Typha Charcoal Senegal

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MASSACHUSETTS INSTITUTE OF TECHNOLOGY

Typha Charcoal in Senegal:

Changing a National Threat

into Durable Wealth15.915 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

TyphaChanging 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 Cos 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 Suprieure 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 Sngal (OMVs) is responsible for

clearing tyhpa from the navigation channel of the Senegal River, but Tyhpa grows uncontrolled along the

rivers 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 teams 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

PERACODs 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 getenergy 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 Senegals Minister of Energy would like to obtain for

the whole countryIt 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 Dakars 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 asan 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 MITs 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
http://d-lab.mit.edu/http://d-lab.mit.edu/http://d-lab.mit.edu/http://d-lab.mit.edu/


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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


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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 Cos 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 Cos business will. Senegals 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


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Additionally, if successful at reducing deforestation, Sup De Cos impacts wouldbe 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 Cos 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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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 countrys 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 Senegals rural labor force will have to be considered.

Investigate Transportation Logistics


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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 Cos 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


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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.


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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 As sumptions

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 cha

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


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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 confirm

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 CFAneed to be confirm

Job cr Person - 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 f leet, rather than owning

Average Distance

from collecting point tokm 10 10 10 Dr. Dieng

Average Distance

from havesting point tokm 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 confirm

Job cr Person - transportation 9 9 9Assume 2 drivers needed for each 10ton truck; round trip would take 30

minutes; 8 hours per day


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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

5 ton per day - ProNatur

website

# of machine needed 1672 57 1

Cost per machine $ 140 65,000 4,000,00032,500,000 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 conf irmed

# of operators per machine 1 10 100 need to be conf irmed

Amortization $ 46,816 370,500 400,000

Interest Expense $ 7,490.56 59,280.00 64,000.00 Assume 16% need to be conf irmed

Job created Person - production 1672 570 100

Outbound Transportation $ 8,400 8,400 8,400

Average volume pertruck per day

tons 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 tonsDr. 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


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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


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APPENDIX B

Harvesting Typha Typha Charcoal

Pro-Natura, Pyro 7

(ProNatura International, 2011)


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BIBLIOGRAPHY

Africa Good News. (2009, April 23). Retrieved May 2011, from

http://www.africagoodnews.com/development/environment/380-senegal-green-charcoal-to-save-

forests.html

Action Learning MIT. (n.d.). Retrieved May 2011, from http://actionlearning.mit.edu/s-lab

Ankurscientific. (n.d.).Ankurscientific. Retrieved 10 5, 2011, from http://www.ankurscientific.com/

Bestenergies. (n.d.). Retrieved 5 10, 2011, from http://www.bestenergies.com/index.html

Brewer, C. E.-R. (2009). Characterization of Biochar from Fast Pyrolysis and Gasification Systems.

Environmental Progress & Sustainable Energy,, Volume 28, Number 3, p.386 - 396,.

Carbongold. (n.d.). Retrieved 5 10, 2011, from http://www.carbongold.com/cacao_belize_project.html

CBBQA. (n.d.). Retrieved from http://old.cbbqa.org/wood/Kingsford.html

Chan, K. e. (2007). Agronomic Values of Greenwaste Biochar as a Soil Amendment.Australian Journal

of Soil Research Volume 45(8),, p.629634.

City Population. (n.d.). Retrieved May 2011, from http://www.citypopulation.de/Senegal.html

Dharmakeerthi, R. S., & Chandrasiri, J. A. (2010). Use of charcoal as a soil amendment in rubber (Hevea

brasiliensis) plantations: Effectiveness in young budding polybagged plants,. Third Symposium

on Plantation Crop Research (pp. p.179-188). Colombo, Sri Lanka: Stakeholder Empowerment

through Technological Advances.

Elbersen, W. (2005).Report on bus ticket no. B1.

Garcia-Perez, M., Lewis; C., T., & Kruger, E. (2011).Methods for Producing Biochar and Advanced

Biofuels in Washington State Part 1: Literature Review of Pyrolysis Reactors. Ecology

publication number 11-07-017. Washington State University.

Kamimoto, L. K. (2005). Economic Feasibility of Bagasse Charcoal in Haiti. Thesis for Bachelor of

Science at the Massachusetts Institute of Technology.

Kingsford. (n.d.). Retrieved 5 10, 2011, from http://www.kingsford.com/our-heritage/


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INTERVIEW LIST

Name Organization / title Area of Expertise Interview date & topic

Richard CocoAgbeyibor

MIT student Spent IAP in Senegal;visited Sup De Co and

PERACOD

4/10/2011. Provided anoverview of the project

Amy Smith MIT D-lab lead Lots of experience inInternational Development,particularly for charcoalproduction

4/26/2011. Overview of theD-lab charcoal projects.Shared key lesson learnt

Amy Banzaert MIT D-lab instructor Charcoal industry expert 4/26/2011. Overview of theD-lab charcoal projects.Shared key lesson learnt

Jessica Huang MIT D-lab staff Project coordinator 4/26/2011. Provided charcoalproject SME contact info

RameshVenkataraman

Jungle Scapes Charcoal production fromLantana in India

4/29/2011. Provide anoverview of their project in

India. They have successfullypartnered with Philips inbringing to the villagers theeco-chulha (a firewood basedcook stove)

Manpreet Singh MIT D-lab alumni Green charcoal projects inChina and Rwanda

5/2/2011. Shared experienceand insights about project inChina and Rwanda.Discussed about the D-labsmall scale charcoalproduction technology

Jesse Ribot University of Illinois,

Political ScienceProfessor

Charcoal in Senegal 5/3/2011. Shared insights

about the charcoal industry inSenegal

Dovi Abbey Senegalese BusinessManFrom Dakar

Business in Senegal 4/30/2011. Discussedentrepreneurship, businessfinancing, and charcoalindustry in Senegal

Khadim Thiam Professor of Africanand French Literatureat University of Ohio.Former resident ofDakar, Senegal

Dakar households,Senegalese culture

5/2/2011. Discussed hishousehold use of charcoal andother cooking fuels. Includingprice 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 localgovernment in Saint Louisregion.

David Ly MIT Sloan MBAstudent, from Senegal

Senegal life and business 5/5/2011. Discussed charcoalindustry and market inSenegal. Shared experiencesof his father who doesbusiness in Senegal.


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