);• LAWMA (Lagos State Waste Management Authority): the

Authority provides Wecyclers with free use of public spaces around Lagos, where the company can set up their local bases, and would like the Company to help improve the waste management of low-income communities which are usually seen as not lucrative by other waste collection companies and - as a consequence - do not get served;

• Industry Coalition on PET recycling: the coalition is working to build a viable infrastructure for the collection of post-consumer PET bottles, as its members (companies like Coca-Cola, Nigerian Bottling Company, Nestle Water, Nigerian Breweries and Pepsi) realize that a workable collection solution needs to be found or they could face negative reputation consequences for their brands. Wecyclers is currently working with the Coalition to set up a large-scale PET collection site.

KEy PARTNERShIPS

• CSR initiatives: DHL supported Wecyclers by donating a van, GlaxoSmithKline sponsored 3 wecycles.

The Company recorded sales of USD 99.000 in 2013, which are expected to grow to USD 265.000 in 2014.

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ThE WAy FORWARd

Wecyclers currently run two Hubs, and want to start and fully operate two additional hubs by the end of 2016. Of the two new Hubs, one will be a PET Shredding Hub, which will allow the company to provide PET shredding services, while the second will be a new Collection Hub, to increase the Company’s collection capacity.

The Company plans to go from the current 5.000 subscribers to over 8.500 by the end of 2014 and nearly 50.000 by the end of 2016. Wecyclers intend to achieve this goal by franchising their wecycles and hubs.

Wecyclers expect to reach break-even point with 200 wecycles by 2016.

KEy ChALLENgES

The biggest challenges for the Company to grow are:

• Securing the capital to finance the expansion of additional hubs.

• Getting government support. In order to be successful, recycling needs to be mandated through government policy. Currently there is no official policy guiding recycling or promoting goods manufacturers responsibility.

• Increasing the technical skills to build and repair wecycles: as Wecyclers grows, lack of skilled technicians could be a major impediment.

• Falling price of recycled PET: the falling price of recycled PET plastic caused by the drop in the price of virgin plastic is a major challenge.

• China’s Green Fence: China has started enforcing new rules that closely regulate the quantity and quality of post-consumer waste imported for recycling. Reduced demand for post-consumer waste from China could seriously weaken the sale market for collected waste.

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ProPlast Senegal

ThE COMPANy

Proplast processes plastic such as polypropylene (PP) and polyethylene (PE), to turn it into granulated plastic that is sold to local plastic processing companies. In the medium-term, Proplast expects to start recycling PET.

Proplast was started in 1998 by the Italian NGO LVIA (http://www.lvia.it). After 10 years of activity as a cooperative, in 2010 Proplast became a private company (an SARL, according to Senegalese law), with each of the 15 female employees awarded with 6% of the Company.

Proplast has three main objectives:• to clean the Senegalese environment from plastic waste • to create a new and sustainable economic activity• to create stable, full-time jobs.

Besides the 15 full-time jobs, the Company has also created 50 casual daily jobs.

Proplast (http://www.proplast-sarl.com) is based in Thies, the third largest city in Senegal with a population of 320,000; Thies lies 70 km East of the capital Dakar, and is a major industrial city.

As elsewhere in Africa, plastic waste is becoming a serious environmental problem in Senegal, because it is disposed everywhere: in the cities, in the countryside, in the rural villages as well on the beaches and in the sea.

Plastic waste gets usually incinerated in uncontrolled fires, which lead to the production of dioxins, furans and other noxious composts, with potential serious consequences for the human health.

Photos Proplast by Manuel Meszarovits Photojournalist

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OPERATINg MOdEL

Proplast buys plastic from a network of collectors operating in Thies, who are usually run by youth associations or women groups. The plastic carried by collectors is checked for quality, and is weighted and stored in temporary warehouses, before being sent to the central processing centre by truck.The price paid to collectors is 40 CFA/kg for PE and PP and 50-100 CFA/Kg for PVC (according to quality)6.

Proplast currently collects the following types of plastic:

• Polyethylene (PE): coming from bottles, cans, etc.

• Polypropylene (PP): coming from chairs, bowls, buckets and pots

• PVC: coming from shoes and sandals

At the processing centre, the plastic is sorted by type and colour in order to make the subsequent grinding phase easier, when plastic is finally granulated. Before being bagged in 25kg bags, the plastic is washed and dried.

Once bagging is completed, plastic granulate is weighed and shipped to customers, such as local plastic processing plants.

Proplast produces granulated plastic of very good quality and purity, which is sold to plastic manufacturing companies in Thies and Dakar, and is used to produce new items such as septic tanks, furniture or detergents bottles.

The Company now generates sales of about USD 250.000 per year, and has reached profitability.

By far the most important partnership for Proplast has been the one with the Italian NGO LVIA, which started the Company in 1998 as an innovative international cooperation approach, and later turned into a private company. More recently, the French cooperative Espere France became an impact investor7

in Proplast.

Proplast started as an initiative aimed at enhancing the income of several unemployed and illiterate women of Thies, who, during the years, have been trained on waste management, recycling and small business management.After more than 10 years, the 15 women have built together a small but profitable company, of which they are employees and shareholders, something unprecedented in Senegal.

buSINESS MOdEL

KEy PARTNERShIPS

IMPACT / INCLuSION OF VuLNERAbLE gROuPS

6. 40 CFA = € 0,06 ; 100 CFA = € 0,157. Impact investments are investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return

24

ThE WAy FORWARd

Proplast has been operating for over 15 years, and has reached profitability. However, there are two operational challenges that are limiting the Company’s growth:

• the amount of collected waste plastic, which is relatively low (150 tons/month)

• the transformation capacity is still limited

KEy ChALLENgES

In order to overcome the above-mentioned challenges, Proplast is going to focus on:

• Strengthening the waste collection system, by:› The organization of awareness campaigns on waste collection; › The expansion of the network of waste collection to other regions

of Senegal;› The collection of plastic waste from manufacturing companies;

• Increasing the Company’s processing capacity, which will require:› External financing via investment capital, that will allow to

purchase new machineries› Training of staff on new processing techniques that will be

introduced.

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26

Kenya

ThE COMPANy

TTS collects, recycles and composts waste: its mission is to provide affordable and environmentally friendly waste management services to all income areas.

TTS was founded in January 2011 by daniel Paffenholz (CEO and main shareholder), and employs underprivileged youths for waste collection. The Company has created 60 full time jobs so far.

Taka Taka Solutions operates in Nairobi, Kenyas’ capital8.TakaTaka Solutions (TTS) (“taka taka” means waste in Kiswahili) is a waste management business and a social enterprise committed to addressing the waste management challenge.

taka taka solutIons

8. For a background about MSW context in the city, please refer to the EcoPost chapter.

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TTS has three main revenues streams:• Waste Collection Fees from customers

(households, businesses, etc..) The service is very affordable. TTS charges

as low as USD 1 per household per month. In order to make the sales process more effective, TTS is now marketing its services through individual sales agents and real estate agencies, which receive a commission for their services.

• Sale of Recyclables TTS sells plastic, glasses, clothes to several

companies that in Nairobi trade or process recyclable waste.

OPERATINg MOdEL

buSINESS MOdEL

TTS is creating a fully integrated waste management service that will result in greatly reducing the amount of waste going to the dumpsite. In order to achieve this, TTS collects separated waste (organic and recyclable waste) by offering high quality waste collection services to its clients, who pay the Company for a twice-a-week door-to-door collection service. TTS provides its customers with bins for waste storage and separation, and offers weekly cleaning of bins and plots.

In lower income areas waste is collected from households using handcarts. Waste is separated at the collection point: the Company has provided its customers with separation bins that are checked by waste collectors who, if the separation level is not satisfactory, manually perform further separation on-site. Waste is subsequently moved to decentralized transfer points where it is further separated. The recyclable waste is separated into 20 fractions (plastics, glass, metals, paper, etcetera) and then sold to recycling industries from the transfer points. The organic waste is temporarily stored at the transfer point, before being transported to TTS’ central waste processing plant (TTS has just started operating a new and much bigger site). The residual waste is taken directly from the transfer points to the municipal landfill.

In higher income areas, where TTS is about to start its activities, waste will be collected with trucks and then transported to a transfer point.

The different waste fractions are converted into different waste-to-value products:

• the organic waste (around 60%) is converted into compost (sold to farmers and gardeners - activity in pilot stage).

• recyclable materials (paper, plastic and metal - around 20%) are separated from the recyclable waste, to be then sold to recycling industries.

• only the 20% of residual waste is disposed into landfills.

TTS is now serving 3,500 households, 50 small businesses and 10 schools. Around 5 tons of waste are handled by TTS every day. The Company is currently acquiring additional 400 households a month.

In order to test the compost produced through the organic waste fraction, TTS started operating a 2,5 acres compost test farm; the results are very encouraging, and the farm is used also as a marketing tool for potential customers (farmers) who are invited to visit it.

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Taka Taka is delivering significant positive impact, by:• Offering affordable waste collection services to low income

areas (3.500 households reached so far)• Creating formal jobs for youths living in low- income areas (60

jobs created so far - 14 women and 46 men)

IMPACT / INCLuSION OF VuLNERAbLE gROuPS

Over the years the Company has been able to raise a considerable amount of grant money from different sources (uSAId/dIV9, Siemens Foundation, etc.) as well as patient investment capital (dEg10) which allowed TTS to start building an ambitious model right from the start, and to adjust it according to the changing market and operating conditions.

The Company also benefited from high-level advisory from two internationally experienced waste management experts, who are also shareholders of the Company.

KEy PARTNERShIPS

• Sale of Compost In the long term, the sale of compost will be the single most

important source of revenues for the Company, and it will drive TTSs’ profitability.

However, due to the current low compost production volumes, there have been limited compost sales so far, as large customers (such as large-scale contracts with local farmers) are looking for high-volume, long term supplies. When the new site will become fully operational, the Company will be able to start compost sales on a full scale. In the short term, the Company is exploring compost sales for the urban gardening market in Nairobi.

TTS generated about USD 50.000 in revenues in 2013, of which 60% came from waste collections fees and 40% from the sales of recyclable materials.During 2014 the new treatment site will become fully operational, allowing the Company to start producing and selling compost in significant quantities; sales are expected to substantially increase.

9. USAID (the US development agency) has launched the Development Innovation Ventures program, an open competition supporting breakthrough market-based solutions to the world’s most intractable development challenges.10. DEG (Deutsche Investitions und Entwicklungsgesellschaft) is a initiative of KFW (Germany development bank) aimed at promoting business initiative in developing and emerging market countries as a contribution to sustainable growth and improved living conditions of the local populations.

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KEy ChALLENgES ANd ThE WAy FORWARd

The Company is facing several challenges:• The quality of the collection service:

the company will continue to focus on improving the collection operations, in order to ensure a high level of separation11

of the collected waste as well as to drive sales more effectively.

• The start-up and ramp-up of the new waste processing plant: despite some delays, the site should become fully operation during the summer/fall of 2014.

• Recycling 80% of collected waste, with a focus on organic waste (in progress, should be achieved during 2014)

• Providing high quality waste-to-value products (compost, recyclables)

• Improving soil productivity through organic fertilizers (produced in limited quantities so far)

• The expansion of the waste collection service into new areas, that will introduce new complexity in the collection operations: TTS should start expanding into additional low income areas as well as starting to serve high-income areas soon

• The ramp-up of compost production and sales: TTS is already running a farm where it tests its compost with good results. The challenge will be to produce compost in quantities high-enough to secure large contracts with local farmers.

• Risk related to producing compost from organic waste collected from households is contamination- not good quality of segregation (raise standards on quality of segregation at household level and check on compost produced)

All in all, Taka Taka Solutions’ integrated waste management model offers an ambitious proposition to tackle the Nairobi waste challenge. Reaching a much-increased scale will be critical to achieve financial sustainability and to substantially increase the social and environmental impact delivered.

11. Achieving a high level of separation is the biggest challenge for every waste collection and recycling company: TTS started providing its customers with three different waste bins (one for organic, one for recyclables and one for undifferentiated waste), but lately switched to a two-bins model (organic and undifferentiated waste) because the three-bins model was too complicated to be managed by customers.

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CoMPANy PLACE oF oPERAtIoNS

StARt oF oPERAtIoNS FoUNDERS

ZanZibar(tanzania) 2011 Foreign company

nairobi(kenya) 2009 Local entrepreneurs

Lagos(nigeria) 2012 Local entrepreneurs

thies(senegal)

2010(1998)

international ngoLocal Communities

nairobi(kenya) 2011 Foreign entrepre-

neur

Comparative Analysis

Before moving to the analysis of the similarities and differences between the companies, it’s useful to summarize the main information regarding the companies in two different tables: the first describes the main characteristics of the 5 companies, while the second focuses on their activities.

comParatIve analysIs and conclusIons

Exhibit 4 - Company Description

31

LEGAL FoRM EMPLoyEES/FEMALE EMPLoyEES KEy PARtNERShIPS CoMPANy

Private Limited15 2 13

investorsDonorsinternational ngoLocal Communitiesgovernment

Private Limited24 12 12

investorsbusiness accelerator

Private Limited42 15 27

Corporate sponsorsgovernmentPrivate sector

sarL (from 2010)before was a cooperative

15 15

international ngoLocal Communitiesinvestors

Private Limited60 14 46

investorsDonorsadvisors

CoMPANy MAIN ACtIvIty MAIN REvENUE SoURCES

Collection and resale of waste plastic and other recyclables

Waste collection feessale of recyclables

Manufacturing and sale of fence posts made from waste plastic

sale of fence posts

Collection and resale of waste plastic and other recyclables

sale of recyclables

Processing and resale of waste plastic

sale of processed waste plastic

Fully integrated waste management servicesales of recyclablesProduction and sale of compost

Waste collection feessale of recyclablessale of compost(going forward)

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Exhibit 5 - Company Activities

Story of the company

All the companies have been established pretty recently, with the exception of Proplast, which was run as a cooperative for many years since its start-up in 1998, and decided to become a private company in 2010.This is coherent with the strong economic development of Africa in the last 15 years: the continent is the second fastest growing region in the world after Emerging Asia, with an annual GDP growth rate exceeding 5%12. In such a dynamic context it is significant to notice that Proplast, started by an NGO, decided to change its legal structure moving to a new legal form that allows it to exploit the new opportunities - also in terms of external financing - that a growing economy offers.

As for the origin of the companies, it is interesting to notice that both local and foreign entrepreneurs decided to embark in ventures that address a challenge that is considered intractable and is usually left to the public institutions.

12. “Lions on the move: The progress and potential of African economies”, McKinsey and Company

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voLUMES CoLLECtED / tRE-AtED SALES / yEAR BREAKEvEN CoMPANy

5 tons / month $ 38.000 (2013)

noshould be reached in 2014

20 tons/month(scaling up to 100 tons/month)

$ 150.000 (2013)

noshould be reached in 2014 with scale-up of operations

25 tons / month$ 99.000 (2013)

noWill require sub-stantial scale to reach breakeven

50 tons / month$ 250.000 (2013)

Yesthe company is now focusing on ex-panding its business

150 tons /month$ 50.000 (2013)

noWill require sub-stantial scale to reach breakeven

5

20

25

50

150

A combination of increased environmental sensibility and conscience that a business opportunity was opening up – due to the Government inability to tackle the problem – stimulated entrepreneurs of different backgrounds to enter the sector.

Partnerships and funding

Funding: The companies leveraged on a pretty diverse set of partnerships, but all of them – in one form or another – had access to grants. The level of grant- financing has been very different among the five companies, but it can be reasonably assumed that none of them would have reached the current stage of development without it.All the companies but one have already received non-grant financing by external investors, while the other (Wecyclers) is now interested in attracting investors. As in other sectors, grant funding can be vital for the start-up of social enterprises, paving the way for the entrance of private investors in the growth phase.

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blended Capital

Typically, social enterprises have to deal with different actors (i.e. Donors, Banks, Investors) in order to receive support, and everyone of these actors tend to stick to their own usual funding area (a donor provides a grant, a bank provides a loan, an investor provides equity)This kind of approach is not ideal, as splitting the type of capital needed by the company among different providers might reduce the efficiency and the effectiveness of the support. More and more social enterprises are looking for blended capital, from actors that are able and willing to offer different types of capital (grants, loans, equity) to the same company. This appears to be the most appropriate support for the specific needs of social enterprises

The public sector: The role of the Government is significant, especially for the companies that directly operate in waste collection. Waste management is often heavy regulated, and is typically under the responsibility of public authorities.However, the under-funded public sector might see positively the intervention of private actors in this space, above all if these are able to effectively operate in low-income contexts where the waste challenge is particularly tough and external support might be needed.

Local communities: the involvement of local communities happens in different ways. Often it is through the direct employment for local low-income communities as collectors, sorters, resellers of recyclables. In other cases local communities can become active economic players, directly dealing with the companies as business partners; in this case the relationship is somehow less direct but potentially more empowering.The involvement of vulnerable and low-income communities is not easily achieved, as these usually lack the skills and the sophistication needed to independently run small businesses in such a complex and new sector. In these cases, the provision of adequate training is vital, and the role of support-agencies is particularly relevant.

Private sector: It is interesting to notice that only one of the selected companies (Wecyclers) is actively engaging with the private sector to structure and run its activities, as the partnerships with big corporations such as Coca Cola and Samsung represent a structural part of their business model.This is a relevant opportunity and should not be overlooked because - as environmental sensibility increases also in African countries - large private actors will have to adapt their strategies to the changing behaviours of customers.

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Activities and business Models

Only two companies, among the five selected, work exclusively on plastic (EcoPost and Proplast), while the others have a broader focus and operate also with other types of waste materials.

EcoPost and Proplast are also the two companies that are closer to sustainability: Proplast is already profitable, while EcoPost should reach breakeven in 2014.The reason is that these two companies are the only ones in the cohort that are processing waste at a significant level, producing finished (EcoPost) or semi-finished products (Proplast) that are sold to third parties. In addition, both companies are not directly involved in waste collection.

This is particularly significant, as it reaffirms the fact that plastic recycling and processing offer the economic potential to build successful businesses, while – at the same time – providing positive social and environmental impact.

Two other companies – Zanrec and Taka Taka Solutions – are pretty similar in terms of business model and activities, albeit at different stage of development. Both directly collect waste, offering a paid service to their customers, and generate revenues also from the sale of unprocessed recyclables and – in perspective – from the production and sale of compost.It’s known that waste collection is the phase in municipal waste management where companies operate at the lowest margin. In developing countries this is exacerbated by the extremely low-income level of customers that are served.As a consequence, it is virtually impossible for a private enterprise to be sustainable while providing only waste collection services. In these contexts extracting value from waste is not only a matter of environmental and social, but also of economic sustainability.

The strategy that both Zanrec and Taka Taka are implementing is to add to their waste collection activity the resale of recyclables, and – above all –to produce and sell compost as a high-value agricultural fertiliser.

Wecyclers differentiate from all the other companies in the group with its creative business model characterized by incentivising low-income communities in providing the company with high-quality recyclable waste in exchange for redeemable points. In this business model the relationship with the private sector is very important, as it can play an essential role in stimulating its customers toward a more sustainable approach to waste disposal.Despite the company being in its start-up phase and still having to prove the sustainability of its model, the Wecyclers experience clearly shows that even in such an established sector there is still room for innovation.

Impact

All the five social enterprises analysed deliver a positive environmental and social impact to the communities where they work.

Job creation is the most evident impact: although the number of direct employees is relatively limited, all the social enterprises generate many more indirect jobs, above all in the waste collection phase. These jobs are particularly significant, as they are typically found in low-income communities where stable employment opportunities are lacking.

Environmental protection is the second great impact area: by properly collecting waste, social enterprises are preserving the environment and limiting deforestation, and are avoiding the production of other waste by adding value to recyclables, which are reintroduced in the production cycle.

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Finally, a large impact area – albeit of difficult quantification – is in terms of improved living conditions, with positive consequences on the health of the people belonging to low-income communities.

Even if impact monitoring and measurement in social enterprises is typically elusive, it’s possible to sketch a comparison between the five different companies.

From the point of view of job creation , it is clear that the companies that work in the collection phase offer a higher number of full-time and stable jobs. Moreover, these companies are directly in control of the salaries and of the working conditions of their employees, and therefore offer better guarantees in terms of the quality of the jobs created.All in all, waste collection companies offer and higher impact in terms of direct job creation opportunities.

From the environmental point of view the most quantifiable parameter is the amount of waste “treated” (collected or processed) by the different companies. From this point of view, it’s not possible to come to any significant ranking of the different impact models. However, it is reasonable to assume that the companies that are not directly involved in waste collection might scale more easily, at least on the supply

side of their model, as they can leverage on external networks. It’s also true, however, that - if waste is going to be processed and not simply resold - processing capacity bottlenecks might represent the real constrain for such companies to scale-up their activities.

If we take a look at the companies’ impact models , it could be argued that the integrated waste collection model - which both Taka Taka Solutions and Zanrec are trying to build - potentially offers a more comprehensive solution to the waste problem, and at the same time also offers the highest potential social impact. This is because, by operating directly in the collection phase, the two companies offer the largest employment opportunities; by reselling recyclables, they promote the reuse and the recycling of disposed goods, thus extending the life cycle of materials; by composting the organic waste they provide a support to sustainable agriculture that can, in turn, increase productivity and generate additional jobs.

It is worth noting that these conclusions are obviously preliminary, and depend on the specific companies that are analysed in this report; moreover, these companies are at different stages of development and operate in substantially different contexts.

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The analysis of five different African social enterprises operating in the waste management sector has allowed identifying several key conclusions.

For what concerns the African waste management sector in general, we highlight the following trends:

As other areas of the African economy, waste • management is a growing business, which is attracting new companies that see a huge economic potential in the sector;Governments and Local Authorities in • general are playing a vital role in the sector, above all for what concerns waste collection activities in low income areas;It is fundamental to make steps forwards • in terms of the legislative framework that regulates waste management in African countries.Social Enterprises can become relevant • actors in multi-stakeholders platforms on policy, incentives and regulation of the waste sector.Plastic processing seems to offer, among • all the waste-related activities, a particular high potential in terms of economic sustainability;Waste collection activities in low-income • communities are particularly challenging both from an operational and from an economic point of view; as a consequence, other activities – such as compost production

– are being developed in order to extract more value from the waste.

Social Enterprises might play an important role in the sector as:

They tend to operate in communities • and neighbourhoods where traditional companies usually decide not to operate, thus helping Local Authorities in facing the waste challenge;The impact that they generate in these • communities is huge, and include employment creation, environmental safeguard and health protection;They might represent an important source • of innovation in such a traditional sector, extending their impact to the whole waste sector, with a catalytic effect.

On the funding side, it has to be highlighted that for social enterprises the role of philanthropic capital is still vital, especially in the initial phases of their lives. Moreover, this support can be leveraged by the companies in their growth phase in order to unlock private capital.

However, what probably social enterprises need the most is blended capital , (grants, loans and equity provided by the same actors), as it is the most flexible, efficient and effective form of capital, the best suited for the needs of social enterprises.

conclusIons

Funded by:

Fondazione ACRA-CCSVia Lazzaretto 3 - 20124 Milan, ItalyT +39 02 27000291 - F +39 02 2552270www.acraccs.org