What does it take to operate a waste management company in a market where you have to compete with a dump site fee of just one dollar per ton?

In this episode, Daniel Paffenholz from Taka Taka Solutions details the realities of building an integrated waste management and recycling company in Kenya. He explains the immense challenge of scaling in a heavily fragmented and informal market, where you must compete against hundreds of other operators.

We discuss the entire operational flow, from collection and sorting at their material recovery facility. Daniel describes the economic pressures of operating without gate fees and the strategic necessity to move beyond simple recycling into value-added compounding to build resilience against global market shifts.

Recorded on site in Nairobi, this episode provides a ground-level view of the complexities and strategic decisions involved in the waste management industry in an emerging market.

Video Impression

People

Daniel Paffenholz, at Taka Taka Solutions
https://www.linkedin.com/in/daniel-paffenholz/

Patrick Hypscher, Circular Business Strategist, PaaS Expert
https://www.linkedin.com/in/hypscher/

Chapters

00:00 Intro
01:28 Taka Taka Solutions Business Model
03:13 Waste Management in Kenya
07:04 How Taka Taka Started
08:48 Taka Taka Operations
12:26 Differences Between Waste Streams
17:40 Waste Management Industry Challenges
27:49 Policy Impact: Plastics Ban
30:46 Future Direction of Taka Taka
33:25 Who Should Reach Out to Taka Taka

About

TakaTaka Solutions runs a vertically integrated waste-management model: collection, sorting, in-house recycling (including flexible plastics), and composting, serving households and corporate clients across Nairobi.

The company reports handling roughly 50–60 tonnes/day and more than 20,000 customers, with operations that include pelletizing plastics and producing compost from organics. It complements municipal gaps by buying from waste pickers and offering client recycling reports, positioning itself as a leading end-to-end player since 2011.

Their recent work also extends to on-site sorting for manufacturers and organics upcycling in partnership projects. Governance and workforce claims emphasize formal jobs and significant participation of women in operations

Further Links

https://takatakasolutions.com/

Transcript

[00:00:00] Intro

Daniel Paffenholz: There’s enough waste, but the question is, is someone willing to pay? Well, can we handle it at the unit economics that we operate with and is someone willing to pay for some of it? So that’s unfortunately the question.

Jingle: My name is Patrick Hypscher. And this is Circularity.fm, the podcast about understanding, building and managing circular business models.

Patrick Hypscher: Welcome back to Circularity Fm and our series on circular entrepreneurship in Kenya. In this episode, we hear from Daniel Paffenholz, founder and managing director of the Waste Management and Recycling Company, Taka Taka Solutions. Daniel talks about what it takes to operate in a fragmented and largely informal market, the barriers to scaling, collection and sorting.

And why? Focusing on cost efficiency and value added recycling is essential for long-term resilience. But before we start, I have an offer for you. If you want to get the actionable one pager about this talk, sign up for the Circularity.fm newsletter. You can find it at www.Circularity.fm.

[00:01:28] Taka Taka Solutions Business Model

Patrick Hypscher: Daniel, thanks for having me here. I just saw, all the facilities, and, it’s impressive, to see what you’ve built up here. Before we start, what does Taka Taka stand for?

Daniel Paffenholz: So Taka Taka is the Swahili word for waste. But it’s a bit of a negative word, so it could be kind of more like trash. So it’s slightly, so when we started, or the company had the name originally, people always laughing at the name because it’s kind of like trash solutions. But I guess if you laugh and then it elicits a reaction, that’s always a good thing.

Patrick Hypscher: Yeah. Okay. So, can you tell us a bit more what you do at Taka Taka Solutions??

Daniel Paffenholz: Yeah, so Taka Taka Solutions is an integrated waste management and recycling company. So in the Kenyan context, that means that we collect waste. So from residential, commercial, and industrial clients, we then take it to our sorting sites or material recovery facility. They’re sorted into various fractions.

Then, the majority of fractions we resell to third party recyclers, cardboard, metal, glass, aluminum. And then there’s two kinds of fractions that we process ourselves. One is organic waste to compost, although not all of the organic waste is composites. Some also goes to pick farmers or black soldier fly farms.

And then we also have, currently two, plants and plastic recycling where we make pallets ourselves. So both for rigid plastics and for flexible packaging. And then to complement the waste, we get ourselves from our own collection and our own material recovery facilities. We also have buyback centers where we buy back waste from waste pickers.

So in summary collection, sorting, composting, plastic recycling, and buying back plastics from waste pickers at dump sites. So that’s basically the model.

[00:03:13] Waste Management in Kenya

Patrick Hypscher: Okay. And, let’s stick to that flow. So, you collect waste from private people, so residential housing, but, but also companies, how that does that work because, I mean the system here in Kenya probably works a bit different.

Daniel Paffenholz: Yeah, so compared to Germany, or most countries in Europe or even the US, we don’t really have municipal contracts here. So you have to kind of fight for every single building. So there are certain mandates by government, how well they’re enforced or not is a different conversation that you need to have a licensed waste collector.

But alone in Nairobi metropolitan area, you probably have 200 waste collection companies. Oh wow. Half of them may not even be licensed, half of them are licensed. And so every building now needs to decide who they want to work with. So in that sense, it’s a very easy market to enter and it’s an extremely difficult market to scale in because yeah, you don’t have a centralized route.

Every client has slightly different demands. You have different invoicing for everyone. and then obviously the regulations around then what happens to the waste cell also, let’s say barely existing. And if they are existing, they’re not enforced. So for example, there’s now regulations that every household should be source separating into general waste, recyclable dry waste, and organic waste.

And so every household should get at least two, ideally, three garbage bags for that. I’d say 95% of waste companies don’t do that because there’s obviously a cost associated with giving all those bags. And then the enforcement of the government for various reasons is, yeah, not what it could or should be.

So there’s always, it’s important to always distinguish between what you read should happen and what actually does happen.

Patrick Hypscher: So when you say you have to fight for it. It sounds like there at least two fights. First of all, you, you need to have the house to decide that they, let’s say have their waste collected. And second one is that you have to fight that you are the one, being selected.

Daniel Paffenholz: I wouldn’t call it that bad. I think if you go to middle income upwards and commercial, they largely want and know they need a waste collector. Now maybe they don’t care so much or at all about the environmental impact, but they know just from a space, you know, perspective, they need a, a waste collector.

So there it’s really just the first fight. Like, okay, who, who will they sign up with? Why should they work with you? and I think some people care about green, the majority of the market doesn’t. So you just need to be reliable and cost competitive. Then I think if you go more to low income areas, there’s also the other fight of like, why should I even bother to pay?

I can just have someone dump it in the river. And again, it’s never that black and white. It’s not like they may not have a service at all. That also happens, but you could just pay someone very little to come with a hand cut once a week and take it a hundred meters from your house and dump it somewhere else, right.

So there’s a whole range of proper collection to either an MRF, to a dump site, to a local dump site, to a local mini dump site, to not having it collected and burning it in your own compound, right? So there’s a whole range there of who your competitor is in any given situation, but the kind of scenarios where you don’t have a collector taken to the dump site.

Again, Kenya doesn’t have a sanitary landfill. Everything, it’s an open dump, there’s no protection, no leeching collection, nothing. that’s generally more in the middle, low and low income areas.

Patrick Hypscher: You mentioned MRF, what’s that?

Daniel Paffenholz: Material recovery facility. So sorting site.

Patrick Hypscher: Yeah. Yes. Okay. And, how does it work on the company side? Is it a bit similar?

Daniel Paffenholz: I mean, same. yeah, you still have to kind of convince each business entity to sign it up. Obviously if you talk to a more international company or larger company, they’re a little bit more willing to invest in something being green. but it’s the same thing. So again, no matter the size, size of the client, you have to convince each client separately.

[00:07:04] How Taka Taka Started

Patrick Hypscher: And when was, Taka Taka founded? And, and why did you probably, found it in the first days?

Daniel Paffenholz: So I grew up in Kenya as a child, then came back after studying, didn’t know what I wanted to do, and some of my mother said, we were, we still had like a holiday home from them. And my mother was like, why don’t you look at waste management since we seem to be burning waste and that’s not a good thing. So in complete cluelessness, I thought that was a great idea and.

Patrick Hypscher: Thanks mom.

Daniel Paffenholz: Yeah. And, and thought, yeah, I should do that. And then I looked a little bit and I was like, yeah, there seems to be a problem. Maybe I can do something here. Yeah, I think a certain positive blindness helps in starting things. and then that’s kind of how the business, started. And that was in late 2011, early 2012. And then initially, I mean, my initial, analysis was that a lot of waste doesn’t get collected, especially in lower income areas, which is true. No one was really, and is doing much with the organic waste. That’s also true. I somehow had the assumption that a lot of recyclables or dry waste was being recycled, which was only partially true.

And so that’s why the initial kind of focus was, was let’s try to collect in low income areas and let’s do composting. That’s how we started. And then over time it evolved into, okay, let’s also go to other income areas ’cause being in low income areas for the reasons I just mentioned, is extremely hard.

So financially, not the smartest idea to start there. Then, you know, we later realized, okay, there is a lot of recycling not present for a lot of fractions. And then over the time as a waste collector being stuck with certain materials like flexible plastic packaging, we then also went into recycling. That was kind of the very short trajectory of what happened.

[00:08:48] Taka Taka Operations

Patrick Hypscher: And, can you give us a bit of an idea in terms of numbers? So how much waste are you processing?

Daniel Paffenholz: Yeah. So I mean, just to give a bit of a context, so Nairobi Metropolitan area does about 4,000 plus tons a day of daily waste production. We are the largest waste collector. yet we do just about 90 tons a day, right. So, just to put it into perspective, because the market is so heavily fragmented. I mean, 90 is not little, but by international standard, that’s not a lot.

But I think those are the numbers, so we manage about, yeah, 90 tons a day. We have about 600 staff. ’cause it’s very labor intensive, the way we sort. But that also allows us to achieve probably in a global comparison, comparative point of view, a very high, you know, rate of above 80% of the waste that we can recover.

But again, that’s also because a lot of the waste is organic, right? So the moment you’ve taken out organic, you’re already at 40% plus of the waste and so yeah, so that’s on the numbers. But then on the recycling side, we supplement that waste. Now also with waste we buy from dump sites. So there we are doing about 300 tons of input collected a month right now on the recycling site.

And that comes both from our own waste collection and now from the buyback centers.

Patrick Hypscher: And you do cover Nairobi, and I also learned that you, have a, a side. Mombasa, right?

Daniel Paffenholz: Again, distinguishing between the different business segments. On the collection side, we are Nairobi and Mombasa. Yeah. and then on the buyback centers, we’re Nairobi Mombasa, but also in Kisumu Nakuru. And we also have a buyback center in Kakuma refugee camp.

Patrick Hypscher: Okay, right. and then you already mentioned you do the composting and you do the plastics recycling. So, what kind of plastics do you recycle here?

Daniel Paffenholz: So on the plastic sites, again, I think we always started at it as a waste collector and management company. Yeah. So we didn’t go for the stuff that had an easy market. We went for the stuff that no one else was doing. Yeah, right, which.

Patrick Hypscher: But by now, you know why.

Daniel Paffenholz: Yeah, so, so initially the first recycling plant, we focused on pp, thermoformed containers, like these fast food containers, which initially we were just crushing hot washing, and then later we added the palletizing stage. So that’s kind of one main focus area. Our plant can process also PET, it can process hard plastic like HTTP below PP injection, but we don’t tend to focus on that a lot because again, everyone else is doing that.

And, we’ve kind of moved, we’re trying to do things others are not doing, for better or worse. so mostly on the rigid side, PP thermoform, so single use containers and then. But our bigger focus on recycling is flexible packaging ’cause that what we realized was done barely, and we were just accumulating stockpiles or flexible packaging from our own operations, right. You’ve maybe seen the remaining of that. That’s about five to 10% of what we had two years ago because just no one was doing anything with it. And so there we mostly do LDPE and HDP, but we’ve also done a little bit of experimentation with PPE film packaging. And that one yeah, then goes into pellets and then those go into various applications, from film applications again to water tanks, to other things.

Patrick Hypscher: And, this mostly then happens in Kenya. You sell it to other companies who then

Daniel Paffenholz: We, for now, our plastic pallets are purely sold in Kenya and we actually compared, or we looked at various points in time what it would mean to export. And generally actually the prices we’re getting in the Kenyan market are very competitive from an international price point and on some fractions even higher than what you would get in Europe. Yeah.

[00:12:26] Differences Between Waste Streams

Patrick Hypscher: And, and what are the, let’s say, problematic waste streams? Where, where there’s, I mean, actually, in most of the, countries where it’s basically market driven, only. This kind of material that, is in demand, is collected and, and is processed. So what is in demand and what is not so much in your mind?

Daniel Paffenholz: Yeah, so I think, yeah. So which factions now from the material recovery and then we can go to plastic are in demand. So metals, aluminum, I think that’s a global phenomenon, they’re always in demand except aluminum foils. That’s a big problem. Again, probably globally, the same glass is in fairly decent demand. Green Glass has demand for Export Brown and Clear has local demand, but we don’t have a problem with that. And we have a strategic partnership with a recycler there. And so that’s on the glass side.

Then cardboard paper has a decent market, but obviously depending on where the global cardboard prices are. They are less or more picky on how clean the material is. But generally there’s more demand for white paper and brown paper in Kenya than there is supply.

Although on the lower qualities you might sometimes be left with material no one wants. So I think now coming on the plastic sites, again, very much like the global situation, so PET bottles, massive demand at any point in time, there are multiple recyclers in the country. More recycling capacity than available PET.

Then HTTP below PP injections, so hard plastics, also significant demand. Many, many recyclers from small to medium to large scale. and so I think that’s generally the situation on the plastics now coming to the harder ones. So one textile, there’s no one really recycling textile other than like more like a story small scale.

So textiles is a huge problem, e-waste. I would also argue, ’cause you don’t have a producer responsibility system in Kenya, so there’s a little bit of cherry picking on the two or three E-waste items like motherboards or lead batteries. Although how they recycle it isn’t always good where there is demand.

But anything where you need basically an EPR subsidy to make it work, there’s no demand. So while again, I mean the percentage of e-waste of the overall waste pie is not very high at all but to mention that, so then we have textiles. then we have on the, plastics. I think multi laminates are a huge problem.

Like, BOPP, Biaxially-Oriented Polypropylene. So like these kind of thicker packaging, there is one company here doing paralysis, but again, they’re also quite picky, they don’t want everything. but a lot of then Tetra Pack used to be a problem. There’s now actually a paper mill that’s just partnered with Tera Pack to put up a processing unit here.

So I hope that is gonna move from a problematic to non-problematic fractions. But in short, everything you saw here today you can assume is a bit more of a problem. PVC also a problem, although on the rigid side there’s a little bit of a demand PVC film, not so much styrofoam, we are actually the only one.

We’ve done some trials recently, so we’ve actually, we are now recycling styrofoam in-house. So that one we found a solution for before, I think. But we are the only recycler of, styrofoam in Kenya. So maybe to give you. A quick overview of what the, and then obviously, sorry, we haven’t spoken about organic waste.

I think that’s the big one. Mm-hmm. so we compost. ’cause you know, in compost you can use everything. There’s a few companies that do black soldier flies, but I think black soldier flies is a helpful instrument, but it’s, they’re quite selective in what they can take. so from our point of view, although, you know, that could be debated, the market, the potential market of black soldier fly in terms of the overall organic stream is less than 10%.

But again, it depends on the recipe and who uses it and how. and then you have also pig farmers who, take which we actually think environmentally is a better thing. ‘Cause then you don’t go through the middleman of feeding an insect to be then fed to an animal, but generally across the country there’s not much done with organic waste.

And both black soldier flies and pig farmers want very clean stream, they want supermarket industrial waste. And, no one else is really sorting mixed waste in Kenya for organic. So I mean, we do that. but I think, so outside of us organic is probably the biggest problem in terms of unutilized fractions.

Patrick Hypscher: What about like, construction, waste, mineral?

Daniel Paffenholz: So in Kenya, I mean, put it this way, is there anyone willing to pay to have construction waste properly disposed? Absolutely not. So let’s start with that. However, people are willing to kind of get rid of it and some things. But the willingness to reuse here is a lot higher, like, you know, concrete stuff that is gonna be dumped. Well, they’re gonna just use it for refilling, right? Old pipes. So for example, when you see a building dismantled here, they don’t just come in with a dozer and tear on the building. They are people going centimeter by centimeter to even recover the old metal. In that sense, there’s naturally on construction waste.

A much higher reuse case and recovery case, but in traditional, it goes to a professional recycling plant that is being paid to manage construction waste. No, that doesn’t

Patrick Hypscher: Yes.

Daniel Paffenholz: But there is a much more Yeah, because of lower labor costs, a much, higher kind of inbuilt demolition recycling rate by the people doing the demolition. Yeah.

[00:17:40] Waste Management Industry Challenges

Patrick Hypscher: You described like an awesome journey, and a variety of, streams. So what are the main challenges you experience these days?

Daniel Paffenholz: So I think, yeah. So what are the main challenges? I think there are many. So I think if we go through maybe the different business units, so the challenges in collection, I think as your question already hinted at, is. It’s very difficult to scale in a market where there’s little enforcement and you have to sign up each building separately.

So I think initially we scaled because we were like greener and that, but that only gets you so far once you’ve signed up majority of hotels, malls, then where you’re gonna go. And so generally, I think there’s a reality that unless you have municipal contracts, which again politically you probably don’t want, because then you have corruption in tenders and other things, it’s just very hard to scale.

So either you accept a certain size or you become extremely price competitive and just start lowering the price. So I think that’s the first challenge combined with the fact that just like enforcement on proper behavior or legislative behavior is not there. So the fact that we come to customers and say, you get two bin liners, you source separate.

Like that’s nice and some people appreciate it, but the majority do not. Right? So it’s just you’re living in an environment where, if anything, the legal requirements are increasing. And if you are a relatively bigger company, you need to be compliant. But you’re competing against 90% of the market that’s not compliant with that, right?

So even a small thing like value added tax, you have to charge value added tax on waste services, which makes sense. But if 70% of your competitors don’t do that. There’s a problem, right? So you’re just constantly competing against the heavily informal sector. Yeah. And so the way we are looking at it, the only way to really then grow in that is that you just need to try to get price advantages or cost advantages from being greener.

So the fact that you’re greener is not a marketing thing that for some people, but it’s like, okay, other people have to, for example, go to the dump site with a truck. They take multiple hours at the dump site. We have one truck for residual waste that goes to the dump side, every other truck doesn’t, right. So that’s where you need to, you’re recovering waste streams that others cannot recover. And then again, there are other companies also doing some level of sorting and recycling. Just probably we do more of that, but you need to look at it from like, the fact that we are greener isn’t actually relevant to the majority of the market.

So how can we translate being green into a cost benefit that allows us to actually be cheaper? And the interesting thing is, when we started as a company, we were a premium provider. Pricing wise, now we’re probably below average. Mm-hmm. just because we’ve used or tried to use what we do to kind of work on prices.

So I think that’s on the collection side. When you look at material recovery facilities or sorting, you know, in fear you’d be like, oh, you’re so competitive. No one has a site that sorts this much. And again, compared to your European sites, we are probably 40 years behind 50 now we’re building next year or in the next few months, hopefully a bit of a fancier site. But even that would be a European site maybe in the late eighties, right. But again.

Patrick Hypscher: In terms of,

Daniel Paffenholz: technology. Like we are not gonna put in optical, near infrared sorters ’cause the volumes that we are running through the lines doesn’t justify that. And then labor costs here are also so much lower. So, probably right now we’re on the way too low end of it.

But even if we upgraded it, there’s a limit to what makes financially sense when you don’t have, you know, 400, 500 tons streams with a gate fee of x 5,000 Euros a ton. Yeah. Right. Yeah. Because we get zero gate fee. Yeah. And so there you’re thinking, okay, you’re competitive with an MRF, but the reality is a different one.

One, you’re competing against the people on the trucks, including your own staff, stealing a lot of the material. Mm-hmm. And by a lot, I mean a lot. that’s number one. Then secondly, you’re competing with a gate fee of $1 a ton, which is the dump site, right. and so I think, and that’s the realistic competitors, not other people who have no, or are very. like ramshackle material recovery facility. And so then the question is, if you want to scale from that perspective, you’re like, how can I compete with a site where you’re charging $1 a ton? and basically dumping is free while the, all of the high value items you need to assume are gonna be stolen before they reach your site, right? And so that’s kind of the challenges that you’re facing there. And then on top of it, you have an offtake market where no one is, you know, interested in taking materials because there’s some mandatory minimum recycled content or anything. They just do it because it makes financial sense. So again, those are the challenges there.

then coming to composting, you know, in Europe when you run a composting plant, most composting plants I’m aware of, don’t make money with compost. They make money with receiving organic waste. In Kenya, again, you don’t get a gate fee. So just to put that in a price perspective, I think if you go to a European garden center and you buy a very fancy compost, you maybe pay 50 euros a ton and that’s like some premium, you know, compost that has been used in the BVB, you know, Dortmund Stadium or something. And here in Kenya you don’t get that. So even here, the compost price is much higher. Now, soil is needed, but, so we are selling at about a hundred Euros a ton. Other competitors are even trying to sell at a higher price.

But you need to look at it completely differently. ’cause you need to completely recover your revenues on the flip side. And so our view is we need to keep that price low because if you wanna scale that, and again, we’re just opening a new compost site, the one you saw is, hmm, slightly full. but you need to have a very low price point.

Although by European context, a hundred euro is not a low price point. but again, you just need to be aware that the market is interested in compost, but for you to sell it as a bulk product that you can actually get paid for, you need to keep a low price. Then you come to recycling and the challenges are there that the majority of plastics today are not coming from clean sources.

It’s at the dump sites. And especially like us, if you’re focusing on harder to recycle plastics, you need to think about it a bit like the savanna. So first comes the line who has like the prime cut and waste. That’s the waste picker in the residential area. That comes before the truck comes, they get the prime.

Then you have the guys on the truck. They’re like the hyena, they get the second cut. Then you go to the dump side, and now you have the birds or the rabbus, you know, and then so. Then even on the dump side, there are multiple levels there, right. And the issue is now a lot of the high value plastics are picked up by the lines before it reaches the dump side, which is fine ’cause in a way that makes it a cleaner material.

But now if you are trying to recover the lower value material and you pick them from the dump side, that has a double problem. One, they’re much dirtier at that point. And two, okay, the conditions of recovery for waste pickers are just inherently not good ’cause it’s a dump site. And three, the cost of recovery for them is also,

it’s quite high ’cause it’s a very inefficient sorting at a dump site and then you need to do secondary sorting and whatnot. So basically the access to the material is very hard. And then, you know, yes, you have a main dump site, but you have many illegal, smaller dump sites. So it’s not like that. You can call three material recovery facilities and agree a one year delivery contract at Virgin minus y percent and then you’re good.

Like that doesn’t exist. So you need to, and especially on the harder fractions you need to set up, your own sourcing network. Now, if you want PET bottles, you’re fine. Everyone knows what a PET bottle is. It’s a fairly uniform product. You can have brokers delivered to your doorstep. If you do, the same with flexible packaging, you are out of business.

Why even if people deliver the material will be so bad, so dirty, so contaminated, and in flexible packaging. One of the big success or failure factors is loss rates, right? Maybe your PET loss rates in plastics is into output 10 to 15% loss rate. Flexible packaging, you can have loss rates up to 60% if you have very dirty materials.

So you controlling the loss rate is essential to knowing if you’re in business or not. And so if you buy dirty materials that you don’t pre-screen, well, you’re not in business. So for example, that’s why we initially used to buy plastics, then we sort it, then we realized our loss rates were insane. So now we get materials delivered.

We sort at our buyback centers, then we buy after sorting, and then we give a bonus or minus system to the. You know, people, the waste pickers who deliver to us based on cleanliness, moisture, content, there’s like a scorecard. but so just saying there’s a lot of complexity in the sourcing, especially for the harder to recycle materials.

So that’s the first thing. And then the second thing is on the flip side, there’s no, again, mandatory requirements to use a certain percentage. So we are completely dependent on where the global market is. And right now as an always cycle in, in plastics, it’s not a good time. Yeah. So prices have gone down.

So demand is lower. And I think generally what I’ve learned, belatedly maybe, is that as a recycler there are three types of plastic recyclers. You either have significant cheap feedstock. That gets you through the bad times or you make a finished product that gives you margin, that gets you through the bad times, or you’re just a recycler and you’re fine when they’re good times and then you’re gonna probably die or not do very well in the bad times.

And you would think we are the first one ’cause we have our own waste and we do, but it’s actually not enough for the plastics we need. So we are kind of in between number one and three. So we don’t have enough of our own ways. What we are now trying to do as a result of that analysis is how can we get more into value addition, either finished product or more likely like kind of value added compounded products where we say to our manufacturer, we don’t want to give you an add-on product that you use 30 20% of.

We wanna give you a product that we have upgraded through compounding that we can give you a hundred percent to use. ’cause then again, you are talking very different market size margins. And those kind of things. So that’s kind of where we’re trying to go to kind of move more towards compounding. ‘Cause we are realizing in this time, and I think looking at the global economy, that’s unlikely to change for the next two years.

Plus I think being only a recycler is not a very smart strategy.

[00:27:49] Policy Impact Plastics Ban

Patrick Hypscher: You touched upon many, different materials and also the economic situation, the, regulation and, there’s this, let’s say famous ban of plastic bags in Kenya. Yeah. My assumption would be that there was not much of an impact of these kind of policies or how did also policy impact your business in the last years?

Daniel Paffenholz: Okay. Yeah, that’s a very interesting question. So actually the plastic ban back plastic bag ban of 27 had major impact, but not in any of the intended ways. So I think we first need to understand what it was. Globally, everyone had the impression Kenya banned plastic bags. So what Kenya banned was HTPE, supermarket carrier bags, and nothing else.

Mm-hmm. So then very quickly, the HTPE supermarket bags were replaced by non-woven bags ’cause they didn’t feel like plastics, which are actually harder to recycle and probably lead to more microplastic pollution. But the unintended positive benefits were two. One, the supermarket used that opportunity to start charging for bags.

So as a result, the number of bag usage drastically dropped in the country versus before they were giving them out for free. So that had a very positive effect, but you could have achieved the same thing by just mandating, you know, a higher fee on the bags or just putting a higher tax on those specific bags, and then you would’ve had more recyclable HCPE bags that were costing more.

But the fact that either way the supermarkets did that, helped massively reduce kind of at least the visible pollution of all these plastics going around. So that was a first, let’s say, indirectly intended positive benefit. The second one is that it kind of set Kenya on a journey of legislating and working around plastics.

And then, you know, you later had, mandatory, now you have extended producer responsibility, you have a few things. Now, again, we always need to distinguish between what is there and what works. It’s a very, very, very slow journey, but I think the direction of the journey is right. I think a lot of the intention of the governments are right.

The speed of implementation and the quality of each piece of regulation and legislation is not always the best, but I think the overall direction is a good one. But coming to your question, has that direction as of today had any positive impact on our business? No. None of it actually came to a point of practical, meaningful, and positive implementation.

Are we on the doorstep of some of that being implemented? Yes. So for example, extended producer responsibility is now mandatory since May. There’s a bit of back, court cases back and forth, but it’s now mandatory. So in theory, that should start soon giving fees to recyclers like ourselves and many others.

And that’s a very positive thing. so I think it’s starting to move in that direction. Everyone talks about material recovery facilities. Most people don’t know what it means, but at least people are talking about it. So overall, the direction is there. The implementation is lagging behind, but I hope it’ll catch.

[00:30:46] Future Direction of Taka Taka

Patrick Hypscher: Daniel, I have two final questions, and we stick to the future. so you mentioned already quite a few times, you’re scaling up various aspects of the business. So where do you want to be in three to five years from now?

Daniel Paffenholz: Yeah. So where I wanna be, I think the question is where would I like to be and what do I think is likely considering the market? That’s not the same, unfortunately. So I think we need to be realistic on the collection, sorting and composting side. We’re gonna be constrained by our growth rate on the collection side, right.

The only way that we can accelerate that growth rate significantly is by dropping prices, which is something we’re looking to do. But even then, it’s a very sticky market. So I think we can grow there, but will we double every year? Impossible, right? Maybe we can double in two, three in three years maybe.

But there is a natural growth limit. Now, you could in theory say, okay, let’s start taking waste from other people. Well, A, you’d need a bigger MRF that is than we have today. But even then, you’ll be likely left with a lot of crappy waste, with very little value. And if that is economically viable at an extremely low gate fee, questionable.

So I think there’s a growth pass, but it’s a conservative growth limited by your ability to sign up clients, which may be somewhat accelerated if you lower prices. I think that’s the realistic situation on the collection, sorting and composting side. on the recycling side, I think it depends. Global markets, as I mentioned, are not very good.

So if, let’s say our foray or journey into compounding is successful, which we hope and think, so, then I think that can actually scale up quite a lot because a finished kind of additive or finished raw material to certain industry has a lot of demand. If we stay longer on the path of just being a recycler that doesn’t have kind of a value added finished product, then I think we can grow a little bit.

But that’s gonna be much harder just based on where global markets are, prices are and other things. So, that’s maybe, the view. But in terms of locations, I think we don’t have the intention of in the near term. Going to other countries that, like, we’ve tried it once, it didn’t work very well. so I think we’ll stay in Kenya, but yeah.

But if compounding were to work, then maybe that opens up some quicker growth path. Otherwise, the industry just has certain constraints we need to be realistic about.

Patrick Hypscher: And I guess there’s enough Taka in Kenya.

Daniel Paffenholz: Yes, there’s enough waste, but the question is, is someone willing to pay? Well, can we handle it at the unit economics that we operate with and is someone willing to pay for some of it? So that’s unfortunately the question. The waste would be enough for sure.

[00:33:25] Who Should Reach Out To Taka Taka

Patrick Hypscher: Yeah. And my last question is a bit about the international ecosystem. So what kind of people do you want to get in contact, to who should reach out, to you?

Daniel Paffenholz: I think, who we’d love to talk to, this might sound a little bit nerdy, but we currently, our main points of contacts are highly specialized plastic additive manufacturers who help us in changing the chemical characteristics of certain plastics. So I think that’s something we’re looking a lot into. So for example, like in three months we’ll go to the K Fair in Germany and those kind of things.

I think generally, you know, we work with a few international players, so like investors in the circular economy space they are always of interest. But I think generally it seems to be the positive is while I feel like the people have somehow scaled back their climate commitments, let’s put it like that.

In the last two years, it feels like the circular economy commitments have not increased, but they seem to have not scaled back. And that seems is very positive. But obviously people start understandably cleaning up at their own doorstep first. So commitments to kind of countries like Kenya tends to then be relatively less, but at least the interest overall is increasing in that.

but in short, yeah, so I think who we would like to be connected to not a name directly. And I think we know a few, you know, we have some connections in the sector already, but generally, yeah, additive manufacturers in the plastic space especially. And then just generally in investors and then to some extent, yeah, technical partners or machinery, but again, many of these contacts we have and increasingly also in the, based on the market we are, we are mostly looking there at Indian and Chinese suppliers.

We have some European equipment, but I think for various, there’s certain kind of niche applications where maybe there’s a technology or patent that others don’t have, but if you look at standard equipment like Baylor’s forklift, like operating in Kenya it doesn’t really make sense to look there for European partners.

Yeah.

Patrick Hypscher: Daniel, thanks for sharing your experience.

Daniel Paffenholz: Yeah. Thanks

Patrick Hypscher: This was the third episode in our series on circular entrepreneurship in Kenya. If you want to get the actionable one pager about this conversation, please sign up for the Circularity.fm newsletter. You can find it at www.Circularity.fm. Let’s drive a profitable circular economy. And please don’t forget, the most abundant renewable resource is your imagination.

Jingle: My name is Patrick Hypscher And this is Circularity.fm, the podcast about understanding, building and managing circular business models.