Why We Invested: Chanzi
In East Africa, over 30 percent of food produced is spoiled due to a lack of proper post-harvest storage and route to market and in Tanzania alone, 26K tons of food waste is produced per day. Countries across sub-Saharan Africa are experiencing challenges with waste management- more than 90 percent of waste generated in Africa is disposed of at uncontrolled dumpsites and landfills, often with associated open burning, resulting in the generation of greenhouse gases which contribute to climate change.
Food waste is the largest component going into municipal landfills and one third of all CO2 and methane produced worldwide is by organic waste. At the same time, Africa’s population is expected to double by 2050 to reach 2.5B people and this growth in population, alongside rising incomes, is spurring animal protein demand across the continent, with near term projected growth in consumption annually between 2-3% across major protein categories.
Animal production is currently constrained by high costs of feed, making up 60-70 percent of production costs. Prices continue to rise on the continent due to unavailability of alternative protein feed other than fishmeal, which is the most common protein source in conventional chicken feed and is unreliable and unsustainably harvested.
The Benefits of Black Soldier Flies
More and more African countries have progressed to adopt more sustainable modes of alternative waste treatment options including anaerobic digestion, composting, and waste to energy plants. The use of Black Soldier Flies in organic waste composting is a self-sustaining, cost-effective method that results in high resource recovery and generated value-added products like protein additives for animal feed and organic fertilizer. Through the circular nature of BSF production, BSF can gain up to 5000 times their body weight in just two weeks by consuming organic waste.
BSF larvae is a sustainable alternative to two of the main animal feeds: fish meal and soy. In fact, 37 percent of fish caught globally goes into animal feed and 70 percent of the global fish stock is fully used, overused or in crisis. Soy is the second largest contributor to deforestation globally. BSF can produce 2500 times more protein per acre per year than soy, using less water and land, and generally has higher levels of amino acids, fat and cholesterol. Insect use as a protein source is estimated to reduce the protein cost of feed production by between 25-37.5 percent, which increases affordability for smallholder farmers.
This signifies a strong need to support innovative models cutting across local waste management and agro-input ecosystems and that is why FINCA Ventures invested in Chanzi, a Tanzanian company founded in 2019 that designs and operates breeding and production facilities for black soldier fly (BSF) larvae to produce animal feed protein additives. Chanzi purchases / offtakes unwanted food waste from smallholder farmers, commercial farms, urban markets, and businesses, converts the food waste into protein using BSF larvae, and sells the feed additive to livestock, poultry and fish farmers, agrodealers, and feed mills across Tanzania (and soon in Kenya).
Environmentally Driven Team
Chanzi was founded by Sune Mushendwa, an architect by trade who went through multiple iterations to land on the model that Chanzi replicates (and regularly fine-tunes) across its facilities today. Chanzi’s co-founder and CEO, Andrew Wallace, had previous experience at Victory Farms, a fish farming operation in Kenya, where he experienced firsthand the impact of rising feed prices on production and revenue growth for both the company and its outgrowers. The founders joined together through their commitment to reducing the environmental impact of food waste that is not properly treated and animal feed that is unsustainably produced.
Sustainable Waste Management
Chanzi currently has a total of three sites in Arusha, Dar es Salaam, and Zanzibar and is in the process of launching its first site in Kenya in Nairobi. Each production site has 42 greenhouses that are used to grow the larvae. Additionally, there are areas for waste processing, hatchery caging for breeding, and blanching, drying and grinding. From 18MT of food waste, 5MT of by-product is produced and after drying, is turned into 3MT of larvae and 2MT of fertilizer per day. Chanzi sells whole dried BSF larvae, ground BSF larvae and organic fertilizer to its customers.
From an environmental perspective, a single Chanzi site is avoiding producing 0.4 MT of methane per day and 9.4 MT of CO2 per day, all of which is equivalent to taking 642 cars off the road or planting 49K fully grown trees annually. When comparing BSF production to soya farming, BSF farming demands significantly less land than soya farming to produce an equivalent amount of protein per year.
Through the waste management side of Chanzi’s business, the company reduces the strain on local landfill infrastructure. Chanzi provides smallholder farmers with extra income opportunities for their spoiled crops in addition to collecting waste from local markets for free and from their network of registered waste aggregation agents who they pay by volume for delivery to factory gate. Chanzi further sees an opportunity to source for brewer spent grain and waste from a local breweries in Tanzania. The spent grain will be combined with organic food waste from the community to provide a better-quality feed for the BSF.
Partnerships for Scale
Back in June 2022, Chanzi won the Better World award through the 100+ Accelerator program (an accelerator managed by AB InBev, Unilever, Colgate-Palmolive and Coca-Cola) which provided the company with grant funding and an opportunity to partner with the consortium to scale. To start, Chanzi constructed a new facility outside of Dar es Salaam where one of AB InBev’s brewery is located to sustainably and cost-effectively offtake their brewery waste. Chanzi has future plans to work with other members of the program to cost-share the construction of waste processing facilities alongside their operations and provide Chanzi with the feedstock it needs to scale production.
In 2022 Chanzi received significant grant funding from the Dutch Fund for Climate and Development (DFCD). This funding will enable Chanzi to conduct a detailed feasibility study to determine carbon offsets from production, ability to trade carbon credits and additional R&D for Chanzi. One area of R&D is to test out whether product contaminated with aflatoxin can be fed to BSF without the contaminants being passed through the food chain which would be a strong revelation from a food waste perspective given that aflatoxin is a huge problem with maize in the region, causing substantial food waste and health risks for consumers. The funding will also include training workshops for local waste aggregators and smallholder farmer support projects.
Chanzi’s Bottom Line
What we liked about Chanzi is that they take an extremely localized approach in both waste collection and product sales to reduce unnecessary operational and logistics costs. Chanzi is able to produce insect protein at $1.90 per kg, compared to fishmeal which costs $4.30 per kg and soybean meal which costs $2.20 per kg. Additionally, the Chanzi production model has found a blend of mechanization and labor-intensive production that contributes to greater employment opportunities in Tanzania and beyond, while embedding themselves in the local waste management and agro-input ecosystems.
Chanzi still has lots of room to grow. Feed production for both aquaculture and meat livestock is growing rapidly across East Africa. There is a 1.5 million MT annual chicken feed demand in Tanzania alone. The global black soldier fly market is expected to reach $3.4B by 2030 with a CAGR of 34.7 percent from 2020 to 2030. FINCA Ventures is excited to be partnering with Chanzi to capture this market opportunity, reduce CO2 and methane emissions one city at a time through innovative food waste processing techniques, and provide more affordable feed solutions to smallholder farmers across East Africa.