Evaluating the potential of Container Based Sanitation, Sanergy in Nairobi Kenya

This case study, along with three others, is a component of a wider study by the World Bank of container-based sanitation (CBS) models. CBS consists of an end-to-end service—that is, one provided along the whole sanitation service chain—that collects excreta hygienically from toilets designed with sealable, removable containers and strives to ensure that the excreta is safely treated, disposed of, and reused.1 Rather than having to build a sanitation facility, households can sign up for the service. The CBS service provider then installs a toilet with sealable excreta receptacles (also referred to as cartridges) and commits to emptying them (that is, removing and replacing them with clean ones) on a regular basis. The objective of this study is to document and assess existing CBS approaches with a particular focus on evaluating their safety, reliability, affordability, and financial viability. The report also seeks to identify the circumstances in which CBS approaches are most appropriate and whether they could be considered as part of a portfolio of options for citywide inclusive sanitation (CWIS). This case study examines the CBS service provided by Sanergy and how its business model fits overall in Nairobi as well as specifically in informal settlements there. The study took place in May and June 2017 and involved interviews with Sanergy staff, national and local government officials, business partners (franchisees), donors, and customers/users. It also involved visits to Sanergy’s service area and treatment site and the collection and analysis of relevant data and reports. Overview of Sanergy Business Model Sanergy’s basic business concept is to provide safe sanitation to low-income residents of informal settlements in Nairobi and to create a sustainable value chain that converts feces into premium reuse products for agriculture. The structure is based on the concepts that excreta end products can be produced and sold to agricultural markets at a profit and that sanitation services for the urban poor are a public good for which no market solution at scale currently exists. The activities of the for-profit excreta reuse business complement the nonprofit CBS toilet service by ensuring pathogen elimination of the feces, thus creating a full value chain from containment to safe treatment. Sanergy provides single-cubicle, branded Fresh Life Toilets (FLTs) to franchisees for a fee and collects the excreta from the toilets on a frequent basis (daily or every two or three days). There are three business models for these toilet franchises: “commercial” toilets serve the public as pay-per-use businesses, “school” toilets are used by pupils and teachers, and “residential” toilets are operated by landlords for use in their compounds. In the commercial model, toilet operators pay a US$350 installation fee followed by an annual US$70 renewal fee. Schools pay US$290 for installation and US$60 for renewal. In the residential context, following a successful pilot phase, a new sales model has been implemented across the toilet network since mid-2017, which offers landlords a US$8.50 monthly collection fee and no upfront installation fee. Sanergy is aiming to reach the entire addressable market in its service area by increasing manufacturing capacity for its locally made toilets and converting existing pit latrines to FLTs. The emptying and collection processes involve swapping out filled plastic containers with fresh ones and transporting the excreta to a treatment site to produce organic fertilizer and animal feed. At the treatment site, feces is composted aerobically to produce high-quality organic fertilizer, which is sold on the open market under the Evergrow brand. Sanergy has also developed a high-protein animal feed product using black soldier fly larvae (BSFL). Sanergy’s Operating Context in Nairobi Kenya is the largest economy in East Africa and recently introduced a devolved system of government in which 47 newly created counties were mandated to provide basic services to their populations. Kenya’s capital city, Nairobi, has a young and rapidly growing population, with a large number of people living in informal settlements with poor access to basic services and infrastructure. The urban poor purchase water in jerrycans from public kiosks and disproportionately suffer the impacts of climate change and environmental degradation, including periodic water shortages and flooding. The total population without access to sanitation in the area where Sanergy operates is approximately 500,000. Water supply in Nairobi is insufficient to meet demand, and the residents of informal settlements are the most affected as they purchase water from water vendors and public water kiosks. Pit latrines are the most common alternative to Sanergy’s toilets and almost always result in unsafe excreta disposal. Public toilet blocks connected to sewers are available in some commercial areas adjacent to informal settlements. CBS is now defined in a policy as a specified category of improved sanitation in Kenya (referred to as cartridge-based sanitation). The national Kenya Environmental Sanitation and Hygiene Policy (KESHP) 2016–30 includes provisions for increased private sector participation in providing sanitation services, requires local governments to develop annual plans and financing/investment plans for sanitation, and aims to tackle fragmentation of responsibilities in the sector. However, legal and regulatory frameworks at the county level were still evolving at the time of the case study, and Sanergy’s excreta collection service was primarily regulated by the National Environment Management Authority (NEMA). The county and national governments have recognized the need for partners in defining more affordable solutions to help bridge the gap in sanitation for urban areas where sewers and septic tanks are not appropriate solutions. In Nairobi, the Nairobi City Water and Sewerage Company (NCWSC), a parastatal wholly owned by the Nairobi County Government, is responsible for water, sewerage, and wastewater treatment provision. Sewerage coverage for urban areas in Kenya has been on a slow decline since 2010–11, when it was at 19 percent, to 2014–15, when it was at 15 percent, leading the water and sewerage services regulator to recognize that low-cost options need to be explored in order for Kenya to attain its Vision 2030 target of 100 percent sanitation coverage for urban populations (Water Services Regulatory Board [WASREB] 2016). Assessment of Sanergy’s Services Satisfaction expressed by customers with Sanergy’s toilets was high, including Sanergy’s excreta collection service, the support received from Sanergy, and, in the case of commercial toilet operators, the income that their toilet businesses provided. User feedback was universally positive, with each interviewee raising cleanliness of the FLTs as a principal attractive feature. Users of Sanergy’s toilets are paying much the same rates as they would for other toilet options. Sanergy allows franchisees to set their charging system and rates. Operators of commercial (public) toilets are mostly payper-use with a few giving a monthly flat-rate option. Landlords incorporate charges into the rent and schools into school fees. Sanergy plans to scale significantly to serve as many as 500,000 people in its existing areas of operation. The only current alternatives that provide a full sanitation service chain solution are public toilets (pour-flush) connected to sewers or lined pits that hire a licensed exhaustion service. Neither of these provide a completely satisfactory solution for informal settlements. There is insufficient access to construct sewer laterals and service lines, and a safe exhaustion service would require a complete overhaul of current practices (including pricing, equipment, and treatment facilities). The FLT service had an estimated total annual cost of a little less than US$1.5 million in 2017, with a little less than US$290,000 (19 percent) recovered via fees from operators and from sale of the reuse product. Revenues from the fees charged to the FLOs were a little more than US$160,000 in 2017, amounting to 11 percent of the total costs, and 19 percent of the costs of providing the toilet service. Up to this point, the majority of external funding has been provided by 15 family and corporate foundations (the median contribution being US$93,000). Sanergy has been deploying various approaches to reduce the external funding requirement for the nonprofit, including improving its operating model, gaining efficiency, and growing the operations to generate economies of scale. In order to remain financially viable over the medium term, Sanergy is looking to mobilize domestic subsidy funding in a predictable manner—for example, through results-based financing arrangements. Key Lessons Sanergy’s FLT operation fills a gap in sanitation provision in the informal settlements where it operates, which results from the unplanned nature of these settlements and severe space constraints. FLTs have a minimal footprint and only require on-foot access. By contrast, water-based sanitation—pour-flush toilets— requires access to a sewer, whereas sewers generally do not penetrate into the heart of the informal settlements. In addition, FLTs have the significant advantage of not requiring water to operate, as the main cover material in use is sawdust, which can increase resilience where water scarcity is a challenge. Pit latrines fill up and have to be emptied, which is an unpleasant manual process, and when this is performed at present, the excreta is often dumped in the nearby environment. An evolving policy landscape and significant investment by Sanergy and others has radically changed the status of CBS in a short time. When Sanergy began operating, it faced resistance from the Nairobi County Government, which was skeptical of the legality of CBS services. Sanergy introduced a government liaison team that established and maintained a dialogue with policymakers at the city–county level and the national level. Over time, the Nairobi government has come around to seeing CBS as a high-quality solution and an important one for at least the medium term. At national level, the KESHP explicitly recognizes CBS as an accepted technology. FLTs are generally well-managed and deliver a high standard of user satisfaction. The franchisees that operate the toilets are usually individuals or small partnerships so that management responsibility is concentrated. FLTs that do not keep to minimum standards are shut down (that is, excreta containers removed) and debranded. Users of Sanergy’s toilets are paying much the same rates as they would for other toilet options. Sanergy leaves it to the Fresh Life Operators (FLOs) to set the price per use; hence, market forces prevail, and the estimated annual cost to users of its commercial (public) toilets is about US$18. Residential toilet fees are covered in the rent, though some landlords do not increase the rent after installing a Sanergy toilet as they see it as a way to maximize occupancy levels. School toilet prices are included in the school fees. The FLT operation shows promise to provide a highly cost-effective sanitation solution at scale. Financial modeling of Sanergy’s expansion plan, conducted by Sanergy, shows an increase in cost recovery from the toilet servicing and fees paid for the feedstock value of the feces from 20 to 70 percent. The expansion is projected to take seven years, with the addition of 2,000 toilets per year to Sanergy’s Fresh Life network, during which time the subsidy required (costs not covered by revenues) per person should rapidly reduce—from about US$19 per person in the first year to about US$2 per person per year once expansion is completed. Sanergy has an ambitious expansion plan that will need to be monitored to verify assumptions, in particular, in terms of the number of users per toilet. Increased dominance of the residential model, should the commercial model market penetration plateau, could lead to the average number of users per toilet falling as most residential compounds are relatively small (eight households or fewer). Sanergy can monitor this after having established the mean mass of excreta per use, and it would be important to follow this metric, adjust the cost model for the expansion, and report this to partners such as donors, regulators, and authorities to inform its planning processes. Continuous research, development, and piloting of new approaches has been key to Sanergy’s progress and success and has been enabled by a strong funding base. Sanergy has been very successful in raising funding from donors and investors. This has allowed it to aggressively pilot new approaches, generating growth via new business models where older ones were appearing to face headwinds or reach limits. However, this raises a risk as its services are highly dependent on receiving a continuous stream of external funding.