Suraj_&_Ernest.jpg
Suraj Wahab and Ernest Kyei
Toyola Energy Ltd. is an enterprise that fabricates and sells charcoal efficient cooking stoves (Improved Kenyan Jiko-type) to 30,000+ households a year in Ghana (Feb 2010).

A USAID-sponsored training program first provided the entrepreneurs, Suraj Wahab and Ernest Kyei, with technical stove manufacturing skills, though they later adapted materials selection and production processes.

E+Co made an initial investment of $70,000 in late 2006 to develop a production and distribution system that greatly increased the availability of stoves in the market. After a year's time, Toyola was exceeding its sales projections by almost 90% and absorbed another $100,000 of capital in early 2008 and then again in 2009 when they had gone from producing several hundred stoves per month to several thousand. In the meantime, Toyola began the process of monetizing the carbon offsets that its stoves produced under the Gold Standard. In 2009, they dramatically scaled up their operations, covered almost all regions in Ghana and are now (early 2010) anticipating realizing their first carbon revenues. They are looking to expand beyond the Ghanaian market and into the wider ECOWAS region.

Ghana is the largest per capita consumer of charcoal in the West Africa sub region. About 30% percent of Ghana’s rural and urban households depend solely on charcoal for their chief cooking fuel and a further 9.2% use it as a back-up fuel source. Ghana’s forest is depleting at a rate of 75 square hectares per year since 1990. Ghana’s two most populous and economically active regions, Greater Accra and Ashanti Region, consume over 80% of the charcoal produced in Ghana. Each stove saves, on average, about one ton of CO2 from being emitted into the atmosphere each year.




OVERVIEW:


Began: Entrepreneurs began training with Enterprise Works (a USAID-sponsored NGO) c. 2003. In June 2006, Toyola Energy Ltd. was legally registered with core operations in Accra, Ghana.

What: Toyola manufactures and distributes improved efficiency charcoal cookstoves using locally available materials (scrap metal and fired clay liners). Sales occur mostly with cash using internal sales personnel and a large network of agents, but there is also significant dealer credit and frequent "risk-free trials" offered in the peri-urban and rural areas. These stoves reduce the amount of charcoal needed for cooking by around 35% resulting in significant household savings, and can offset approximately a ton of carbon dioxide equivalent per year.

The Energy Need: In Ghana, around 30% of households rely on charcoal for cooking and 55% use firewood. Some small percent use LPG, but even then maintain charcoal as a back-up fuel. The main drivers influencing households' choice of cooking fuel are price and availability; since other energy carriers such as LPG and electricity are roughly 2 to 4 times more expensive, woodfuels-based cooking is likely to retain an important market share for the foreseeable future. On top of that, increased rural-urban migration means that firewood sources are increasingly unavailable for urban populations meaning that charcoal use is on the rise relative to firewood. Ghana's forested areas are disappearing at an unsustainable rate of around 3% per year

E+Co Investment: $270,000 total beginning in 2006 (three disbursements). $90,000 was advanced on future carbon revenues.

Business Development: Business planning assistance provided by E+Co's Vincent Yankey in 2005-06 helped the company formalize its operations and create strategies for controlling the whole supply chain and expanding geographically. Additional assistance from E+Carbon aided in navigating the bureaucratic requirements of carbon monetization and innovating with respect to mobile technology.

Now (2009): Toyola has grown dramatically since its inception to build four large, sophisticated production centers, including kilns for the manufacture of ceramic liners (previously purchased from a 3rd party vendor). Computerized accounting, inventory and sales tracking systems have been implemented. Toyola should realize its first carbon revenues in early 2010, is diversifying its activities into solar PV retail, and is looking to expand to other countries.

Outcomes/Impacts: As of June 2009, Toyola had manufactured and sold 64,000 stoves, was offsetting 44,000 tons of CO2 annually, and had created over 300 indirect jobs.
Back to top


LESSONS LEARNED:


1) Job-training doesn't guarantee jobs


Toyola grew out of a training and capacity-building initiative that sought to teach local artisans, both metal workers and ceramics workers, how to manufacture the Gyapa-brand (meaning “good fire”) stove. After three years of program implementation (sponsored by USAID and implemented by Enterprise Works) which included the training of 76 artisans, an extensive marketing campaign, and rigorous scientific testing of the stoves' benefits, the initiative came to a close.

In 2006, however, though there were 76 trained artisans, very few of them could set up workshops and produce more than one stove per day. They were fundamentally limited by their lack of access to enterprise finance – to purchase raw materials and tools, train and employ others, and deliver the final product to market. Because of the difficult and limited nature of the work, not all 76 trained artisans remained 100% dedicated to stove production.

With business development services and a loan from E+Co, two of the trainees – Suraj Wahab and Ernest Kyei – were able to register their company and begin to expand production, hiring a great number of the other program-trained artisans and training new ones. They segmented stove production into specialized tasks, thus multiplying the number of stoves that any given group of men could produce in a day and increasing the overall profitability while keeping costs low. Likewise, with larger production capacity, the purchase of delivery trucks was warranted. Capitalizing on the popularity of the stoves (a combination of good design and excellent advertising) and the availability of trained workforce, Toyola was able to dramatically exceed its own sales projections and continue expanding.

One of the factors limiting expansion – and another example supporting the need for capital and business development services to complement technical training – was the separate production of the ceramic liners. Even in the face of strong demand signals from Toyola as well as several others, the producers of ceramic liners were not able expand sufficiently. They too lacked access to enterprise finance and capacity building and this became a major choke point for Toyola's business.

The solution? Toyola, having the financial backing and the entrepreneurial resourcefulness, made a $25,000 equity investment in the ceramics company which relocated to one Toyola's production facilities. The ceramics company also obtained a loan from E+Co to increase production and this helped ease the bottleneck.

2) When you can't compete with the informal sector, co-opt it


At the beginning of Toyola's story, in 2006, the owners found that they couldn't manufacture stoves using new, purchased raw materials (sheet metal) while the informal sector collected scrap metal or purchased it for a nominal fee. Also, by having regular workers on salary, Toyola couldn't match the efficiency of what the informal sector was producing and compete on price.

A result, very early on, Toyola began sub-contracting the informal sector artisans and purchasing from them on a piece basis. It applied this same idea to delivery truck drivers, making them responsible for them own gas and maintenance while paying an output-based fee.

Toyola also recruited an army of sales "evangelists" working on commission to disseminate the stoves in their home communities. These informal sales agents, some just hosting a couple of "tupperware-type" parties for their neighbors and families, have proved to be an effective and efficient sales force because of their enthusiasm and credibility in their communities. Some particularly motivated individuals have risen higher within the company.

3) Carbon can come with baggage


It took more than two years for Toyola to complete the necessary steps to begin realizing carbon revenue. In the meantime, Toyola had to scale its operations enough to justify high costs of monetization (the carbon hurdle) and those high costs had to be financed somehow. Systems also had to be put in place to accurately track sales and customer data a greater level of detail. This, not surprisingly, put significant strain on the company, its operations and its pre-existing financial obligations. The underlying business model was significantly, if not fundamentally, altered and without adequate support and determination on behalf of the entrepreneurs, it is quite possible that Toyola could have become a victim of its own success.
Back to top


THUMBNAIL ANALYSIS:


1) The Policy-Enterprise-Technology Balanced Approach:


Toyola_Triangle.JPG

Back to top

2) The Enterprise-Customer Connection:


Toyola_E-C.JPG

Back to top


ADDITIONAL INFORMATION:

Cooking Fuel Mix in Ghana (2006 est.):
Fuel
% HH Using
Electricity
1.1%
Kerosene
2.0%
LPG
6.2%
Charcoal
35.9%
Wood
55.8%