Sanergy: making a sustainable business out of the sanitation value chain

Sanitation is a major problem in urban slum areas. With so many neighbors and so little infrastructure, residents have few good options for dealing with human waste. Often they resort to “flying toilets”: plastic bags of waste tossed in ditches or down alleyways after use. Many slum residents pay small fees to use pit toilets instead, but those have to be emptied by the bucket and waste usually ends up in local waterways. You can imagine the public health effects of these practices.

There are countless efforts underway to improve sanitation in slums. For example, one business tries to improve on the “flying toilets” by selling better bags, which the company then collects, sanitizes, and turns into fertilizer. At the other end of the spectrum, some organizations advocate for meaningful public investment in sanitation infrastructure, but governments are often reluctant to provide services in settlements that may be technically illegal.

Somewhere in the middle, we find a young company called Sanergy. Their business model has several components, each of which is in a different stage of development. The end goal is to create a sustainable business to address the entire sanitation value chain. I should confess that “sanitation value chain” is not how I normally think about dealing with excrement. I wanted to learn more, so I recently stopped by their office in Nairobi and talked with co-founder David Auerbach. He gave me a better sense of how they work.

1. Low-cost sanitation centers

The first component of Sanergy’s model is a network of low-cost sanitation centers in the slums. Sanergy has developed a toilet that costs $200 to manufacture. These toilets form the core of the sanitation centers, which are sold as franchises to local entrepreneurs in Nairobi’s slums. Franchisees pay $500 for the sanitation center itself, which comes with the first year of waste collection services and discounts on accompanying products like soap and toilet paper. Services will continue in subsequent years for a renewal fee, still undetermined but likely $100 per year. Franchisees earn revenue by charging 5 cents per use.

The branding is an important part of what franchisees get. In the community, toilets are branded as “Fresh Life” — not Sanergy. The slogan — “Be clean. Be fresh. Be you.” — is written in English. Auerbach explained that the intent is to create an aspirational brand, the way Coca Cola does. Customers are attracted to the promise of a better life. Fresh Life operators also get the benefit of increased business that comes with being part of a network.

Sanergy recruited its first franchisees last fall. The company partnered with microfinance bank Faulu Kenya to pitch the franchises to many of its borrowers. Faulu then provided financing for many of the franchises, while other entrepreneurs have started on layaway plans or paid cash. Initially, Sanergy thought that youth groups would be the primary operators, but working with youth brings extra challenges. The company now sees its ideal operator as a slightly older community member who is already running one business, and is looking to start a second. Ned Breslin profiled one such operator after a recent visit.

There are currently 12 franchises in Viwandani and Mukuru Kwa Njenga, two slum areas in Nairobi. Each gets about 40 uses per day, though they are designed to eventually accommodate 100 uses. Sanergy has 25 more toilets in the pipeline.

2. Daily waste collection

Sanergy has committed to collecting waste from its franchises every single day. The toilets were designed to make the process quick and clean: waste is captured in an air-tight container, and the company’s waste collectors can easily swap a full container for an empty one.

The promise of daily waste collection has meant a lot to potential operators, but it’s been met with skepticism. Residents of Nairobi’s slums have seen many well-meaning outsiders show up, make promises, and then disappear. Sanergy is different because it actually makes a business out of the waste. They don’t advertise that fact as much to potential operators, but Auerbach tells a good anecdote about a light bulb going on in one gentleman’s head, as he realized that Sanergy would keep coming back.

3. Converting waste into fertilizer and electricity

The other side of Sanergy’s business model is what it does with the waste after collection. Currently they have about four tons composting in boxes. With the addition of sawdust and certain microorganisms, this will convert into a high quality fertilizer. The first customers are likely to be big agricultural operations, like flower farms.

Eventually, the company also plans to convert waste into biogas, generate electricity, and sell it directly to the Kenya power grid. (Hence the name: sanitation + energy = sanergy.) The biogas process would still result in fertilizer, so the two aren’t mutually exclusive. For now, though, Auerbach says they’re focusing on fertilizer as the more lucrative opportunity.

4. Other initiatives

Outside of the pieces described above, Sanergy has a lot more going on. For example, showers may become part of the sanitation centers in the future. They’ve also designed a “pedal powered poop pump” that could be used to cleanly remove waste from standard pit latrines. Finally, a not-for-profit arm is exploring a voucher program to improve affordability and accessibility of the toilets for poorer slum residents.

Conclusion: Advice for other social entrepreneurs

As we wrapped up our conversation, I asked Auerbach if he had any advice I should share. Without much hesitation, he replied:

“Get on the ground…”

Sanergy started as a concept in a class at MIT’s MBA program. Auerbach and his cofounders — fellow MIT MBA’s Ani Vallabhaneni and Lindsay Stradley, along with engineer Joel Veenstra — received a grant to do a feasibility study in Kenya, then designed prototype toilets that they tested in Kibera. As they gathered more support from the likes of Echoing GreenUSAID’s Development Innovation Venturesand others, they’ve further refined both the technical side and the business model. The team has also expanded. Many of them live in the house that doubles as an office, with laptops open at the kitchen table or on the patio.

“…and hire locally.”

The success of the business model depends on creating viable franchise opportunities for local entrepreneurs and attractive services for slum residents. Foreigners might bring great technical skills, but for understanding the market, nothing beats having strong Kenyan staff who know the communities and the people. “Hire locally” is more than a good development principle. It makes business sense too.