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MASSACHUSETTS INSTITUTE OF TECHNOLOGY
Typha Charcoal in Senegal:
Changing a National Threat
into Durable Wealth 15.915 Laboratory for Sustainable Business
Rodrigo Caro, Helena de Frutos, Ajamu Nassor Kitwana, Angela Shen
5/12/2011
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CONTENTS
Executive Summary ...................................................................................................................................... 3
Background & Objectives ............................................................................................................................. 4
About Senegal ........................................................................................................................................... 4
Typha – Changing a National Threat into Durable Wealth ...................................................................... 4
Project Objectives ..................................................................................................................................... 6
Feasibility Analysis ....................................................................................................................................... 6
Market Potential ........................................................................................................................................ 6
Typha Charcoal Production Process ......................................................................................................... 9
Industrial Practices ................................................................................................................................ 9
Value Chain Analysis ............................................................................................................................. 11
Typha Harvesting ................................................................................................................................ 11
Typha Charcoal Production ................................................................................................................ 12
Distribution ......................................................................................................................................... 14
Business Model Summary .................................................................................................................. 14
Financial, Environmental and Social Impacts ............................................................................................. 15
Financial Implications ............................................................................................................................. 15
Environmental Impacts ........................................................................................................................... 17
Social Impacts ......................................................................................................................................... 18
Alternatives ................................................................................................................................................. 18
Recommendations ....................................................................................................................................... 19
Appendix A ................................................................................................................................................. 23
Appendix B ................................................................................................................................................. 27
Bibliography ............................................................................................................................................... 28
Interview List .............................................................................................................................................. 30
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EXECUTIVE SUMMARY
Sup De Co, a business school headquartered in Dakar, Senegal, is inspired to make a positive difference
for its country. Salla Dior Dieng of Sup De Co is a national champion for two environmental challenges
in Senegal. The first environmental challenge is the spread of invasive Typha Australis, a weed similar to
cattails that has significantly over grown throughout the Senegal River corridor. The second is
deforestation and desertification in Senegal.
As a business school, Sup De Co would like to find a market-based solution to these problems. In fact,
Dr. Dieng has collaborated in the past with an NGO called PERACOD to demonstrate that the invasive
Typha plant has several potential commercial uses. Sup De Co proposed developing paper pulp, biofuel,
and cooking charcoal to the S-Lab team as business opportunities to explore for large scale commercial
usage of Typha. We chose to target charcoal because of the significant domestic market (350,000 tons
annually) for charcoal, and its social and cultural importance in Senegalese households.
The S-lab team conducted a high-level feasibility analysis of launching a Typha charcoal production
business in Senegal. After comparing small scale, medium scale, and large scale production options for
profitability using market projections that are in line with Sup De Co’s goals, we estimate that large scale
production will be the most profitable. However, given that a market for Typha Charcoal has not been
established yet, it would be valuable for Sup De Co to pilot Typha charcoal production starting with the
small scale 3-barrel approach. This is largely because of the lower risk associated with the 3-barrel
process due to low up front capital requirements and the fact that it does not require electricity or other
energy inputs. The areas that we recommend investigating at the pilot scale before expanding are:
Customer demand, Typha harvesting, transport logistics, barriers to charcoal markets and supply chains,
and financing costs and availability
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BACKGROUND & OBJECTIVES
ABOUT SENEGAL
The host company, Sup De Co (Groupe Ecole Supérieure de Commerce de Dakar), seeks to develop a
large scale operation to produce green charcoal from an invasive wetland plant called Typha that grows
along the Senegal River. Sup De Co, a private institution based in Senegal, includes six schools, and
provides university level education in business, commerce, finance, business management and
information technology (IT). Sup De Co plans to be an owner of this new biomass energy production
venture.
Senegal faces a considerable deforestation problem. With trees disappearing, finding viable alternatives is
a must. Currently, at least half the population relies on expensive wood and charcoal for household fuel.
Less than 30 years ago, charcoal consumed in Dakar came form 70 Km away, from the Thies region.
Now, people have to go 400 Km form Dakar to find forests (Africa Good News, 2009). 40% use petrol
products like butane gas that is all imported and partially subsidized by the government because of its
high price (Africa Good News, 2009). 350,000 tons of wood charcoals are consumed each year from
wood, in other words, approximately 2.5 million trees being cut down for charcoal national wide.
Harvested locally in the southern semi-tropical region of Senegal, this contributes to desertification in the
country and southern expansion of the Sahel region. This transition is characterized by decreased
vegetation cover, greater soil erosion, millions of tons in soil loss, and diminished soil fertility in a
country where 65% of the total population depends on the agricultural sector, directly or indirectly.
(Elbersen W. , 2005)
TYPHA – CHANGING A NATIONAL THREAT INTO DURABLE WEALTH
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During the 1980s, two dams were constructed on the Senegal River to provide electricity, irrigation,
drinking water and to prevent sea water incursion. After the construction of the dams, altered river
conditions cultivated wetland plants in shallow water along the shore. Typha, a native plant on the
Senegal River, grows aggressively in the new environment and now covers large parts of the Senegal
River. Typha roots in the soil and requires less than 5 feet of water depth. The proliferation of Typha
leads to many problems, including blocking irrigation canals, making access to the river and fishing
difficult for the local population, attracting bird pests that invade rice plots, a weed problem in rice plots,
and increasing health problems that result from stagnant water. (Elbersen W. , 2005)
The Senegalese Organization pour la Mise en Valeur du Fleuve Sénégal (OMVs) is responsible for
clearing tyhpa from the navigation channel of the Senegal River, but Tyhpa grows uncontrolled along the
river’s banks. In order to encourage the removal of Tyhpa, Senegalese public officials and academics
have considered promoting several options for commercial use of Typha biomass material. Those options
include compost for local horticulture farms, paper production, construction material and energy
production. For this study, we focus on investigating the feasibility of Typha charcoal production, given
the urgency of the energy shortage and deforestation in the country.
Concerned Senegalese NGOs and citizens like Dr. Salla Dior Dieng of Sup De Co have identified using
biomass from Typha to create green charcoal as one of the solutions to limiting the proliferation of Typha
and simultaneously reducing deforestation in Senegal. Any organic material such as agricultural waste
can be carbonized in an anaerobic burning process called pyrolysis to be made into charcoal. PERACOD,
affiliated with a German NGO called GTZ, has introduced a “3 futs” (3-barrel) system for community
scale charcoal production in Senegal. PERACOD ran a pilot program producing green charcoal from
Tyhpa. The project brought together groups of rural women who harvested the Tyhpa, produced charcoal,
used it at home and sold some in their local communities.
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PROJECT OBJECTIVES
The S-lab team’s task was to work on a business plan for starting and sustaining a large-scale charcoal
business in Senegal using Typha. Sup De Co is particularly interested in understanding business models
and production models used internationally for charcoal production. The plan had to consider the likely
production, management, operational and marketing challenges for the envisioned production process and
final products in the context of Senegal. The S-Lab team streamlined the project scope based on what they
could produce in the time and with the resources available. The framework developed here can be built
upon with further research by Sup De Co or others such as a group in the G-Lab course in the fall of
2011. Here we develop a framework to compare potential approaches to launching a Typha charcoal
business. This can be useful to identify the necessary conditions to achieve profitability in the tyhpa
business- such as a minimum market share required to break even. If Sup De Co deems a given approach
to be attractive, the next step would be to complete a business plan for the approach selected.
FEASIBILITY ANALYSIS
MARKET POTENTIAL
PERACOD’s pilot project revealed some challenges to market adoption of the green charcoal. It burns
slower than wood charcoal and has a different odor. Moreover, charcoal vendors have less incentive to
sell Tyhpa charcoal due to smaller profit margins compared to wood charcoal. For 1kg of green charcoal,
a vendor makes a profit of 5 US cents, whereas conventional charcoal brings in almost 20 cents per
kilogram. (Africa Good News, 2009). Additionally, identifying distribution networks to reach the primary
market in Dakar is also likely to be a challenge given the agreement between the Merchant Union
(producers of wood charcoal) and the permitted vendors of charcoal in Dakar. Finally, interviews with
Senegalese citizens that we conducted indicated that use of charcoal in Dakar has been falling and
replaced by more convenient gas burners. The four interviews we conducted are not a statistically
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significant sample, but this does merit more investigation into the growth projections in the charcoal
market.
Currently, the population consuming Typha charcoal in Senegal is negligible. The few people producing
green charcoal are doing so in association with NGO sponsored pilot projects and they typically produce
at the household or rural community scale. Furthermore, selling green charcoal, even at a significant
discount (about 50%), to replace wood charcoal has been a challenge in the country. The energy yield of
Typha charcoal per kilogram is 80% of that of wood charcoal. The appearance is different from wood
charcoal so consumers believe it has lower quality. In the PERACOD pilot, Typha charcoal was also
poorly packaged, so consumers were deterred by the fact that they got dirty managing it.
However, Typha charcoal also offers many advantages to the consumers. One kilogram of green charcoal
sells for just $0.15, whereas traditional charcoal currently costs twice that (Africa Good News, 2009).
Right now, the price of butane gas is six times the price of green charcoal (about $1/day). Producing
Typha charcoal presents an opportunity to get energy in an inexpensive and more sustainable form of fuel
for the country and for the riparian communities in particular. The Senegalese government has subsidized
butane gas in the past to deter demand for wood charcoal and mitigate deforestation. Gas subsidies have
however been phased out due to high costs to the national government. The demonstrated national
commitment to combat deforestation through subsidies could be an opportunity to get financial support
for Typha charcoal as a less costly alternative to wood charcoal. Moreover, another advantage of
decreasing gas consumption in Senegal will be the reduction of the dependency on volatile international
oil markets.
A PERACOD customer who switched to green charcoal from gas explained that she is happy with the
change because it is the most efficient, affordable and suitable (especially for large-scale cooking)
household fuel (Africa Good News, 2009). Moreover, there is a general perception that cooking with
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charcoal produces better flavor for many meals than cooking with gas. Green charcoal can offer the flavor
advantages of charcoal without the deforestation impacts that have lead the government to limit charcoal
production. Restaurants also present a market opportunity for green charcoal; most of them currently
consume both gas and charcoal, with the price being the single biggest determining factor in the choice.
In our study we will examine the feasibility for large scale production. 40% of the population uses gas as
a household fuel, but even those people maintain the capacity to switch to charcoal because of the high
price of gas, the variance of government subsidizes over time, and the frequent gas shortages. The
estimation of the charcoal consumption in Dakar is about 210,000 tons (60% of total consumption in
Senegal) (Ribot J. C.) . In order to market Typha charcoal, Sup De Co has to implement an adequate
marketing strategy that includes attractive packaging (e.g. paper bags), providing visibility and
accessibility for customers in Dakar, a convenient price (about half the price of wood charcoal), and
educating the consumers (including cooking demonstrations). If Sup De Co does so, it could potentially
be able to replace some of the current consumption of wood charcoal in Dakar. If we assume that
marketing efforts are successful in capturing 20% of the charcoal market in Dakar, this will represent the
12% of the total wood charcoal replacement (20% wood replacement in Dakar which is 60% of total
wood consumption). This meets the benchmark that Senegal’s Minister of Energy would like to obtain for
the whole country – “It is not possible to completely replace charcoal. But even if we can replace 10% or
15% is good” (Africa Good News, 2009).
Thus the S-Lab team estimates that 20% of the Dakar charcoal market will switch to Typha charcoal. Sup
De Co is very confident in the availability of Typha as a resource for charcoal. There are more than
400,000 hectares currently covered by Typha and we estimate that only 8,700 hectares will be used to
meet the needs of 20% of Dakar’s charcoal market. Furthermore, the route from the river side to Dakar
passes by several big cities, such as St. Louis (181,000 inhabitants) or Thies (278,000 inhabitants) (City
Population). If Sup De Co were able to address any of these market, it might well reach the high range of
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15% that the Ministry of Energy had set to replace the national consumption of wood charcoal. If Sup De
Co helps the Ministry to get to this goal of wood charcoal replacement, it might be able to get some
economic help from the Government to support the project.
TYPHA CHARCOAL PRODUCTION PROCESS
Charcoal is made through a process called pyrolysis which involves baking biomass in the absence of air
to drive off volatile gasses. Pyrolysis can be done with two main methods, Direct and Indirect methods.
Direct pyrolysis uses the biomass as its heat source and is easy to implement. This is the method used in
the majority of small scale production processes. However, at the large scale the Indirect method, which
requires an external source of heat such as coal or fuel oil, is typically used because this is more energy
efficient. (Lehmann & Joseph, 2009)
Another emerging process is gasification. The process converts biomass into carbon and hydrogen by
transforming the raw material at high temperatures with a controlled amount of oxygen (Brewer, 2009).
Ankurscientific, a company founded by an MIT trained PhD, uses this process in India, Sri Lanka,
SouthAsia, US, and Mexico. The company produces 100KW power on average, using different biomass
such as wood waste or coconut shell (Ankurscientific). However, currently there is no charcoal production
at industrial level using the gasification process, let alone any using Typha as feedstock (Garcia-Perez,
Lewis; C., & Kruger, 2011).
INDUSTRIAL PRACTICES
The charcoal market is divided in two main groups of producers, the lump charcoal producer and the
briquette charcoal producer. While the lump charcoal involves whole pieces of wood being exposed to
high temperatures, the briquette charcoal consist of biomass being ground up, mixed, and compressed.
Both charcoal type use pyrolysis processes (Lehmann & Joseph, 2009). Biomass sources include not only
wood but also other biomass, such as coconut from Vietnam, Philippines and Cambodia. There are
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numerous examples of charcoal production from non-wood biomass sources, such as coconut shell (Water
Siemens), cocoa (Carbongold), as well as agricultural and forestry wastes, and animal manures
(Kamimoto, 2005). In the US, the lump charcoal is mainly controlled by small companies.
The main charcoal briquette producer in the US is Kingsford, which controls over the 80% of the charcoal
briquette market. This company uses wood chips as the main biomass source (Kingsford). The process
consists in the pyrolysis of the wood chips. Then this ground wood is mixed with other products such as:
Mineral Coal to improve its calorific power
Sodium borate as a press release agent to allow the briquettes to release from the molds they are
made in
Limestone used as an ash colorant
Binder in the past they used wheat starch as a binder for the charcoal briquettes. Now they
change the formulation to another chemical
Sawdust to speed the ignition
Sodium Nitrate to speed the ignition
The pyrolysis charcoal process generates organic residues that can be used as a fertilizer that can increase
revenue (Dharmakeerthi & Chandrasiri, 2010) (Chan, 2007) (Whitford, 2008). The effects on the soils are
(Lehmann & Joseph, 2009):
Reduce leaching of nitrogen into ground water
Increase cation-exchange capacity resulting in improved soil fertility
Moderate of soil acidity
Increase water retention
Increase number of beneficial soil microbes
Regarding the use of gas, most processes re-circulate the syngas to the pyrolysis stage to increase the
temperature inside the system. Best Energies in Canada patented a slow pyrolysis reactor that
incorporates an electrical generator that operates on syngas (Bestenergies).
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VALUE CHAIN ANALYSIS
In order to help Sup De Co identify and evaluate the various potential points of entry in to the charcoal
market in Senegal, we will examine the charcoal value chain. This review will discuss challenges and
opportunities that Sup De Co should consider at each stage in the process. The financial feasibility model
in Appendix A offers cost and revenue estimates for the processes discussed.
TYPHA HARVESTING
Typha can be harvested throughout the year once a month if cut appropriately. The two challenges are 1)
Typha needs to be cut 10-15cm above the water; 2) large amount of green Typha (approximately 21 tons)
is needed to produce one ton of charcoal. At the small scale “3-barrel” production, every 21 tons of green
Typha would produce 3.5 tons of dry matter and consequently 1 ton of Typha charcoal. From the
economic perspective, it would make business sense only if the Typha can be harvested using highly
efficient machine or very low cost labor. Given the financial estimates compiled in Appendix A,
harvesting costs are 65% to almost 90% of total charcoal production costs.
We spent time on secondary research and interviewing industry experts, trying to identify existing
machinery that can be used to harvest Typha. Although it would be ideal to have a specific machine to
cut Typha, our research shows that in developing countries (e.g. China, Kenya), pest plants are harvested
in very labor intensive ways. According to the report prepared for PISCES and FAO by Practical Action
Consulting, when harvesting with basic tools such as sickles, on average the yield is 250kg /person /hour
which is approximately 1,500kg of fresh Typha each day based on a 6 hour work day. It is important to
point out that Typha harvesting is very demanding. In a pilot project led by PERACOD, there were three
production groups involved in the study when the project kicked off in 2006, but only one stayed
involved till 2008. (Practical Action Consulting, 2009)
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A 2005 “Typha for Bioenergy” report stated that a World Bank Project was in the pipeline to reduce the
Typha coverage to 30,000-40,000 ha. (Elbersen W. , 2005) However Dr. Salla Dieng reported that the
project did not happen and that it is no longer anticipated. It is currently uncertain whether there will be
an effort to reduce the coverage area of Typha to protect against its negative impacts. However, if Typha
is reduced to 30,000 ha, this still exceeds the amount needed to meet the proposed market share target. If
efforts are launched to actually limit the Typha coverage, Sup De Co should keep that in mind when
preparing the site the facility. This could also impact longer term growth opportunities. To further
understand the impact, research must be conducted to understand the optimal or safe level of Typha on
the Senegal River, the result of which could impact the business case of the investment. We have seen
that in some cases of biomass production of invasive plants, there is a tension between the new incentive
to grow that plant and the effort to manage it, if it ever becomes cheaper for someone to grow their own
Typha at or near their property than it is to go out into the river to harvest it. We could risk encouraging
additional Typha growth by creating a market for Typha products.
On average, it takes 5 to 10 days to dry the Typha. For this study, we assume that either in the case of
small scale production or household level production, the farmers would be able to find open area close to
the harvesting site to dry to Typha.
TYPHA CHARCOAL PRODUCTION
We examined three potential methods of producing Typha charcoal. Each of these processes use Pyrolysis
conducted at different scale. All figures reported in this section are the results from our financial model
included in Appendix A.
The first method considered is the 3-barrel method which PERACOD has used in the past. This is a
household level production process. Each 3-barrel system produces 31 tons per year. In order to achieve
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the large quantity (52,000 tons of charcoal based on the assumption of 20% Dakar market), Sup De Co
would operate almost 1,700 different systems. This highly decentralized approach maximizes the number
of jobs and entrepreneurial opportunities created through the process at 4,327 new jobs. A key advantage
of the 3-barrel system is that the technology has been proven and many in Senegal are very familiar with
a similar process from experience producing wood charcoal at the household scale. In our review of
charcoal production efforts around the word, the small scale direct method has dominated as the approach
of choice.
The second method evaluated is at the midsize or semi-industrial scale. Pro-Natura, a French NGO, has
marketed and operated an indirect pyrolysis system that produces 936 tons/year. The most recent version
of their system is called Pyro 71. (ProNatura International, 2011) To meet the large scale demand goal
with the Pyro 7, Sup De Co would purchase and operate 57 systems at $65,000 each. In partnership with
Eco-Carbone a French company that brokers carbon credits, Pro-Natura is promoting its system to
charcoal producers around the world. They advertize a profit margin near 70% once carbon credits are
incorporated. The cost of energy in this system is approximately $0.50 per ton of charcoal produced. Sup
De Co would create approximately 3,200 jobs with this approach.
The third method that we evaluated is an industrial scale production. Our S-lab team did not find
examples of production of biomass charcoal at this scale in our review of the industry. The figures used
for the model were taken from a previous Sup De Co report that estimated cost and production at an
industrial scale. (Groupe Sup De Co, 2010) At this scale Sup De Co would need only one system. It costs
$4Million upfront and has a capacity to produce 60,000 tons of Typha charcoal per year. Operating costs
are at about 60% of revenues and 2,700 jobs would be created with this approach.
1 Pictured in Appendix B.
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DISTRIBUTION
In this part, we discuss the cost of transportation and distribution. We will separately consider inbound
transportation and outbound transportation.
Due to the large amount of green Typha needed for charcoal production, i.e. 21 tons of green Typha for
one ton of charcoal, and the dry climate in Senegal, we believe it is easier to dry the green Typha before
transporting to the production site. Even though, roads already exist for charcoal production
transportation, the inbound transportation would be a considerable piece of cost. Outbound cost would
also be significant, especially when planning to produce in north Senegal, close to St. Louis, and sell to
Dakar. Distance of the two cities is above 300km. High-level estimation of the transportation cost is in the
financial session.
We interviewed the project leaders from MIT’s D-Lab (http://d-lab.mit.edu/), Amy Smith, Amy Banzaert
and Manpreet Singh, who have worked on charcoal production projects in several developing countries.
They reported that most of the D-lab projects were done on a small scale, not only because the small scale
operation has a quick payback period (approximately one month) and promotes local development, but
also because the cost to transport biomass material is high, compare to the overall production costs.
BUSINESS MODEL SUMMARY
Sup De Co aims to set up an industrial production facility for Typha charcoal. It would buy dried Typha
plant material from rural harvesters, centralize the production and ship the charcoal to wholesalers in
Dakar markets. Although the raw material (mainly dry Typha) cost is very low, the harvesting costs are
expected to be high given the distribution of Typha along the Senegal River. Regarding the source
material, further studies are needed to understand the cost of using Typha versus leveraging biomass
15
leftovers from agricultural or other sources. It is important to set up facilities that can process not only
Typha but other biomass residuals. Regarding the production process, we would recommend further
study to understand the economics of the different stages of the Typha charcoal production process:
separating carbonizing and briquetting.
FINANCIAL, ENVIRONMENTAL AND SOCIAL IMPACTS
FINANCIAL IMPLICATIONS
Revenue potential
Dakar is the primary market for wood charcoal, accounting for 60% of the charcoal sold in Senegal.
(Ribot J. C.) Dakar is the target market for our Tyhpa charcoal business due this size, Sup De Co want to
maximize scale in order to disrupt the wood charcoal market and mitigate its negative environmental and
social impacts. For this analysis we assume that Sup De Co is able to capture 20% of the Dakar charcoal
market within 3 years. This means selling 52,500 tons of charcoal and would yield $6.6 Million dollars in
revenue.
Profitability
Our financial analysis in Appendix A shows the profitability figures discussed below. Our baseline
scenario using the 3-barrel method projects a gross profit of $214,000, this is a 3% margin. We estimate
that at an industrial scale the profit margin could be as high as 28%. The actual profits from green
charcoal will depend on several factors. For the large scale production, profits will fall if sales fall below
projections. Uncertainty in operating and maintenance costs and financing cost could also cut into larger
scale profits. This process as well as the midsize ProNature process requires energy inputs, a larger
upfront investment and certain lead times. ProNatura advertises their Pyro 7 machine to produce a
16
generous 38% profit margin with the potential to be doubled by using carbon credits which they facilitate
for their customers. This option should be further explored in future phases of the business plan.
Sup De Co’s position in the supply chain will also impact profitability. We assume that Sup De Co would
produce charcoal and sell to wholesalers in Dakar. The wood charcoal business in Senegal is reportedly
tightly controlled by special interests, therefore making it difficult for new entrants to profit. Current
profit margins range from 3% for local villagers to 54% for merchant union members who exercise
significant power over the supply chains (Ribot J. , 2006). The profits that do exist are concentrated in to
hands of few powerful players. Sup De Co sees benefit in the end goal of reducing deforestation,
combating Typha, and limiting desertification. Therefore the uncertainties in profits alone are not likely to
be a significant deterrent given the benefits of operating this business even if it just breaks even.
Financing sources
Sup De Co can potentially enhance its ability to launch, scale up or expand their Typha charcoal operation
by leveraging appropriate financing resources. Sup De Co should pursue private sector investment
programs from development banks that operate in Senegal. These funds are typically more willing to take
the risk of investing in a startup industrial scale operation than traditional banks in Senegal (Abbey,
2011). Many of these international development finance institutions prioritize initiatives which have a
positive environmental impact as Sup De Co’s business will. Senegal’s department of Forestry has grant
funds available that could support pilot phase projects for Typha charcoal. They national government has
subsidized gas in the past to help reduce stress on deforestation. Sup De Co should explore the potential
for a similar subsidy for Typha charcoal as an alternative to wood charcoal and to oil which has been
challenging due to price volatility.
The NGO ProNatura has partnered with Eco-Carbone, a broker of carbon credits, to offer additional
project financing for green charcoal. In their advertised sample business model they project eligibility for
17
carbon credits that augment revenues by 87% of sales. Sup De Co should seek a green house gas or
carbon offset asset broker to offer similar subsidy to their green charcoal operations. EcoCarbone helped
ProNatura to develop their proprietary pyrolosis system as well as to find carbon offset investors.
(ProNatura International, 2011) Such a partnership with an entity with international experience in green
project finance is strongly advisable.
ENVIRONMENTAL IMPACTS
Sup De Co hopes to achieve various environmental impact goals with its Tyhpa charcoal business. Those
goals are to reduce footprint of Typha in Senegal’s waterways, to reduce the rate of deforestation, and to
reduce the rate of desertification in the country.
The impact on Typha is removing 8,700 hectares from Senegal’s riparian banks. This impact estimate is
based on producing 52,500 tons of charcoal or taking 20% of the Dakar market share and this displacing
42,000 tons of wood charcoal from the market.
Deforestation is a significant concern to Sup De Co and a demonstrated priority of the national
government. By taking market share from the wood charcoal industry Sup De Co’s Tyhpa charcoal
business can save trees at a rate of 7 trees per ton. We estimate that our operations would save 300,000
trees given sales of 42,000 tons of Tyhpa charcoal. This number could be influenced by several factors. It
is possible that Sup De Co achieves its sales goals and deforestation doesn’t diminish if due to increased
cooking gas costs the overall sales of charcoal increases. The national government has tight control of
wood charcoal quotas, so Sup De Co should seek to coordinate with the national government to
encourage them to decrease wood charcoal quotas as Typha charcoal sales increase.
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Additionally, if successful at reducing deforestation, Sup De Co’s impacts would be helping to reduce
desertification. Retaining trees will add to soil stabilization and moisture retention and therefore mitigate
the desertification impacts in Senegal.
SOCIAL IMPACTS
Sup De Co can make positive social impacts by “greening” the charcoal industry and “greening” charcoal
production jobs. By replacing the charcoal made through the highly regulated and allegedly corrupt wood
charcoal industry, Sup De Co’s success would have important social consequences. Today rural villagers
who live in regions of Senegal like the Cassamance that are exploited for remaining wood resources get
almost no financial benefit compared to the other parties in the charcoal value chain (Ribot J. , 2006). The
value in the wood charcoal industry goes largely to the merchant union (whose heavy-handed leader is
currently under investigation for fraud) and migrant worker groups that do not stay to contribute
significantly to the local economy. Sup De Co hopes to employ rural women in sustainable jobs as it
grows its green charcoal business.
Projected jobs created from a Sup De Co Typha charcoal business range from 2,756 for the large scale
production to 4,328 using the 3-barrel method. 2,607 jobs are created across all production methods in
rural areas from harvesting alone.
ALTERNATIVES
Our research shows that production location, production machinery, market access, and financing
availabilities are key factors that would impact the success of the business. We suggest that Sup De Co
consider the alternative opportunities below.
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Distribution Centers: First alternative is for Sup De Co to set up distribution centers along the Senegal
River to purchase charcoal from entrepreneurs who produce it on their on, presumable using a system
similar to the 3 barrel system. Then Sup De Co could focus internal efforts on marketing and distribtion
of Typha charcoal. On one hand, this allows the local community to produce charcoal either for their own
use or generating additional income; on the other hand, Sup De Co leverages its marketing and
distribution expertise (cultivated in the business school) to promote adoption of Typha charcoal.
Advantages of this approach include: fast Implementation, low upfront investment, and encourage rural
entrepreneurs.
Multi-national Partnership: Another alternative we would suggest is to partner with a multi-national
charcoal manufacturer. In Senegal, charcoal is produced at a decentralized scale by many small players in
the market. However, there might be international players with the appetite to tap into the green charcoal
production, either for business expansion or sustainable development purposes. One example is Eco
Carbone, a French company that brokers carbon credit trading, that partnered with Pro-Natura to set up
their medium scale green charcoal system. This approach could get Sup De Co access to both technology
know-how and financing.
Revisit alternate uses for Typha: Our S-lab Team focused on charcoal because of its significant local
market size and potential for environmental impact by reducing deforestation as well as commercializing
Typha. However our study has shown that charcoal seems to be a declining market with significant
barriers to entry in Senegal. Sup De Co should further explore additional uses such as producing biogas,
insulation, and fertilizer from Typha biomass.
RECOMMENDATIONS
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Sup De Co is very committed to take action to address the significant environmental challenges
associated with the spread of Typha in Senegalese waterways and deforestation in the country’s southern
region. Commercializing Typha by producing green charcoal is promising as a way to potentially address
these challenges and produce profits. However, charcoal is a very challenging industry in Senegal. Before
launching a Tyhpa charcoal business in Senegal we recommend that Sup De Co work to further
understand several factors including: demand for Typha charcoal, harvesting challenges, logistics of
transport of Typha to be processed and of charcoal to markets, barriers to entry into the charcoal industry,
and financing costs and availability.
Increase Demand and Awareness of Typha Charcoal
Launch a marketing, education, and market research campaign to increase demand for Typha charcoal.
Find out what segments of the population are open to the Typha charcoal. Examine the speed at which
people choose to adopt Typha charcoal over other fuel methods and why. Study customer willingness to
pay for Typha charcoal and factors that increase customers’ willingness to pay. Study what might be
unique about the Dakar market regarding demand and willingness to pay for Typha Charcoal.
Find an Optimal Harvesting Technique
Harvesting represents the greatest portion of the Typha charcoal production cost in our analysis. So far
those studying Typha commercialization have proposed and tried several methods of harvesting. The
challenge of Typha growing in water, and the fact that it must be cut sever centimeters above the water
make the harvesting process challenging. We recommend that Sup De Co study harvesting techniques to
settle on one that will have predictable costs. If Sup De Co wants to create jobs through harvesting, the
capacity and costs of Senegal’s rural labor force will have to be considered.
Investigate Transportation Logistics
21
Our interviews and literature review suggested that drying and transporting Typha can be significant
logistical challenges that drive up costs. However the examples that we found sited production facilities
near the source of Typha. These examples did not require the extent of transport that Sup De Co would
require to bring tyhpa (wet or dry) to the large scale processing facility. Sup De Co should conduct a pilot
that require transporting tyhpa to a central location then shipped to markets in Dakar. Study the cost and
benefit trade-offs to selling in Dakar compared to smaller cities that are closer to Typha sources.
Secure an entry point into the charcoal supply chain
Make a close assessment of the charcoal supply chain to identify a good entry point. For this analysis we
assumed that we will be able to sell to charcoal wholesalers but both union control and smaller Tyhpa
charcoal margins are potential detterents to Dakar wholesalers from taking and distributing Typha
charcoal.
Start with Small Scale
We found that at the targeted scale (20% of Dakar market) the industrial scale tyhpa production would be
most profitable. This is consistent with Sup De Co’s hypothesis. However, we did not find evidence of
actual demand being significant enough to justify the initial investment ($4Million) in industrial scale
production. We recommend that Sup De Co produce charcoal at the small scale in conjunction with
market testing, raising awareness within the market, and investigating optimal harvesting strategies. Once
Sup De Co has observed evidence that demand for Typha charcoal will reach the scale studied (50,000-
60,000 tons annually), it would then be reasonable to invest in an industrial scale facility.
Seek partnerships
As an educational institution Sup De Co could face many barriers in starting a business. We recommend
finding strategic partners with experience raising financing and with operational experience in charcoal or
22
a similar industry. An international company with experience accessing carbon credits that can help to
incorporate them as a revenue stream would be particularly helpful.
Investigate Financing Options and Costs
Literature review and interviews with Senegalese professionals have emphasized the potential challenges
of finding financing. We did not focus on this aspect, but we found a general sentiment that lenders in
Senegal as well as the international finance agencies like the World Bank and IFC tend to be conservative
when lending in Senegal. This can make borrowing difficult for a startup. Find out more about specific
public and private financing options and what is required to access them. Forming the right partnership as
recommended above can significantly help in this regard.
APPENDIX A
IMPORTANT NOTE
Below session is a high-level business case comparison among the small scale, mid size and industrial level production, to show case
the economical, social and environmental analysis. Costs of material other than Typha, packaging cost, marketing expenditure etc are
not included, due to the lack of data support. Further studies are needed for investment decisions.
Basic Assumptions
Item Number Unit
Exchange rate 1USD = 500 CFA
Working days per year 208 days
National charcoal consumption 350,000 ton per year
% of charcoal consumed in Dakar 60%
Assumption: SupDeCo market share in Dakar 20% in 3-5 years
10 kg
conversion: wood to wood charcoal 5
conversion: wood charcoal to typha charcoal (energy efficiency) 1.25
# of CO2 equivalent emissions are avoided for each Kg of green charcoal produced
Item Unit
conversion: green typha to charcoal 21
conversion: dry typha to charcoal 3.5
conversion: green typha to dry typha 5.9
Total area covered by typha 400,000 ha
Green typha 125 ton per ha per year
Typha charcoal market price 75 CFA per kg
Distance Ross Bethio, St Louis - Dakar 300 km
conversion tree to wood 50%
Mass of avg tree 680 kg
24
Baseline - 20%
Dakar @ 3 barrel
Baseline - 20%
Dakar @ midsize
Baseline - 20%
Dakar @ industrial Assumption Source / Note
Volume of Typha charcoal ton 52,500 52,500 52,500
equals to CO2 emission reduction ton 525,000 525,000 525,000
equals to wood ton 262,500 262,500 262,500
Harvesting Harvesting labor cost $ 4,130,516 4,130,516 4,130,516
Premium for drying / harvesting 50% 50% 50%
Assume green typha will be harvested
and dried at the river side, before being
transforted to the production center
need to be confirmed
Harvesting efficiency kg / (person*hour) 250 250 250 Peradco report
Work hours hours 8 8 8Average work week. 8 hours per day,
8 month per year, 6 days per week
Daily salary cost / (person*day) 5.08 5.08 5.08OECD report, in 2002 average salary
at $220; 2540 CFA need to be confirmed
Job createdPerson - harvesting 2606.069712 2606.069712 2606.069712
Inbound Transportation 499,800 499,800 499,800
Total dry matters ton 183,750 183,750 183,750 Assume renting the fleet, rather than owning
Average Distance
from collecting point to km 10 10 10 Dr. Dieng
Average Distance
from havesting point to km 500 500 500
Assume 1/8 of the length of the river,
which is 4K km
Cost per ton per km $ 5.33E-03 5.33E-03 5.33E-03
12.5 tons 300km costs 1000CFA;
Assume 10 times cost of high-way long
distance transporting
need to be confirmed
Job createdPerson - transportation 9 9 9
Assume 2 drivers needed for each 10
ton truck; round trip would take 30
minutes; 8 hours per day
25
Baseline - 20%
Dakar @ 3 barrel
Baseline - 20%
Dakar @ midsize
Baseline - 20%
Dakar @ industrial Assumption Source / Note
Production Annual depreciation 46,816 370,500 400,000
Operation cost (labor + fuel) 1,766,702 627,525 130,904
Capacity per machine ton / year 31 936 60,000
60K -MIT SUPDECO
report Oct 2010; 31407 -
2004 PERACOD report; 4-
5 ton per day - ProNatural
website
# of machine needed 1672 57 1
Cost per machine $ 140 65,000 4,000,000 32,500,000 CFA -
PREDAS fiche project
Fuel cost $/ton 0 0.48 0.48
cost of 500K CFA fuel
for 5 tons per day for
six months
PERACOD project
proposal;
Total fuel cost $ 0 25,240.38 25,240.38
PPE useful life year 5 10 10 need to be confirmed
# of operators per machine 1 10 100 need to be confirmed
Amortization $ 46,816 370,500 400,000
Interest Expense $ 7,490.56 59,280.00 64,000.00 Assume 16% need to be confirmed
Job created Person - production 1672 570 100
Outbound Transportation $ 8,400 8,400 8,400
Average volume per
truck per daytons 12.5 12.5 12.5
It takes 5-6 hours from
Ross Bethio to Dakar,
so assume one round
trip per day, each truck
carry 10 to 15 tons
Cost of transporting
per truck$ 2 2 2
1000 CFA per truck of
10 to 15 tons Dr. Dieng
Job created 40 40 40
Assume 2 drivers
needed for each 10 ton
truck
Wholesale 662,344 662,344 662,344
Mark up % 8.41% 8.41% 8.41% bench-mark wood charcoal
Job created 30 30 30
Retail 593,137 593,137 593,137
Mark up % 7.53% 7.53% 7.53% bench-mark wood charcoal
Job created 1500 1500 1500
26
Summary
Revenue @ market price 7,875,000 7,875,000 7,875,000
-) Dealer mark-up 1,255,481 1,255,481 1,255,481
Revenue @ selling to wholesalers 6,619,519 6,619,519 6,619,519
-)
harvesting +
transportation cost +
operating cost
6,405,418 5,266,241 4,769,621
Gross margin 214,101 1,353,278 1,849,899
Gross margin % 3% 20% 28%
Margin after amortization 159,794 923,498 1,385,899
Margin after amortization % 2% 14% 21%
Total Job Created 5,858 4,756 4,286
excl retailer and wholesales 4,328 3,226 2,756
Impacts
Typha cleared ha 8673
wood charcoal substituted ton 42,000
wood substituted ton 210,000
Trees saved 308,823.53
Trees saved/kg charcoal 7.35
APPENDIX B
Harvesting Typha Typha Charcoal
Pro-Natura, Pyro 7
(ProNatura International, 2011)
28
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INTERVIEW LIST
Name Organization / title Area of Expertise Interview date & topic
Richard Coco
Agbeyibor
MIT student Spent IAP in Senegal;
visited Sup De Co and
PERACOD
4/10/2011. Provided an
overview of the project
Amy Smith MIT D-lab lead Lots of experience in
International Development,
particularly for charcoal
production
4/26/2011. Overview of the
D-lab charcoal projects.
Shared key lesson learnt
Amy Banzaert MIT D-lab instructor Charcoal industry expert 4/26/2011. Overview of the
D-lab charcoal projects.
Shared key lesson learnt
Jessica Huang
MIT D-lab staff Project coordinator 4/26/2011. Provided charcoal
project SME contact info
Ramesh
Venkataraman
Jungle Scapes Charcoal production from
Lantana in India
4/29/2011. Provide an
overview of their project in
India. They have successfully
partnered with Philips in
bringing to the villagers the
eco-chulha (a firewood based
cook stove)
Manpreet Singh MIT D-lab alumni Green charcoal projects in
China and Rwanda
5/2/2011. Shared experience
and insights about project in
China and Rwanda.
Discussed about the D-lab
small scale charcoal
production technology
Jesse Ribot University of Illinois,
Political Science
Professor
Charcoal in Senegal 5/3/2011. Shared insights
about the charcoal industry in
Senegal
Dovi Abbey Senegalese Business
Man – From Dakar
Business in Senegal 4/30/2011. Discussed
entrepreneurship, business
financing, and charcoal
industry in Senegal
Khadim Thiam Professor of African
and French Literature
at University of Ohio.
Former resident of
Dakar, Senegal
Dakar households,
Senegalese culture
5/2/2011. Discussed his
household use of charcoal and
other cooking fuels. Including
price changes, gas shortages,
and incense use.
Magueye Seck Resident of Saint
Louis, Senegal
Senegal politics and Family
life
5/2/2011. Discussed the
charcoal market and local
government in Saint Louis
region.
David Ly MIT Sloan MBA
student, from Senegal
Senegal life and business 5/5/2011. Discussed charcoal
industry and market in
Senegal. Shared experiences
of his father who does
business in Senegal.
31
