We recently spoke with MBAs Without Borders Advisor, Mikael Baker, to learn more about his experience working with Water For People (W4P) in Kampala, Uganda, where 94 percent of residents lack access to sanitation. Mikael is currently supporting W4P in their effort to launch and scale Sanitation Solutions Group (SSG), a Sanitation-as-a-Business (SaaB) social enterprise in Kampala. Mikael and W4P are collaborating with Ugandan micro-entrepreneurs to develop sustainable business models that address all areas of the sanitation value chain. Mikael believes that bottom-up, market-based approaches are key to creating sustainable social impact.
Mikael, can you briefly describe what you’ve been doing as an MBAs Without Borders Advisor in Uganda?
Absolutely. To sum it up, I am supporting Water For People (W4P) in their effort to launch and scale a social enterprise named Sanitation Solutions Group (SSG) based in Kampala, Uganda. Since the beginning of my assignment, I have been helping with various aspects of getting the business off the ground; including supporting business and marketing strategy, market research, financial modeling, brand management, supply chain management, and partnership development. It is very exciting to have so much input and to wear so many different hats!
That is very exciting! You mentioned Sanitation Solutions Group. Can you please describe their work and tell us how they’re connected to Water For People?
SSG is a social enterprise tackling the sanitation problem in Uganda using a market-based approach. Part of that approach is selling to customers at unsubsidized prices. We believe providing subsidy-free sanitation products and services will increase the sense of ownership by customers, leading to better maintenance of latrines and sustainability of the business. SSG constructs latrines, upgrades latrines, distributes latrine improvement products, and franchises emptiers of latrines. It is important to note that the latrines constructed by SSG are permanent concrete structures, unlike most latrines (aka porta potties) typically seen in the west. We carry a mix of products and services, some developed by SaniHub, W4P Uganda’s engineering program, and some procured on the open market. We are keen on adding a waste re-use component to our product/service mix, but that may come later on. The goals of SSG include growing the market for sanitation products, improving health outcomes, and creating economic opportunities for entrepreneurs.
In 2010, W4P launched its SaaB program. This program was the pre-cursor to SSG. SaaB was an NGO program, so there were challenges with customer perception and willingness to pay. There is a common perception among much of our target market that products and services provided by an NGO should be free or highly subsidized. It was difficult to run an NGO program like a business, so the SaaB program was spun off into an independent entity, Solutions Sanitation Group (SSG). W4P provided seed funding for SSG’s first year of operations.
It’s great to hear that a market-based approach is being applied to the sanitation sector. To you, what makes sanitation different from other sectors when it comes to business?
The target market for improved sanitation products and services is the base of the pyramid (BOP), a sizeable market segment that has traditionally been ignored or neglected by businesses. Consumer goods manufacturers have had success marketing low-price consumables to BOP customers, but marketing big ticket items like latrines is a hard sell. Investors and banks see sanitation as a risky investment because of the potential for high default rates on loans, low end-user valuation of improved sanitation, the dependence culture and market distortion fostered by NGOs and aid organizations, and high cost/effort of measuring impact.
Most of our customers have needed full or partial financing to afford our latrines. SSG has partnered with a Ugandan micro-finance institution (MFI) and a medium-sized bank to provide sanitation loans to customers for latrine purchases and latrine upgrades. Some MFI and bank lenders have strict collateral requirements that prevent many customers from even qualifying for loans. Our MFI partner has been flexible with our customers, allowing them to use assets such as televisions, furniture, livestock, and even their future latrine(s) as collateral.
The dependence culture and market distortion created by NGOs and aid organizations both make it difficult to compete in the market. Why would one buy a new latrine when an NGO will provide one at no cost? Investors, in particular impact investors, are concerned with measuring impact at varying degrees. A sanitation business can claim that by providing improved sanitation they are improving health and/or economic outcomes, but that is not enough for some investors. It is not cheap to bring in a third-party to conduct an impact evaluation, just ask any NGO or aid organization. As a business we are trying to make impact measurement as cost-effective as possible while focusing our efforts on generating demand for our products and services.
Jumping off of that, is sanitation in Uganda a lucrative business?
I wouldn’t go so far as to say that sanitation is lucrative as a business, but I will say that there are indications that the right approach in the right market(s) can make sanitation lucrative. Many of the opportunities to make sanitation make business sense require achieving a significant level of scale; 94 percent of Kampala’s 1.7 million residents do not have access to sewage lines, so there is a tremendous opportunity for on-site sanitation and distribution of improved sanitation products. Improved sanitation involves hygienically separating human excreta from human contact. The demand for construction of new latrines is estimated at 8,000 latrines each year in Kampala alone.
The product and service offerings of SSG are attractive when compared to alternatives in the market. SSG’s DuraSan modular latrine model is more cost-effective than mason-constructed brick latrines which are close in cost and take a long time to construct. The DuraSan is constructed from pre-cast concrete blocks which are assembled on-site, similarly to Lego blocks. The DuraSan is a de-skilled latrine, meaning it is easy to train individuals to cast blocks and to assemble latrines. Mason-constructed brick latrines can take up to two months to construct, typically do not have sealed pits or septic tanks, and are often poorly constructed. DuraSan latrines can be constructed in 2-3 days, have sealed pits or septic tanks, have standardized construction quality, have water-sealed latrine pans, and have many options including tiled floors and walls. SSG franchises manual latrine emptiers, who each pay a monthly fee for an SSG-branded motorized tricycle, a manual latrine emptying pump called a Gulper, a uniform, safety equipment, and waste transport barrels. The Gulper is a hand-operated PVC and metal pump, which will draw waste from a latrine pit and into a container such as a plastic barrel. It appears there is an opportunity for manual emptying in Kampala because many housing settlements are too dense for vacuum trucks to get close enough to latrines for emptying. Manual emptying also allows latrine owners to choose how much they want emptied, so for example a customer with a full latrine pit may only be able to budget enough to have their latrine half-emptied. With a vacuum truck it is all or none.
SSG follows many of the big-name sanitation businesses around the world and most have some common elements in their business models, like latrine construction, latrine emptying, waste collection, waste treatment, biofuel production, compost/vermicompost production, financing, subsidies, and service contracts. There is great opportunity for vertically-integrated service providers in the sanitation sector, particularly when waste reuse/recovery is incorporated into business models. Waste reuse adds an extra demand element to the sanitation value-chain.
Are there particular challenges that face the sanitation sector in Uganda?
In Uganda, as in many other countries, the government is investing more in water infrastructure than in sanitation. As a result, the country has made limited progress over the last 15 years towards achieving the Millennium Development Goal in sanitation. Households in Uganda have limited awareness of the health benefits of improved sanitation, and sometimes even when they are aware, they prefer to invest in more aspirational products they link more closely to improving quality of life.
In my experience, one of the biggest challenges in sanitation in Uganda is the cultural stigma attached to working in sanitation. This stigma has made it difficult to recruit staff to work as salespeople and manual latrine emptiers. People that work in sanitation often hide it from their significant others and friends out of fear of being shamed. One of my colleagues has not received approval from his fiancée’s parents to marry her because he works in sanitation. A department head from a local university where we’ve attempted to recruit staff said students from his university are too good to work in sanitation.
How is Sanitations Solutions Group working to address these issues in Uganda?
Public spending on sanitation is obviously out of our hands, but we are attempting to address the issues we can. SSG educates potential customers on the value of improved sanitation using social marketing and behavior change communications (BCC) techniques. We use multiple angles to market our latrines including health benefits, safety benefits, quality of life improvements, social status impacts, improved user experience, and increases in property value. We believe incorporating humor into our marketing will help draw attention to our products, and we are in the process of procuring some costumes for our salespeople to wear at marketing events. With regard to recruiting, we make the case that recruits will develop valuable marketing and sales experience that will be translatable to other fields. We hope that in concert with other actors in the sanitation space working toward similar ends, we will be able to lift some of the stigma out of sanitation.
It sounds like you and SSG are doing some really great work. But launching a start-up always comes with its own challenges. How is SSG working through those hurdles?
There are always hurdles when launching a start-up. We use a lean start-up method to pilot business models and ideas, using validated learning to determine which direction to take the business and when to pivot. Each SSG product/service offering has its own business model, with distinct challenges and stakeholders, making it difficult to fit them under the umbrella of one business, particularly a start-up. Making the business models fit together seamlessly is key in bringing SSG to scale. When it comes to incentivizing salespeople to generate sales, we have tried a number of different compensation structures and we think we are close to nailing down an optimum one. We have mapped most of our business processes and eliminated waste where we are able to. Some of our business functions, such as actual construction/installation of latrines were originally outsourced but brought back in-house to improve margins, increase efficiency, and ensure quality control.
Despite that, it sounds like you and SSG are on the road to success!
Lastly I would like to ask you: why did you decide to join MBAs Without Borders?
It was a difficult decision for me to make! About three years passed between the first time I heard of MBAs Without Borders and the time I became an MBA Advisor. There were many personal and professional implications to consider. While discussing international development at a Net Impact networking event in 2011, a new contact mentioned she had heard of MBAs Without Borders and that I should look into it. I was intrigued and the seed for joining MBAs Without Borders was planted. It was my short-term career goal to transition to international development. I knew the transition would be difficult, and it was even more difficult than I had anticipated. A year after graduation I was working for URC, a USAID implementing partner, doing international health program management. There was some valuable learning in the experience, but I felt underutilized in my role. I decided I had to get to the field, meaning overseas, in order to get the experience I was looking for. As many who work in international development know, international field experience is the first qualification many international development employers look for and there is a catch-22 about needing field experience to get field experience. I evaluated MBAs Without Borders alongside some programs with varying degrees of similarity and decided MBAs Without Borders would be the best fit for me. I ultimately decided to join MBAs Without Borders to gain international field experience, start-up experience, social enterprise experience, and market-based sanitation experience. The MBAs Without Borders opportunity in Uganda with W4P looked to be a great fit, due to alignment with my qualifications as well as alignment with my longer-term career goals.