Entrepreneurship Zone: 19 May 2022 :: An opportunity worth millions: Exporting Lagos’ plastic waste

Thu May 19 09:11:53 CAT 2022

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Entrepreneurship Zone: 19 May 2022 :: An opportunity worth millions: Exporting Lagos’ plastic waste

 <https://www.netone.co.zw/> 

Kaltani is an end-to-end plastic recycling business based in Nigeria. The company, which recently announced $4 million of seed funding, collects and processes waste plastics, and resells the recycled materials for use in consumer goods packaging and other items. Kaltani’s founder, Obi Charles Nnanna, spoke to James Torvaney about his business.

Why did you decide to go into the plastic recycling industry?

I spent 13 years working in the energy industry, in the United States and France. When I moved back to Nigeria five years ago, I knew I wanted to start a business, I just didn’t know what exactly that business would be. I set up the company Kaltani before knowing exactly what I would use it for.

Spending time in Nigeria, I saw two major problems glaring at me – one was plastic pollution and the other was youth unemployment. It was clear to me that I should do something that addressed these.

How did you go about starting the business?

It’s important to take time to understand the lay of the land and where the issues are, so the first couple of years I continued consulting in the energy industry before going full-time with Kaltani.

In that time, I put together a business plan for the plastic recycling business, and conducted a KPMG feasibility study to really understand the entire A to Z value chain for plastic waste in Nigeria. We’ve done our homework. The market for plastic recycling in Nigeria is a $10 billion market.

I started sourcing equipment factories in Asia, and finding buyers in Europe, America, and the Middle East. I was raising money from family and friends, and putting in my own money. That was our pre-seed, and it was a little over a million dollars.

I didn’t go fully operational with Kaltani until around one year ago, after Covid disrupted our initial plans. In that time we’ve been able to raise our seed round and secure a few major contracts.

What exactly does Kaltani do? How does the recycling process work?

Unlike a lot of companies in the recycling space, Kaltani covers the A to Z chain of plastic recycling. That is, we collect, process, and resell the plastic. Many companies focus only on one aspect.

The first stage is collection. We started with collection centres in Lagos and Ogun States and are currently working on building 20 additional collection centres across more than 10 states in Nigeria. We employ 30 to 40 people at each centre.

People bring the plastic to the collection centres where we sort it into three different kinds of plastics: PET (polyethylene terephthalate), which is your soda bottles; PE (polyethylene), which is your pure water sachets; and PP (polypropylene), which can be plastic products such as chairs, buckets and tables. We sort them, then compress and bale them, and transport them by truck to our factory.

We have two big factories on the outskirts of Lagos – one for PE and PP recycling, and the other for PET recycling – and these employ the whole gamut of machinery. There are machines for everything from removing labels, removing metal pieces, hot washing, friction washing, grinding, separating and drying. We have six different machines just for washing the plastics. The final recycled products are also tested with laboratory equipment for things like the level of impurities and the moisture content before being sold.

What are the final products that you sell? Who is buying them?

Our main product is hot washed PET flakes, which are used to make brand new bottles. This allows FMCG companies – for example, soft drink manufacturers – to reduce dependency on virgin materials.

We also make polyester staple fibre flakes, which can be used to manufacture clothes. The likes of Nike, Puma, and Adidas are all buying recycled flakes to make clothing.

Obi Charles Nnanna, founder of Kaltani.

Where are your customers based?

We have buyers in Europe, the Middle East, the United States, and Canada, as well as Nigeria. It happens that a lot of buyers are international companies, but a lot of large local firms are also becoming more aware and willing to use recycled materials.

What is the incentive for companies to use recycled plastics?

Right now, every soda and water bottle in Nigeria is made from virgin materials, and that’s a major environmental issue. In the past, people would just ship their waste to China and let China recycle it. But now that’s changed and China is not accepting more waste. When that happened, I knew that a lot of countries would start to have bigger and larger plastic waste management issues.

Many countries, including in the EU and the UK, are introducing new laws saying that bottles need to be made of 30-40% recycled material. So it’s a very good time to be in plastic recycling.

Who is collecting the waste plastics? Can you use dirty, soiled bottles, or does it need to be clean plastics for you to recycle them?

The plastic goes through about six different washes and a couple of grinds. It’s being treated with detergent and caustic sodas at very high temperatures – over 100 degrees Celsius. So yes, we can and do take in very dirty bottles and process them.

Can people make a full-time living collecting plastic waste?

They already are! People are bringing us plastics in droves. We’re buying off individuals at 5, 10, 20 kilograms a batch; we are buying one or two tonnes a time from waste pickers with little push carts; and we are buying off larger guys, coming with truckloads of four or five tonnes a go.

I know many people whose full-time jobs are supplying this plastic. And the more collecting stations we have, the more people this income is available to. At the moment we are empowering around 500 to 1,000 new waste pickers per month and that is increasing rapidly as we grow.

How much does it cost to buy the waste plastic?

It really depends on the quality but generally we pay collectors around 80 to 100 naira (US$0.19 to $0.24) per kilogram. So our landed cost is around $200 per tonne by the time it gets to our factory.

And what is the international market price for recycled plastics?

For the hot washed PET flakes, we’re talking anywhere between $1,100 per tonne to $1,300 per tonne – that’s the FOB price, before shipping costs.

You recently announced a $4 million seed funding round. What kind of funding was that?

The seed round was a mix of equity and concessionary debt, primarily from impact-focused investors. We had previously turned down funding from venture-focused investors that I believed undervalued the company.

What will the $4 million seed funding go towards?

The funding is going, first of all, to expand the number of collection centres we have in Nigeria. Secondly, we are expanding our logistics infrastructure in Nigeria, for example our fleet of trucks. And we’re increasing our staffing to over 500 by the end of the summer.

We are also looking to close our next round of funding – series A – by the end of the year.

But we are still just scratching the surface of what is possible. We’ve looked at other markets across Africa. The problems we face in Nigeria are the same as the problems they face in Senegal, Ghana, Ethiopia and South Africa. The market is vast. Circular economies, sustainability, environmental impact – these are all on the front foot at the moment. The sky’s the limit.

Howwemadeitinafrica

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DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of Faith Capital (Pvt) Ltd for general information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The information contained in this report has been compiled from sources believed to be reliable, but no representation or warranty is made or guarantee given as to its accuracy or completeness. All opinions expressed and recommendations made are subject to change without notice. Securities or financial instruments mentioned herein may not be suitable for all investors. Securities of emerging and mid-size growth companies typically involve a higher degree of risk and more volatility than the securities of more established companies. Neither Faith Capital nor any other member of Bulls ‘n Bears nor any other person, accepts any liability whatsoever for any loss howsoever arising from any use of this report or its contents or otherwise arising in connection therewith. Recipients of this report shall be solely responsible for making their own independent investigation into the business, financial condition and future prospects of any companies referred to in this report. Other  Indices quoted herein are for guideline purposes only and sourced from third parties.

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