The winners of the 2011 Ashden Awards for Sustainable Energy were announced at a ceremony in London on 16 June. Among the five international award winners was Toyola Energy, which was set up in 2006 to make and distribute fuel-efficient cookstoves to low-income families in Ghana. Founder and CEO Suraj Wahab spoke to Caroline Hartnell about overcoming initial funding difficulties, the progress he has made so far, and what he would like the future to hold for his company.
Toyola Energy was set up by accountant Suraj Wahab Olugburo and engineer Ernest Kwasi Kyei to replace the polluting, inefficient cookstoves that are widely used in rural Ghana with cleaner, more fuel-efficient versions. The company gained a start-up loan from E+Co in 2006, which allowed it not only to produce more stoves but also to provide credit to its customers, most of whom could not afford the stoves otherwise. The company now has a turnover of around US$550,000 per year; by March 2011 it had made and sold 154,000 stoves. As well as environmental and health benefits, the company creates social benefits in terms of training and employment for rural people − the cookstoves are now made by about 172 artisans and sold by more than 300 people. In June 2011 Toyola Energy won the Ashden Gold Award.
Why did you start Toyola Energy?
I wanted to work in an area I love. I was never happy about how we destroy a lot of trees for charcoal and firewood for cooking − over 250 million people in West Africa depend on cooking done this way. So I wanted to stop that, preserve the environment I love, and at the same time make it a business.
I also saw a big business opportunity because we do need a cleaner way to cook. If one is available, there is a potential market of millions of households. The problem is those with the most need are unaware; somebody needs to educate them and explain the benefits of changing the way we cook. There is also the need to improve access to this improved cooking technology for the poorest people. Everybody thought I was crazy taking it on, but I felt like I had to do it.
So I got trained in making cookstoves and set up shop under a tree because there was no money to build a factory. We felt there was a future there, and that because of our education we should be able to raise money, but no local banks were interested. For four years, from 2003 to 2006, we were looking for money and couldn’t get it.
What else were you doing during this time?
There was a project funded by USAID and Shell Foundation – the Ghana Household Energy Project, which we joined in 2004. They gave us and several other local artisans training in stovemaking and initial marketing support. This helped us to refine the technology and enabled us to train more people to make these clean cookstoves to help our people and the environment. However, though we knew how to make cookstoves, we still didn’t have money to turn our skill into a proper business, despite demand. By 2006 we were at the point of frustration – we had hardly been able to eat because we hadn’t been doing any other jobs! When E+Co lent us money in December 2006, for the first time we were able to do the things we wanted to do. We produced the stoves in large quantities, trained more artisans and employed most of our trained colleagues instead of competing with them. We bought vehicles to take the technology to the people we felt needed it most, particularly in rural areas. We were able to offer credit to poor households, which is a very important factor. Though the stove only costs £4,the target customers don’t have the money to pay upfront. We worked out a way to show them that they have the money to buy the stove if they stop wasting it on the large amounts of fuel needed for traditional cookstoves.
So by saving money on fuel they will be able to afford the stove?
Yes. But as nobody believed us, we had to practically show them. So we came up with the Toyola money box (pictured). People normally buy fuel every day, but using our stove makes the same amount of fuel last two days. So users now need to buy fuel every other day, and the money saved on days they don’t need to buy it goes into the Toyola money box to pay for the stove. In a maximum of two months people have saved enough to pay for a stove that can last up to five years. It doesn’t take too long for these low-income poor households to see what a good bargain we are offering them. One of my best experiences in this business is the surprise I see on the faces of customers when the money box is opened and they see how much has been saved. They start telling their friends and family about it. That word-of-mouth advertisement has proved very effective.
Have you had anybody who didn’t save the money?
There have been a few occasions when people don’t put in as much money as they should but when they know Toyola is coming tomorrow they stuff it in there because more often than not they or their friends will need to buy more stoves under the same scheme. We have been particularly successful in the rural areas, because they don’t often get this kind of opportunity and because there is a stigma attached to not paying your debts. We also make use of traditional authorities in the villages, especially the Queen Mothers. They want to help, not just because the product is good but because what we are doing is unusual and helpful to them. Normally they have to go to the town or market to get whatever they want. We are taking the trouble to bring it to the village.
If they don’t pay, do you take the stove away after two months?
That is the idea, but it hasn’t happened. In the last five years, I’ve had only one stove returned and they had very particular problems that meant they could not pay. I think the important thing is that investment capital allowed us to do what we wanted to do. The business model is very much fashioned according to what works in our own community. That has allowed us to move very quickly. Our initial business plans said we would expand to the whole of Ghana in ten years, but we did it in three. We planned to sell 6,000 stoves in year one but we did a little over 20,000 units.
The E+Co money, was that a loan or equity?
It’s a loan we are repaying over five years. They have made three other loans to us due to our good track record but we still have outstanding amounts we are currently servicing. We have not got any grants or equity investment so far.
It would be good to get equity investors as long as they allow us to run our business the way we have run it to make it successful. Most of the things we do are actually things born from our own environment, which is quite different from the way things would be done in the West. Grants will help us to train more people and reach more rural poor by improving their accessibility to modern energy products.
About three years after we started, we were told that what we were doing had the potential to reduce carbon emissions. This is something normally associated with big projects: nobody in the world had ever been registered or received carbon money for cookstoves at that time. However, as is our practice, we decided to give it a shot. We ended up as one of the pioneers in this field. Toyola become only the second cookstove carbon finance project in the world to be registered under the Gold standard.
The carbon money came at a time when we were experiencing rising costs of production which could have resulted in passing significant cost increases to our customers in the form of higher prices. This was because we had to compete with Chinese buyers for an important raw material, scrap metals, used in making the stove body. We now have to pay much higher prices for materials we used to buy for next to nothing.
Carbon money allowed us to keep our price down while making our finances more comfortable. E+ Co was able to extend more loans to us than they would otherwise have done, because carbon revenue represents an additional stream of revenue for loan repayment while also serving as collateral. Goldman Sachs buy our carbon emission reductions.
Your initial training in how to make cookstoves through the USAID programme. Have you had any other capacity-building help?
Yes, as part of the E+Co package we have help with business planning, modelling and accounting. They have a monitoring and evaluation report every six months. However, we need help in the form of a grant to train more unemployed youths to produce more stoves and to increase our market penetration. For example, one of our biggest potential markets is on and around the Volta lake (one of the biggest lakes in the world) but we need a bigger boat to serve as our floating shop, instead of the canoe we presently use to reach these communities.
How many stoves a year are you selling now, and do you have a target to increase that?
Last year we sold about 52,000, but that is all we can produce. The biggest problem we have now is producing enough. We want to sell 100,000 this year but this may not be possible because we don’t have enough money to produce them all and to extend credit to our customers who want them. Carbon revenue helps but it comes only once a year. Having more money now, secured against expected future carbon revenue, will definitely help.
Our market is expanding much more rapidly than we planned. For example, we never planned to be an international company yet, but we found that people were taking the stove to neighbouring countries. Responding to these demands has resulted in Toyola stoves being sold in four West African countries and counting. We have had to open a production/marketing centre in the Republic of Togo and currently have to resist pressures to set up production centres in other countries in West Africa.
The problem is that I have to have money before I can produce stoves and sell them. I have to face the fact that this is not a small business any more, especially because of the international expansion. We need to upgrade the business system and mechanize – we have to go into mass production. We could sell 200,000 stoves a year if we could produce them.
Also, Toyola wants to produce and promote the production of more sustainable charcoal to serve as a fuel source for its stoves. We are already working with some organizations in this field but will need assistance to pursue this effort.
It sounds like you need loan finance for your working capital and patient capital for the investment.
Yes, we do, but we could also do with grants for training and marketing. There are a lot of people in Africa who could benefit from learning to make or sell the stoves. For our production centres around Ghana (such as the one pictured) we pick unemployed youths, who are sometimes considered a nuisance in the community. We train them in stove making; they collect scraps locally to produce the stoves, which they then sell in their communities. Also over 90 per cent of our marketers and agents are women, who earn money that helps their families. At present we finance this training ourselves, but we could do much more if we had help. We also need more vehicles to use as mobile shops for sale and cash collections in far-flung rural communities.
If we have the right investment and support, the potential is very big. We are now redefining our market as the whole of Africa, starting with West Africa. I’ve recently been approached by someone who found out about Toyola on the Ashden Awards website. He works in development, trying to help women in Pakistan, and he thinks that Toyola cookstoves are the answer. He wants me to sell him two container-loads of stoves to start with. Much as I would love to do this, I cannot, because I don’t have enough for West Africa.
I also feel that it would be more useful for me to go to Pakistan and show him how to do it, not to make money but to show that Toyola can help elsewhere without taking over the world. I am looking for somebody to finance this and similar trips. I would be very glad to show more people how we succeeded and work with them to replicate the Toyola model in their regions. This would give me a lot of satisfaction. I’m very flattered to be here and I believe that I have to give something back.
I will consider Toyola successful if people see us as an example of what can happen from Africa when we are given the support we need, not in the form of handouts but in investment capital. I believe there are many more Toyolas out there but they won’t have the opportunity I’ve had unless somebody helps them.
I love telling E+Co that they made Toyola through that first investment that enabled me to start implementing the Toyola vision, because I would probably still be under that tree if they had not invested.
How did E+Co get interested? They were obviously the key, but how were you put in touch with them?
It was actually the UN Foundation-funded AREED (Africa Rural Energy Enterprises Development) project. They put up a newspaper advertisement in 2006 to help projects like ours. They have the United Nations Environmental Programme, E+Co and their local partners as implementing partners. I applied and eventually got funded after assistance with business planning. E+Co’s regional manager for Africa actually flew in from South Africa to talk to me, which was flattering after years of local banks ignoring my pleas for funding and everybody telling me I was mad. When the money came I didn’t even have money to go to the bank to collect it!
USAID/Shell Foundation had funded the training for about 78 of us through Enterpriseworks. I invited my colleagues to come and work with us so we can compete with the polluting and inefficient traditional cookstove. By helping one major player, impact investors and other relevant bodies can actually reach many more beneficiaries, as is the case here.
One of our most critical success factors is the commitment of the members of the Toyola family, as we like to call ourselves. I have succeeded in attracting people who want to make a difference in poor people’s lives and they are making a good job of it. Starting with Ernest Kyei, an engineer and the first person to realize I was not crazy, the Toyola family consists of several hundred evangelists who, despite knowing there are easier ways to make money, choose to work for our cause. As entrepreneurs, we want to make money to be self-sustaining, but the real driving force is doing a lot of social and environmental good in the process.
Somebody once asked me what Toyola means to me. I remember telling him it is a labour of love, a mission, a passion and a way of life, all rolled into one.
For more information
Email Suraj Wahab at firstname.lastname@example.org