The journey to creating viable bio-digester business

The journey to creating viable bio-digester business

To make bio-digester business viable, SNV and National Bio-digester Programme of Ethiopia are supporting institutionalisation of bio-digester enterprises and scale-up of bio-digester dissemination.

Since its start in 2009, National Bio-digester Programme of Ethiopia (NBPE) has trained about two thousand masons on bio-digester promotion, construction and after-sales service. NBPE has supported installation of over 16,000 bio-digesters till date in Amhara, Oromia, Southern Nations Nationalities and Peoples Region, and Tigray National Regional States.

However, according to an assessment done by the programme the number of masons who are still in the business is only about 10%. The long process to set up bio-digester enterprises, misconception on commercial viability of the bio-digester business in the rural context, limited business management capacity among the youth and capacity to promote bio-digester in the rural setting have contributed to the high turnover. Hence, many of the masons joined other competing sectors in urban areas, particularly, the booming construction industry.

To systematically take up the private sector development addressing the challenges and issues in bio-digester sector in Ethiopia, SNV and National Bio-digester Programme of Ethiopia have provided support in formalisation of the biogas construction enterprises (BCEs), provided capacity building support to masons, and provided technical support to fill business management related gaps.

Bio-digester masons have taken training on new digester model construction

Bio-digester masons have taken training on new digester model construction

One of the main supports related to development of guiding documents is National Framework for Private Sector Development under Public-Private Partnership (PPP) in the Ethiopian bio-digester sector. This document guides and will accelerate the process of creating a commercially viable bio-digester sector in Ethiopia by providing overall framework as well as specific concepts, tools and instruments for private sector development and defining the end-of-programme situation regarding private sector development.

Since 2015, bio-digester business is on the list of Ethiopian Standard Industrial Classification (ESIC) as Installation and Maintenance of Biogas System (No. 651) in which the Ministry of Water, Irrigational and Electricity is a verifying body. This creates an enabling environment for the sector as it is the basis for institutionalisation.

Federal and regional governments of Ethiopia have been mobilising more resources and are committed to scale up bio-digester dissemination. For instance, Amhara region alone has set a target to construct 20,000 bio-digesters to achieve the vision set by the Growth and Transformation Plan II of Ethiopia (GTP II, 2015/16-2019/20). To realise the plan, the regional government has re-organised its energy structure and other regions are also taking similar measures. The recent launching of new programme – Biogas Dissemination Scale-Up Programme (NBPE+) which  targets to construct additional 36,000 bio-digesters in Afar, Amhara, Benishangul-Gumuz, Gambella, Oromia, Somali, Southern Nations Nationalities and Peoples Region, and Tigray National Regional States, is a big opportunity for enhancing the private sector as well  sustaining the results  and complementing efforts and achievements made so far towards  creating a commercially viable bio-digester private sector.

NBPE has introduced a new digester model (SINIDU 2008) which reduces bio-digester cost by around 25-35% compared to the previous model (SINIDU) combined with effort to improve access to credit  for bio-digester users, definitely improves affordability for bio-digesters and hence stimulates the demand. The programme has enhanced the skills of active masons on the new model. Some bio-digester construction enterprises (BCEs) have already engaged in producing cement bricks for construction of bio-digesters, as an additional business.

As an incentive to formalise the BCEs, the government has increased payment for constructing a bio-digester by a BCE by about ETB 300, as compared to payment for an individual mason. Such kind of positive measures are energising masons to formalise their bio-digester business. Moreover, these measures have attracted former bio-digester technicians and also higher qualified energy experts. These higher qualified experts have started to be engaged in bio-digester business, playing active roles in the sector diversifying their business in the bio-digester value chain, beyond the construction work.

For example, Challa Lelisa, a mechanical engineer and Keabeneh Desta, B.Sc. degree holder in chemistry, have joined the sector and have been formalising their bio-digester businesses. To date, in Ethiopia there are more than 30 active BCEs of which six of have proper office, minimum organisational structure and resource to run the business.

Some BCEs like Tamirat and Addisu BCE, Challa BCE and Mikias BCE have also started supplying materials that are available in local market to users, with a reasonable profit.

Observing the progress in the business, regions have started improving service provisions in line with the National Framework on Private Sector Development.  “In Oromia region, the preparation to pilot full bio-digester business package for selected BCEs is in its final stage. It will be officially launched soon” said Kedir Adem, Coordinator, Oromia Biogas Programme Coordination Unit. This gives the opportunity to supply bio-digester appliances, accessories and other inputs by BCEs, on top of constructing bio-digesters. By doing these, BCEs are reducing costs of construction by integrating efficiency and economy of scope advantages with mark-up that contributes to their business profit.

The Oromia Unit has supported Mikias BCE to access a credit finance of ETB 300,000 for expanding the bio-digester business. The money is used as working capital to supply some of bio-digester appliances, accessories and other inputs and to pay wages. Mikias is not anymore waiting to construct additional bio-digester until he receives payments from the programme. Besides, using a portion of the loan, he purchased a three wheeled vehicle, locally called Bajaj for multiple purposes, including for transporting employees, for demand collection, transporting inputs and for diversifying his source of income by transporting people on rental basis.

SNV, as a technical assistance provider, has supported BCEs in business plan preparation and in business coaching; and has facilitated entrepreneurship training to enterprise owners/managers. SNV has so far supported 24 BCEs in business plan preparation; provided business coaching to owners/managers. From this exercise, BCE owners/managers have learnt the dynamics of the bio-digester market, the relevance of collaboration among stakeholders, ways of improving marketing of their products and services,  accessing  and supplying construction materials and appliances, as well as customer complaints management,  including providing after-sales services, in particular, and developing their business sustainably, in general.

From the entrepreneurship training, 31 BCE owners/managers and 27 masons have benefitted. The training was provided in collaboration with Entrepreneurship Development Centre of Ethiopia (EDC Ethiopia), a UNDP initiative. Business development services (BDSs) will be continued and strengthened to help BCEs stand on their feet, to run their business successfully and address the needs of bio-digester owners.

With the embedding of the programme with the government agencies from federal to Woreda with the minimum system and capacity, has already established a public sector support chain. The private sector supply chain and the public sector support chain working together in a public-private partnership (PPP) will be the foundation towards creating a viable bio-digester market and sustainable sector in rural Ethiopia.

National Bio-digester Programme of Ethiopia (NBPE) in its phase I and II, is co-funded by the Government of Ethiopia and the Dutch Ministry of Foreign Affairs, Directorate General for International Cooperation (DGIS). It receives fund management and technical assistance from Humanist Institute for International Development Cooperation (HIVOS) and SNV Netherlands Development Organisation, respectively. The programme creates market-based solutions to energy poverty through promotion of bio-digesters, for clean energy and for bio-slurry, a co-product, as an organic fertiliser.  NBPE focuses on the creation of a sustainable market and through structured involvement of a growing number of business enterprises resulting in job creation, integration with other renewable energy technologies, product improvement or development, and productivity improvement while being profitable.