Starting up sanitation enterprises does not mean a market for products

Published on: 05/01/2018

A colleague from SNV and I travelled to the Southern Nations, Nationalities, and Peoples' Region (SNNPR) to explore the financing options for sanitation marketing in USAID Transform WASH intervention woredas (these districts are the third-level administrative divisions of Ethiopia). Encouraging enterprises to offer sanitation products in rural areas is not by itself sufficient to ensure a sustainable business service and our visits around the region suggest that noble ideas and initiatives are not enough - we need to think as much about building marketing skills as we do about the quality of the products enterprises are producing. This is a sad story in a way, but one we can all learn from. 

In the first woreda we visited, we met the head of the Woreda Health Office (WoHO), who told us that the woreda has been a pioneer in sanitation marketing implementation. The woreda government in collaboration with an NGo, local government offices (WoHO, Technical and Vocational Education Training (TVET), Micro and Small Enterprise Development Office), microfinance institute and local slab producers. The aim was to establish small enterprises that would be able to supply high quality slabs for improved pit latrines for the rural community.

Two enterprises were formed as associations of local masons and artisans. With seed money from the project the microfinance was to ensure financial access through loans to the enterprises as well as to consumers. In addition, the NGO provided equipment (molds and hand tools), raw materials (reinforcement bar, sand, gravel and cement), training and technical support for the newly established enterprises.

We met workers from one of the sanitation slab producing enterprises. Their association was established in 2015/16 with 14 members, out of which only seven are working currently. The enterprise borrowed ETB 40,000 from the MFI to start up the business. They have produced 100 concrete slabs so far, but demand has been very low. The workers said, "Sales have been very poor as the community presumed slabs should be distributed freely given the business was supported by an NGO. Consumers also complain the slabs were expensive (ETB 360), whereas the price is not feasible due to inflated costs of production materials".

On top of that the loan system is no longer functioning due to staff turnover at woreda and MFI and the phasing out of project, along with a lack of clarity about the contract between the woreda and the MFI. Both enterprises have stopped producing slabs, at least for the time being.

Although only we example and here are exceptions Tigray this a fairly typical story about slabs. We were told the enterprise had lost out on the business so far. 'Each of us has contributed 715 ETB to establish the enterprise and has taken a loan from MFI. Whatever we earn from sales goes to MFI, but the amount of interest on the loan is increasing. Members of the enterprise cannot take any other loan from MFI, as we are regarded as having an unreturned loan'.

The next day, We visited a near by woreda where the hygiene and environmental health officer, told us the woreda has been ODF since 2014 and improved sanitation coverage is more than 40%. The woreda health office in collaboration with an NGO here implemented a pilot project which attempts to strengthen supply of sanitation products and services by organizing slab producing enterprises locally. It established nine associations, one per kebele, mainly consisting of local artisans who are willing to engage in production of concrete slabs. The enterprises were given training on business management and construction techniques.The NGO also provided 4,500 ETB (US$ 165) to each enterprise as a one-off business startup grant, and established a sales and product demonstration shop in each kebele.

We tried to learn the impact created through the project in the woreda since it had already been phased out. We were told the impacts were not sustainable as the number of enterprises that continue production and sales are low. There was little integration of these activities with the Woreda Health Office plans and health extension workers (HEWs) were not even fully aware of the project activities according to the Officer.

We also had the chance to meet some members of the enterprises in this Kebele who told us that since the enterprise had been established more than two years earlier they had made only ten slabs and sold only six. At the time of our visit the enterprise was no longer making concrete slabs. We asked him the reasons for such low sales and his response was that households in the kebele perceived the 300 ETB (US$ 11) price of a concrete slab as being too expensive. However, our informant argued that this price was too low to be feasible for the enterprise because of the high costs of raw materials. We asked about their sales strategy and approach. He said that the agents selected by the community and appointed by the project who were supposed to stimulate demand in the community were not active in social mobilization. As members of the enterprise are also engaged in other activities, their involvement in demand creation and promotion was inadequate.

What I conclude from these two interventions is that organizing new enterprises specialized in making sanitation products does not by itself ensure a sustainable supply of sanitation products in rural areas. Both the enterprises we met have been supported and given technical and financial support to strengthen their business. Nonetheless, the number of slabs they sold is far too low to make any impact on improving rural latrines. Noble projects, ideas and initiatives are not sufficient and do not provide a guaranteed market. In organizing new enterprises, we need to think about enhancing their marketing skills as much as we care about the quality of the slabs they are producing. I believe the failure of such enterprises could have long-term implications for other initiatives as well, by demotivating those who have been involved.

Before linking enterprises with financial institutions, detailed feasibility studies should be conducted with a priority given to assuring that there is a market and demand. As we have witnessed, projects might be phased out, offices may cease their support but members of the enterprises are potentially left with a burden of high interest rates and excluded from accessing any other financial services.

This is an ongoing series of blogs and publications by IRC under the USAID Transform WASH project. Please click here for all IRC’s work on this project.

USAID TRANSFORM WASH sets out to improve water, sanitation and hygiene (WASH) outcomes in Ethiopia by increasing access to and sustained use of a wide spectrum of affordable WASH products and services, with a focus on sanitation. It does so by transforming the market for low-cost, high quality WASH products and services: stimulating demand at community level, strengthening supply chains, and building the enabling environment for a vibrant private market.

USAID TRANSFORM WASH is a USAID-funded project implemented by PSI in collaboration with SNV, Plan International, and IRC. The consortium is working closely with government agencies including the Ministry of Health, the Ministry of Water, Irrigation and Electricity, the National WASH Coordination Office and regional governments.