Download Theory of Change

Together Egypt Association
-- Business Plan -Mr. Sameh Seif Ghali
September 30,2010
Executive summary
Together Egypt (TE) intends to provide rural Egyptian villages with affordable, low-tech water
sanitation systems which can be sourced and built locally. Water sanitation systems are of major
importance in Egypt as most waste water in rural areas currently is not treated at all, thus polluting
ground water, causing health problems and contaminating food/crop. The technology of TE’s
sanitation system is proven and has already been implemented successfully in one Egyptian village.
Its main advantages are the technological simplicity resulting in high reliability, a lower investment
and usage cost compared to existing conventional systems, as well as in the possibility to source all
components locally and employ locals, such as unemployed youths. In many cases, only TE’s
affordable technology will enable rural villages to install a water sanitation system at all.
About 50% of the rural population in Egypt (47 million people) does not have access to improved
sewage systems. For most people in this group, the conventional water sanitation solution offered by
the government is too expensive (about $4.500.000 investment for a village of 10.000 people)
compared to TE’s water sanitation system ($800.000 investment). Furthermore, the user fees of the
governmental system are about 10 times higher than those of TE’s system ($10 vs. $1 for villages of
10.000 inhabitants). Market entry is planned to occur in several steps. After the successful
completion of a pilot project with one village, five villages will receive the new water sanitation
system. A detailed planning is already available for these five villages and is documented in this
business plan. The first treatment plant is planned to be fully operational in 2013.
The project team consists of highly experienced professionals. Mr. Sameh Seif Ghali, Together
Egypt’s Executive Director, holds a technical degree Beni-Suef University and has more than 15
years experience in successfully leading development projects all over Egypt. He has collected a
technically and economically knowledgeable staff for the water sanitation project which will enable
TE to successfully implement this business plan.
It is clear that the construction of the plant cannot be financed purely profit based from the user fees.
Thus, the construction cost has to be covered either by donations or by funding from for-profit as well
as not-for-profit investors.
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1.
Problem
1.1.
Emergence of the problem and outlook
Egypt’s main source of freshwater is the Nile River. The river supplies 56.8 billion m³ of freshwater
every year, which represents 97 % of all renewable water resources in Egypt. Average rainfall in
Egypt is estimated at 18 mm or 1.8 billion m³ per year. Furthermore, Egypt has four different
groundwater aquifers: the Nile Aquifer, the Nubian Sandstone Aquifer, the Moghra Aquifer and the
Coastal Aquifer.
These figures give the impression that Egypt is a water rich country and for the last 15 years, the
vast majority of villages in the Minya Governorate (Upper Egypt) have been gradually connected to
the drinking water network, leading to a significant increase of water consumption. While this has
been a generally pleasing development, the increasing supply of water unfortunately has not been
coupled with the necessary installation of related sanitation systems. This is because the high costs
for government-proposed sewage systems (up-front investment of roughly $450 per citizen) often
turn out to be too high for the small rural communities making up a majority of the Minya
Governorate. Furthermore, widespread poverty and low levels of education have often prevented the
rapid adoption of appropriate technologies through local initiatives or the private sector.
Going forward, the ministry's ten year development plan of 2010 continues to aim at delivering
drinking water to villages, but does not sufficiently focus on developing the corresponding sanitation
systems which are required. This is highly critical, because the free discharge of wastewater in
streets and canals brings about serious consequences for the communities, such as the pollution of
the ground and irrigation waters, damage to the foundations of buildings, and spread of harmful
insects. As a result the proliferation of diseases is fostered, the local economy is negatively impacted
(fewer days worked, bad harvests due to pollution) and social tensions among the villagers are
created. The low quality of life and deterioration of the environment in the majority of rural areas in
Egypt has also contributed to a loss of pride and sense of belonging to one's village and has
accelerated the rural exodus.
1.2.
The Minya Governorate
According to the United Nations Development Programme’s
Human Development Report 2010, Minya Governorate’s
population is 3.98 Million as of 2008, roughly one third of
which is 11 years of age or younger. The Governorate has 9
centers and consists of 359 villages and cities. Only 26 of
these communities have access to a governmental sanitation
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system, which includes systems belonging to the major cities. Liver and kidney diseases in rural
areas have reached up to 50% among men, with 60% typhoid epidemic among children between the
ages of 3 to 7.
1.3.
Proposed solution
Together Egypt is convinced that this problem can be solved with reasonable effort and capital,
because affordable and proven sanitation technologies exist. A solution using economical local
materials which can be easily implemented by a local workforce has already been tested by
Together Egypt in two villages. These pilot experiences have proven the workability and efficiency of
TE’s water treatment system as well as the very low cost of the system (up-front investment of $25
per citizen), especially compared to existing government solutions.
With such a water treatment system being operational in one or more villages, people’s health and
well-being will greatly improve as a result of better sanitation. Furthermore, jobs will be created for
operating and maintaining the system and awareness for environmental and health issues will be
raised. Moreover, as Together Egypt intends to place ownership of and responsibility for the system
within the local community, a sense of ownership and pride will be established.
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2.
Theory of Change
Together Egypt’s goal is to build liquid waste and used water treatment facilities, which are simple
and low-cost in their design, construction, operation and maintenance. These treatment facilities will
be a model for rural Egyptian communities in promoting better public health, environmentally friendly
sanitation, and local involvement.
As described in the previous section, the Egyptian government over the past fifteen years has
worked intensively to supply potable water to rural villages in the country. While this has resulted in
more than 98% of Egyptian villages having a potable water supply service, the progress is tempered
by a lack of sanitation facilities. As a result Egyptian rural villages suffer from ground water pollution,
sanitary health issues, and local conflicts arising because of improper disposal of wastewater.
With its waste water treatment technology, Together Egypt offers the following social benefits of an
investment in the company:

Improved public health in the local community, mainly because of the availability of better
sanitation and a safer water supply.

Lower costs for communities compared to government-proposed sewage systems that often
call for massive investments, thus increasing the likelihood that a community will actually be
able to develop a system that meets its inhabitants’ needs.

Unemployed village youths or other members of the community are trained to construct and
provide maintenance services for these systems, therefore generating local employment.

The increased availability of basic infrastructure reduces the pressure to migrate to urban
centers for inhabitants of rural areas, especially its younger population.

Further benefits include the ability to produce organic fertilizer and water suitable for
irrigation purposes
2.1.
Improved public health
According to the Egyptian Environmental Affairs Agency, Egypt is the second most polluted country
in the world, resulting in hotter weather, the spread of disease, and contaminated food, particularly
fish and vegetables and water. Furthermore, the low quality of life and deterioration of the
environment in the majority of rural areas in Egypt has contributed to a loss of pride and sense of
belonging to one's village. As mentioned in the description of the problem, poverty and low levels of
education have often prevented the introduction of technologies that could mitigate some of the
worst environmental health problems.
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One of the major causes for pollution is the absence of sewage systems in rural areas, which
account for 70 percent of the country's inhabited land. While sanitation and safe water supply are
considered the most important indicators of public health, prevailing government policies and public
attitudes have precluded rapid investment and amelioration of this situation. In a majority of villages,
sewage waste flows directly into simple holes in the ground without any means of preventing it from
leaching into groundwater used for drinking and other household and agricultural needs.
Only 29 percent of the rural population has access to piped water, compared to 82 percent of the
urban population. The United Nations Development Programme reports that 90 percent of rural
villages are not connected to sewage systems. A growing number of water-related diseases such as
diarrhea, schistosomiasis, intestinal parasites, lymphatic filariasis, and trachoma are responsible for
major health problems in the majority of rural areas and villages. Over the past five years, in the
Minya Governorate (specifically in the village El Ttafeekya) 150 people suffered from the typhoid
epidemic, as a result of the contaminated water tank in the village that took underground water
contaminated by unhealthy latrines.
The potential economic impact of water-related illnesses includes higher healthcare-related costs,
lost productivity in the work place and the home, and the opportunity costs of an individual’s lost time
and talents. With Together Egypt’s waste water treatment facility, the main and most obvious benefit
for communities is to have access to water and exposure to water sources (such as ponds and other
standing water) that have a significantly reduced level of harmful bacteria, thereby improving the
overall quality of life and decreasing healthcare costs.
2.2.
Low investment and operating costs
The current government structure is not designed to optimally support rural communities. In 2004,
the autonomous Holding Company for Drinking Water and Sanitation was established to include the
General Economic Authorities for Drinking Water and Sanitation operating in governorates. The
Holding Company, under the authority of the Ministry of Housing, is the sole agent concerned with
public sewage systems on the national scale, but it does not cover stand-alone technologies for
individual households in villages and rural areas. As a result, only large villages near an existing
urban sewage system currently benefit from the public sewage system and government expansion
plans. Also, the current design of the government's sewage system relies on pipes that are too large
for most narrow village streets and lanes and is too expensive to build given its reliance on imported
materials. The government's one-size fits all scheme simply does not fit the majority of rural
communities. Moreover, their large sewage systems do not have adequate provision for
maintenance, as a result of which they suffer from frequent breakdowns.
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There have been and continue to be dialogues between the government of Egypt and international
agencies such as USAID and the World Bank on water sanitation, mainly focusing on urban areas.
Some donors, like UNICEF, have invested in a number of pilot projects for rural water and sanitation,
yet no commitment has been given for a campaign or national scale program to improve sanitation
coverage for all segments of the population, including those living in rural areas. No civil society
group focuses exclusively on this objective and those who do provide water sanitation services often
lack community participation because of an insufficient understanding of the model within the
community. Because of this, the community does not undertake maintenance measures, resulting in
unsustainable systems.
With Together Egypt’s waste water treatment facilities, we can work with communities to provide
them with a waste water treatment solution that is reasonably priced (with the option of a costsharing agreement) and that is adapted to local requirements. Advantages of our systems include
minimal land requirement, lower capital investment and maintenance cost compared to traditional
technology, good pathogen removal from die-off and natural biological processes, and lower energy
usage because we use gravity feed.
2.3.
Create local job opportunities
By building this system with local materials and operating with people that live in the villages
(specifically unemployed youths), Together Egypt generates wages and creates jobs in these
villages that would not otherwise exist. Each village is expected to have five people that are trained
to maintain the water treatment facility, with additional jobs being available during the construction
phase.
2.4.
Further benefits
Together Egypt has also developed and modified models for stables and barns to treat domestic
waste, animal dung, and agricultural waste. In conjunction with this project, farmers were taught how
to treat the sludge by composting it, with agriculture. The output of the treatment plant can be used
as an organic fertilizer after being mixed with the agricultural waste and stored for one month. The
number of stables implementing the model increased from 3 to 500 in the village where TE
undertook its pilot project. The sludge produced by our wastewater treatment plants, is safe to use
as a fertilizer after composting, as there are no heavy metals in the product.
2.5.
Inputs / Activities / Outputs / Outcome
Inputs

Smart sanitation system for villages in small governorate
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
Staff team the technicians and administrators

Land licenses needed from government institutions

Funding
Activities

Awareness campaign

In Kind and/or Cash contribution campaign

Full survey for the village's street and open spaces

Construction of the collection system and pump station

Training, i.e. operating and maintaining the sanitation system
Outputs

Superior and affordable water sanitation system

Improved public health

Village employment

Cheaper source of organic fertilizers

Establishment of a local NGO that will be responsible for the community to collect fees,
operate and maintain the system
Outcome

Improved health

Increased productivity

Cleaner environment

Cheaper water treatment fees (vis-à-vis current setup or government proposed system) for
the community

Self-sufficiency

Empowerment

Convenience
2.6.
Tracking progress toward social outcomes
Together Egypt is in a strong position to monitor the social impact of its activities to the community
as the scope and the diversity of the company’s footprint is focused on a per community basis, which
can be easily overseen. As discussed above, the main benefits of our water treatment system are
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improved public health from cleaner environment and lower cost for the community compared to a
current setup (if existing) or government proposed water treatment system.
Improved public health can be measured by analyzing hospital and other medical records, especially
the number of diagnoses of illnesses caused by water-related diseases. Because we expect that a
significant number of cases would go unreported, sick days related to water-borne illnesses in local
businesses and the number of days of school absences can be used as a substitute or additional
way to track progress in public health.
In terms of measuring the cost benefit of communities, the analysis is quite straightforward
distinguishing between the initial investment and the running cost of the system. Government
designed water treatment systems in urban areas demand c. $4.500.000 as an initial investment
(excluding the connection of individual households to the system). Each household is expected to
pay about $10 per month (as of 2010) in operational fees. Together Egypt’s system requires an initial
investment of only c. $800.000 for each village with members of the community making cash or inkind contributions. Furthermore, each household will only need to contribute roughly $1 per month to
cover running costs. As can be seen, our system cost about 5 percent of government technology.
Compared to the current setup, the savings from our proposed water treatment system will mainly be
reflected in lower healthcare costs and improved productivity.
In the two communities of our pilot project we aimed to achieve the mission set forth at the beginning
of this section:
Building a waste water treatment facility, simple and low-cost in its design,
construction, operation and maintenance, to serve as a model for rural Egyptian
communities, promoting the health of the public and the environment.
Within the two villages, we were able to:

Raise community-wide awareness of the project, its components, its importance to public
health and the environment, and the need for universal support for its success.

Encourage members of the community to contribute to the project implementation in cash
and kind.

Train village youths, favoring those who are unemployed, in the operation and maintenance
of the system.

Form a local committee responsible for follow-up of management arrangements.
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We are currently in the process of measuring the social benefit that accrues from our water treatment
system. We also acknowledge that further development of metrics and tools, given that for example
hospital or clinic data is not widely available, is essential as we seek to assess how we can improve
our impact, and measure the full extent of the benefits that our water treatment system is able to
provide to the community. This information will definitely help us convince communities to migrate to
our waste water treatment system.
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3.
Solution
By introducing low-cost sewage systems as described in detail in the following sections to rural
communities, Together Egypt is able to offer its customers the ability to mitigate the problems
described above and is able to achieve the goals set forth in the Theory of Change section of this
business plan.
3.1.
Targeted customer group & stakeholders
Potential direct customers of Together Egypt are individual households in villages and small towns in
rural regions of the country. Egypt’s population amounts to roughly 83 million people, 57 percent of
which (47 million) live in rural areas. 10.8 million of the rural population lives in poverty and while 98
percent have access to an improved source of water, only 52 percent have access to improved
sanitation facilities According to the United Nations’ International Fund for Agricultural Development,
the majority of the rural population lives in Upper Egypt (where Minya Governorate is located), where
there is an increased poverty rate and poorer access to safe water and sanitation compared to the
national average.
Furthermore, in a majority of villages sewage is presently disposed of by directing the water directly
into simple holes in the ground. As a consequence, sewage waste can pollute the groundwater,
which is used for drinking, other household needs, and agricultural purposes, resulting in a lack of
hygienic living conditions. Despite these deficiencies, government investment plans in the next
decade will likely focus on larger communities in more urbanized areas (as discussed in the previous
sections).
As a result of these issues and based on our experiences with first implementations of our system,
we are convinced that the targeted households should be very receptive to the idea of employing our
solution, which offers them access to a very affordable sewage system that would greatly increase
their quality of life. Important factors to consider when analyzing the potential target group in an
individual rural community are the size and layout of the village, the households’ current investments
in sewage and sanitation systems (if existing, often stand-alone septic tanks), and the citizens’ needs
and preferences with regard to water disposal.
Further major stakeholders impacted by our solution are rural communities as a collective, through
local governments as well as community development associations (CDAs). These stakeholders
have the opportunity to benefit from an overall improvement in living conditions for their citizens as
well as from employment and community involvement generated by operating and maintaining our
business model.
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3.2.
Business & service model
Basic Components of the System
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
Individual households are connected to a gravity pipe system via pipes, allowing them to
dispose wastewater directly from the house into the collection.

Gravity Pipe System: a system of pipes which is implemented in the streets in order to
collect the wastewater from connected households.

Lift Station: concrete underground sumps that are used in order to collect wastewater from
the gravity pipes and pump it to the wastewater treatment plant.

Force Main: pipes that deliver the collected wastewater from the lift station to the treatment
plant.

Treatment Plant: The treatment plant is able to purify wastewater to a point where it can be
reused for agricultural purposes such as irrigation. It consists of an anaerobic bacteria
treatment chamber, an aerated weir, an air injection compressor, and a gravel bed planted
with local cane. Treating the sewage with naturally generated anaerobic bacteria, filtered
water is directed into a gravity-fed sequence of three shallow ponds for solar treatment and
can finally be drained into an irrigation feeder line to be reused.
3.3.
Implementation and installation
To begin the implementation of our business model, the installation of the sewage system must first
be planned and then executed. This includes the basic tasks of establishing a project organization
and an implementation team. Furthermore, the foundation for generating revenue and future growth
potential is laid at this stage of the operation.
Growth & Revenue
Project Organization
Human Capital
Achieve growth by
multiplication
Agree on and execute
implementation plan
Appoint implementation
supervisor
Ensure future
revenue stream
Develop individual
solution
Provide engineering
consultants
Establish community
support
Identify local needs
Recruit local
team members
Local Awareness & Involvement
Local Governments, CDAs, Individual Citizens and Households
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The foundation: local Awareness & involvement
By raising awareness among the affected rural population, support for the installation of our sewage
treatment system can be gathered, while the number of potential future customers can be estimated.
Involvement of local residents at this early stage of the project is essential, because a key element of
the strategy is to develop individual solutions based on the community’s needs. This approach is
preferred over applying generic models taken from research centers and text books, because such
models are much less suited to the individual situation of a community.
Human capital: recruit local team members and provide expert support
During this early stage of the operation the implementation team is formed. This team includes a
group of locals (usually 5 people) which are recruited and trained to actively implement the system.
Furthermore, competent engineering consultants must be engaged to assist in preparing tender
documents, including technical specifications of the project and qualifications of bidders. Engineering
consultant will be hired for system design (collection, lift station, treatment plant and preparation of
tender documents, later supervising and quality assurance of construction). Finally, a supervising
engineer must be appointed, responsible for monitoring the quality of the on-site implementation and
village youth (especially those currently unemployed) can be trained to work on operating and
maintaining the system once implementation is complete.
Project organization: developing and implementing and individual solution
The team surveys the community to determine the locations of lift stations within the village and of
the treatment plan on its edge. It also draws up technical plans and specifications as well as
timetables and milestones on which the implementation process can be based. During this process
the cooperation of local team members and external advisors allows for a powerful combination of
detailed knowledge about the community, especially its needs and specific frame conditions, with
expert technical knowledge and experience. The following detailed activity plan outlines the key
activities that will be carried out in order to successfully implement the solution developed by our
team.
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Detailed Activity Plan and Timeframe of the Implementation Process
Timeline (quarters)
Activity
Q1
Q2
Q3
Q4
Q5
Q6
Q7
Q8
Raise community awareness
Explain the importance and benefits of the project
Motivate entire community to contribute in kind or cash
to the establishment of a sanitation system
Form committee in the community and train members to
keep awareness and monitor progress
Survey village street layout and number of homes to
select sites for lift stations and treatment plant
Engage experienced engineering consultants to prepare
tender documents and explain the work to be carried out
Construction of collection system and pump station.
Employ supervising engineer to monitor implementation
Construction of wastewater treatment plant. Employ
supervising engineer to monitor implementation
Train selected group of local youth to be part of
operating and maintenance crew of the system
Prepare to operate system by determining ownership
model and agreeing on monthly operating fees
The fee will be taken from the community after the
project has completed all its phases, by then all houses
will be connected to the lifting station. There is no
additional cost to the beneficiary.
3.4.
Transitioning from implementation to continued operation
Establishing an organizational structure
Together Egypt believes that there are two options in order to sustain operation and maintenance of
the system, once it has been installed completely:

By establishing an independent committee or NGO which is rooted in and controlled by the
local community. Its responsibilities include operating and maintaining the system as well as
generating revenue by collecting the previously agreed-on monthly operating fees.
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
By turning over control of the system to the local government (for example in form of a water
and waste management holding company), which would be in charge of operation and
maintenance as well as fee collection.
Together Egypt highly encourages employing the first option, as we are convinced that this would
create a stronger, more direct community involvement and greater sense of ownership among the
local population. As has been previously outlined, this is key element in Together Egypt’s strategy
and essential to the success of our business model.
3.5.
Organizational structure
Executive Director (Sameh Seif Ghali)

Direct contact with donors.

Preparing quarterly and semi annual reports.

Approving field reports and financial reports with the financial manager.

Defining the general work strategies for the whole project.

Coordination with the governmental concerned sides to facilitate the implementation
procedures.

Monitoring the project administrative team and the work system.

Monitoring the project time frame, the achievements and handling implementation obstacles.

Salary : $ 18.000 / year
Financial and Administrative Manager (Ayman Thabet)

Preparing and reviewing the financial reports.

Monitoring the project accountant and his performance

Monitoring project expenses according to the approved budget and time frame.

Attending the meetings for the donor auditing and implementing recommendations.

Monitoring the partner CDAs in the project

Salary : half- time – $ 8500 / year
Project Manager (Noshi Zaki Ibrahem)

Overseeing operation and reporting to the overseeing board (as established through one of
the two options listed above) on a regular basis
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
Responsible for the operational and construction plans of the project

Responsible for the team, their plans, and the quality of work performance

Prepares management reports, timetables and stages of progress

Responsible for the community capacity building and the local contributions

Coordination of all governmental measures

Salary: $ 10.800 / year
Operations team / General Coordinator (Sami Mahrous)

Operating the sewage treatment plant and ensuring that the quality of treated water is
compliant with requirements to be reused for irrigation

Working on all phases of implementing the project with the consultants

Responsible for the general contracting and the implementation with the contractors

Responsible for the maintenance

Report to Project Manager through all phases in the project

Salary : $ 4800 / year
Operations team / Consultant Engineer part time (Anwar Manaf)

Preparation of the engineering structure designs

Preparation for the conditions of TORs of tenders

supervision on technical implementation of Engineers

Training of the administrative structure of the project

Salary: $ 6000 / year
Operations team /Engineering full time: (Mohamed Barakat)

Responsible for overseeing the engineering implementation of the contractors

Responsible for the training of the officials maintenance

Responsible for testing all the implementation phases of the project

Responsible for testing all the implementation phases of the project

Responsible for the follow-up of all the quality activities of the implementation in the project

Responsible for the project’s supervision of all operational phases
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
Responsible for reviewing all the project’s down payments

The Salary: $ 12.000 / year
Administration Accountant (Emad Atta Saed)

Operate billing system to collect monthly fees from participating household and ensure
payments are accurate and timely

Responsible for the accounts of the contractors in the filed

Responsible for the public tenders of the project

Responsible for the warehouse and storage supervision

Responsible for the disbursement of all administrative structures’ salaries

Responsible for the administrative bodies

Salary : $ 4800 / year
Maintenance team: (Mostafa Ragab -Khaled Saad - Hamada Mohamed)

Ensure that the system remains in good technical condition and is fully operational at all
times

Responsible for the periodic maintenance of the treatment plant

Responsible for the cleanliness of all lines on the streets

Responsible for any blockage occurs for Lines

Responsible for the operation of the lifting station and treatment plant

Responsible for the cleanliness of the lines

Salary : $ 2400 / year
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3.6.
Generating a continuous revenue stream
Towards the end of the planning stage, a monthly operating fee which is to be paid by each
participating household is agreed on with the community members. This fee must be sufficient to
cover the running costs outlined above. Consequently a system of fee collection must be
established. Responsibility and accountability for the fee collection lie with the operating manager
who is supported by the accounting/administration staff. The operating manager will provide regular
reports to the local overseeing committee about the development of revenues, including the
timeliness of payments, the addition of new households, and the sufficiency of revenues to cover
costs.
Together association will be responsible for sustainability and the monthly fees that will be collected
from each family, and will be responsible for supervision, payment of wages and the payment of
monthly maintenance fees. Together Egypt’s experiences show that in a village of approximately
10.000 people, a fee of $1 per household and month is sufficient to cover running costs.
3.7.
Growth Opportunities
Working together with CDAs and local governments has proven to be an effective way to achieve a
high level of local involvement and establish a network of support. In addition, these channels can be
used to generate interest in other communities, therefore enabling an expansion of the business
beyond organic growth from adding subscribers within a single community. Growth is therefore
achieved by sharing experiences, providing proof of successful implementation, and enabling other
communities to establish their own operation by implementing our business plan as described above.
Our previous successes furthermore show that the inclusion of local citizens during all stages of the
operation leads to further multiplying effects via word-of-mouth and helps to generate a sense of
ownership within the community that can lead to support through funding as well as the provision of
manpower during the implementation process.
3.8.
Social value created
This project generates high social impact in Egypt and at all possible application sites. It will improve
the well-being of villagers through better collection and treatment of wastewater, it helps sustain local
business and workers opposed to buying pre-installed, complicated foreign technology, and it spurs
local economic growth through helping small enterprises.
Social value is created with this project through several means:

Whereas conventional project have been envisaged, the new water treatment technology
promises substantial savings in investment which then can be used for other projects

Similarly, the cost for operation and maintenance is much lower with the new technology,
leading to lower fees for the users

Conventional treatment technologies usually are delivered from a foreign supplier, local
value is low the new technology is mainly made out of local supplies and thus generates
value for local suppliers and workers and thus helps increasing their incomes

The new technology permits water treatment also to those villages which otherwise could not
have installed any treatment technology

Where the new treatment is going to be installed the better water quality and hygiene
standards will lead to lower sickness rates, medical treatments and to overall better health of
the villagers (hard to quantify obviously). This again leads to improved lives of children,
increasing future incomes of them

Lower energy usage: lower energy costs than with tradition installations, again leading to
lower user fees

The better cleaned waste water helps lowering cost for water plants to produce drinking
water

Altogether these cash flows can be combined to a “social cash flow” which then has to be
discounted to know value generated today
Social cash flows planned
2011
2012
2013
2014
Installed base: savings
$ 3.700.000 savings
against conventional
($ 4.500.000-
installations
$800.000)
Smaller fees for users
$90.000 savings
$90.000 savings
$90.000 savings
$90.000 savings
compared to conventional
(10.000 users x $9
(10.000 users x $9
(10.000 users x $9
(10.000 users x $9
installations
savings)
savings)
savings)
savings)
Avoidance of illnesses
$20.000 less
$20.000 less
$20.000 less
$20.000 less
and treatments from
treatment cost (20% treatment cost (20% treatment cost (20%
treatment cost (20%
uncleared water
of 10.000 x $10 per
of 10.000 x $10 per
of 10.000 x $10 per
of 10.000 x $10 per
villager)
villager)
villager)
villager)
$ 67.300 salaries
$ 67.300 salaries
$ 67.300 salaries
$ 67.300 salaries
$3.877.300
$177.300
$177.300
$177.300
Local earnings for
suppliers and workers
Total social cash flows
20
In addition, there will be non-quantifiable social benefits.

Improved health of the villagers: the general well-being of the villagers is improved through
the new technology

Environmental impact: waste water in many cases was just spilled somewhere and then
ultimately went into a river and wasted it, now many villages will be able to treat their waste
water

Less land usage than traditional installations

Harmonious appearance, part of the landscape, no big technological installations necessary

Changing behavior of villagers: the new treatment technology is less expensive and intrusive
than traditional installations, more villagers will be willing to use it and change their waste
water behavior
The computation of the social cash flows assumes that a conventional plant would be built at all, with
enough money provided. Social cash flows realized should be checked for example by looking at
treatment installations planned and realized, or at fees planned and realized etc., at a later stage.
21
4.
Competition
4.1.
Other existing solutions
Alternatively to our solution farmer’s septic tanks can be used for disposal of waste water, however
this method does not integrate the whole community and is more expensive.
4.2.
Other service providers or competitors
Egypt had more than 200 wastewater treatment plants in 2004. The capacity of Egypt's wastewater
treatment plants was about 11 MCM per day, serving approximately 18 million people. The number
has increased 10 times within the last 20 years.
The Ministry of Housing, Utilities and Urban Communities (MHUUC) is controlling several
organizations which are operating and maintaining water supply and sanitation. Furthermore, it
provides technical support directly and indirectly through National Organizations for Potable Water
and Sanitary Drainage. The MHUUC is controlling two organizations in Egypt which are responsible
for operation and management.
The Holding Company for Water and Wastewater, which was created in 2004, holds 14 companies
that operate water and sewer systems. The two largest cities, Cairo and Alexandria, have separate
companies in charge of water supply on the one hand and sanitary drainage on the other, with a total
of 4 companies. 10 other cities or governorates - Aswan, Minia, Beni Suef Fayoum, Dakahlia,
Gharbia, Sharkia, Beheira Governorate, Kafr El Sheikh and Damietta - each have a joint water and
sewer company as a service provider. However, investment activities - planning, procurement and
supervison of works - are the responsibility of separate entities, notably the Cairo and Alexandria
Potable Water Organisation (CAPWO) and the National Organisation for Potable Water and Sanitary
Drainage (NOPWASD) for the rest of the urban areas excluding new communities. In the latter, the
New Urban Communities Authority is responsible for utility investments, operation and management.
The Egyptian government is supporting private sector participation. One aim of creating the Holding
Company was to privatize the sub organisations at the long term. Reasons for the involvement of
private actors are the mobilization of financing as well as the improvement of water management and
water services.
In some cases, the private sector already fulfills certain service provision functions beyond
construction and consulting through public-private partnerships (PPP). For example, in Cairo, Suez
and Ismailia a private company has been engaged to inspect water and wastewater networks,
reduce leakage and install water meters. Moreover, there are build-operate-transfer (BOT) for
22
wastewater facilities in Gabal el Asfar and Tanta.[19] BOT contracts for two large wastewater
treatment plants were in the tender process in May 2010: The1.2 million cubic meter/day Abu
Rawash plant (upgrade to secondary treatment) and the New Cairo plant. A new PPP law is
expected to be passed in 2010, modernizing the legal framework for the procurement of such
projects
4.3.
Specificities of Together Egypt’s business model

Minimal land requirement

Harmonious with nature in appearance and dynamics

Proven technology

Cost of operation and maintenance lower than traditional technology

Good pathogen removal from die-off and natural biological processes

Effective with a wide range of water plants

High levels of treatment possible by increasing planted area

Uses gravity feed to reduce use of energy

Low capital investment (typically 5% of traditional technology)
23
5.
Financial Plan
Together Egypt’s business model, whereby service fees charge to the community is based on
marginal cost of operating the water treatment plant, will result in a break-even financial scenario. In
the next section, we will discuss in detail our assumptions on which our forward-looking financial
statements are based. To properly analyze Together Egypt’s financials, we decided to present
separately the financial statements of the central office and of the water treatment plant. In doing so,
we can provide true financial insights as to the economics of operating a water treatment plant.
5.1.
Assumptions
Timing of Construction and Operation
Timeline
2011E
2012E
2013E
2014E
2015E
Construction of the 1st
treatment plant for 5 villages
1st treatment plant in operation
Construction of the 2nd and
3rd treatment plants for 10
villages
We assume that it takes about two years to construct a water treatment plant. Hence, cash inflow
will only be reflected in the financials during the third year. For this business plan, we expect to have
one water treatment plant to become operational in 2013. Two new plants will be constructed from
2014 to 2015.
Pricing
Our current pricing strategy is to charge per household at US$ 1.2 per month. This fee was agreed
on by the core team based on the study we made as to how much the local villagers would be willing
to pay for this service. Essentially, this rate is the marginal cost of maintaining and operating the
water treatment plant. Small, rural villages in Egypt usually comprise about 4,600 people. A typical
household in Egypt constitutes about 6 people. Thereby, a rural village has about 750 households.
This forms the basis of our revenue calculation. Every year, once the plant becomes operational, we
will recognize about LE 0.06M every year for each water treatment plant. As can be inferred above,
further research on our pricing strategy is still needed by ensuring that the true benefit that we
provide to these communities is partly captured in the fees.
24
Water Treatment Plant
Initially, the sources of funds for a single water treatment plant will mainly come from foundations,
both local and foreign, and donations from the community. Based on our calculation, donation from
these groups would total about LE 5.0m, enough to cover the costs of constructing the water
treatment plant (e.g. pump, collection and waste water treatment plant systems). As the construction
period will run over two years, only LE 2.5m will be spent in each year. In addition to construction
costs, operating and maintenance costs are also reflected in the Water Treatment Plant Financials.
Central Office / Headquarter
Central office costs primarily relate to the salaries of Together Egypt’s core team. This includes
administrative, travel and rental expenses. Based on our assumptions, we expect central office
costs to have a running rate of about LE 0.3m every year.
Operating Performance
As mentioned above, we have split the presentation of the financials to central office and water
treatment plants so we can analyze in isolation the true financial performance of operating a water
treatment plant.
As it stands, the water treatment plant, given conservative pricing assumptions, is breaking-even.
When we consider central costs, operating performance for the whole Together Egypt is negative,
primarily driven by central office costs as these costs have not been included in charging the local
villagers.
Cash flow
The donations amounting to about LE 5.0m will be used up during the span of two years for
constructing the water treatment plant. Marginal pricing to end consumers will only allow Together
Egypt to pay for the operating and maintenance of the water treatment plant. Hence, central office
costs, such as administrative expenses, will also be dependent on donations as well.
Challenges and Opportunities
In this business plan, we are aware that significant savings or economic benefits will be realized from
economies of scale and from learning on how to be more cost effective in constructing water
treatment plants. However, quantifying and determining when we will accrue this is challenging and
thereby we decided not to include these in our financials.
25
5.2.
Detailed Financial Plan
Plant
Assumptions of the Financial Plan
Revenue
Donations
Donations of foundation for financing the
construction of the Sanitation plant of (ElSadaisa- Katrena – Ragy El-Ghrbia) El4.724.512 L.E.
Fashn (Ragy El-Sharkia) Beba
6,7
Annual fee increase
4%
Number of household
750
households
Current population of the 5 villages
4600
people
Number of people per household
Donation of Foundations for financing the
8.869.024 L.E.
construction of the 2nd and 3rd plants
Donations directly received by Together
Egypt to cover part of HQ costs
296.000
Materials
L.E.
-111.900 L.E. / year
Executive director
-50.400
L.E. / year
Finance and Administrative Manager
-36.000
L.E. / year
Driver
-15.000
L.E. / year
Secretary
-6.000
L.E. / year
Office boy
-4.500
L.E. / year
Annual salary increases
-12.000
L.E. / year
-4.000
L.E. / year
Maintenance and cleaning of the treatment plant
-4.800
L.E. / year
Cleaning tools
-2.000
L.E. / year
Other
-1.200
L.E. / year
Salaries
-41.400
Salary of each maintenance employee
Number of maintenance employees
Annual salary increases
Training and Awareness Activities
-13.800
L.E. / year
3
4%
-20.000
L.E. / year
4%
-74.595
L.E. / year
Operations (=construction)
Communication equipment & fees, bank
expenses, office supplies,…
-74.595
L.E. / year
Total cost of construction of the
Sanitation plant (w/o HQ salaries)
Other Operating Expenses
people /
household
Maintenance of the lifting station
Travel Expenses
Real Estate Expenses (Rent)
6,1
COGS
Headquarters
HQ Salaries
L.E. / per
month /
Fee per household
-31.081
L.E. / year
2%
% of Staff
Costs
-4.323.117 L.E. / plant
Land
-248.649
L.E. / plant
Pump Stations
-822.613
L.E. / plant
-1.771.622
L.E. / plant
Sanitation Plant
-984.234
L.E. / plant
Project manager's salary
-132.000
L.E. / plant
Site engineer's salary
-120.000
L.E. / plant
Consultant engineer's salary
-72.000
L.E. / plant
Site coordinator's salary
-48.000
L.E. / plant
Accountant's salary
-54.000
L.E. / plant
Travel expenses
Documentation
-20.000
-50.000
L.E. / plant
L.E. / plant
Collection System
Duration of the construction
2
Annual cost of construction of the
sanitation plant
-2.161.559
years
L.E. / plant /
year
Depreciation / Capital Expenditures
Total amount to be depreciated
-40.000
L.E.
Two pumps for the lifting station
-40.000
L.E.
One pump for the treatment plant
-4.000
L.E.
Operator panel for the lifting station
-5.000
L.E.
Electric switch board
-2.000
L.E.
Gravels and Plants
-5.000
L.E.
Other
-7.000
L.E.
15
-6.867
years
Depreciation duration
Annual depreciation
26
-103.000 L.E.
Two air compressors
L.E. / year
Project of construction of 3 sanitation plants over a 5-year period (HQ + 3 plants)
Timeline
2011E
2012E
2013E
2014E
2015E
Construction of the 1st
treatment plant for 5 villages
1st treatment plant in operation
Construction of the 2nd and
3rd treatment plants for 10
villages
Income (P&L) Statement
REVENUE
Operating Revenue
2011E
2012E
Total Revenue
COGS
Operating Costs
Maintenance Costs
Salaries
Material
Training and Awereness Activities
-20.000
-20.000
2013E
60.300
2014E
62.712
2015E
65.220
60.300
62.712
65.220
-53.400
-53.400
-41.400
-12.000
-95.056
-55.056
-43.056
-12.000
-40.000
-96.778
-56.778
-44.778
-12.000
-40.000
-20.000
-20.000
Total COGS
-20.000
-20.000
-53.400
-95.056
-96.778
GROSS PROFIT
Operating Revenue
Other Revenue
-20.000
-20.000
6.900
-32.344
-31.558
Gross Profit
-20.000
-20.000
6.900
-32.344
-31.558
Operating Expenses
Operating Expenses Total
Administrative Expenses
Salaries
Travel Expenses
Communication equipment & fees, bank expenses, office supplies,…
Real Estate Expenses (Rent)
Other Operating Expenses
-294.408
-261.089
-111.900
-74.595
-74.595
-31.081
-2.238
-298.884
-265.565
-116.376
-74.595
-74.595
-31.081
-2.238
-303.539
-270.220
-121.031
-74.595
-74.595
-31.081
-2.238
-308.381
-275.061
-125.872
-74.595
-74.595
-31.081
-2.238
-313.415
-280.096
-130.907
-74.595
-74.595
-31.081
-2.238
EBITDA
-314.408
-318.884
-296.639
-340.725
-344.973
-6.867
-6.867
-6.867
-6.867
-6.867
-6.867
Depreciation & Ammortization
Depreciation & Ammortization Total
Depreciation on PPE & Intangible Assets
EBIT
Interest & Taxes
Interest, net
Taxes
-314.408
-318.884
-303.506
-347.591
-351.840
-314.408
-318.884
-303.506
-347.591
-351.840
Tax Rate
Earnings (Net Income)
27
Project of construction of 3 sanitation plants over a 5-year period (HQ + 3 plants)
Timeline
2011E
2012E
2013E
2014E
2015E
Construction of the 1st
treatment plant for 5 villages
1st treatment plant in operation
Construction of the 2nd and
3rd treatment plants for 10
villages
Cash Flow
Operating Cash Flow
Net Income
+ Depreciation/Amortization
Change in Net Working Capital
Cash Flow from Operating Activities
2011E
-314.408
2012E
-318.884
2013E
-303.506
6.867
2014E
-347.591
6.867
2015E
-351.840
6.867
-314.408
-318.884
-296.639
-340.725
-344.973
-2.161.559
-2.161.559
-6.867
-4.329.984
-4.329.984
-2.161.559
-2.161.559
-6.867
-4.329.984
-4.329.984
296.000
9.349.024
Cash Flow from Investing
- Ch. Financial Assets
- Capital Expenditure
Cash Flow from Investing Activities
Cash Flow from Financing
Liabibilites (Debt)
Equity
4.964.512
Donation of Foundations for financing the
construction of the 1st plant
Contribution of the villagers to buy the land for the
1st plant
4.724.512
240.000
Donation of Foundations for financing the
construction of the 2nd and 3rd plants
8.869.024
Contribution of the villagers to buy the lands for the
2nd and 3rd plants
480.000
Additonal donations necessary to cover HQ costs in
2013 (or staffing on other Together Egypt's
projects)
296.000
Cash Flow from Financing Activities (Cashflow aus Finanzierungstätigkeit)
4.964.512
Net Cash Flow
2.488.545
2.488.545
2.488.545
Cash Position
Beginning period
Changes
Ending Balance
28
296.000
9.349.024
-2.480.443
-7.506
4.678.316
-4.674.957
2.488.545
-2.480.443
8.102
8.102
-7.506
596
596
4.678.316
4.678.912
4.678.912
-4.674.957
3.955
One sanitation Plant (5 villages without Headquarters)
Timeline
2011E
2012E
2013E
2014E
2015E
Construction of the 1st
treatment plant for 5 villages
1st treatment plant in operation
Income (P&L) Statement
REVENUE
Operating Revenue
2011E
Total Revenue
0
2012E
0
2013E
60.300
2014E
62.712
2015E
65.220
0
0
60.300
62.712
65.220
Costs of Service
Operating Costs
Maintenance Costs
Salaries
Material
Training and Awereness Activities
-20.000
0
0
0
-20.000
-20.000
0
0
0
-20.000
-53.400
-53.400
-41.400
-12.000
0
-55.056
-55.056
-43.056
-12.000
0
-56.778
-56.778
-44.778
-12.000
0
Total Costs of Service
-20.000
-20.000
-53.400
-55.056
-56.778
Operating Expenses
Operating Expenses Total
EBITDA
Depreciation & Ammortization
Depreciation & Ammortization Total
Depreciation on PPE
EBIT
Interest & Taxes
Interest, net
Taxes
Tax Rate 0%
Earnings (Net Income)
0
0
0
0
0
-20.000
-20.000
6.900
7.656
8.442
0
0
0
0
-6.867
-6.867
-6.867
-6.867
-6.867
-6.867
-20.000
-20.000
33
789
1.576
0
0
0
0
0
0
0
0
0
0
-20.000
-20.000
33
789
1.576
2011E
-20.000
0
0
2012E
-20.000
0
0
33
6.867
0
789
6.867
0
2015E
1.576
6.867
0
-20.000
-20.000
6.900
7.656
8.442
0
-2.161.559
0
-2.161.559
0
-6.867
0
-6.867
0
-6.867
-2.161.559
-2.161.559
-6.867
-6.867
-6.867
0
4.964.512
0
0
0
0
0
0
0
0
4.724.512
0
0
0
0
240.000
0
0
0
0
Cash Flow
Operating Cash Flow
Net Income
+ Depreciation/Amortization
Change in Net Working Capital
Cash Flow from Operating Activities
2013E
2014E
Cash Flow from Investing
- Ch. Financial Assets
- Capital Expenditure
Cash Flow from Investing Activities
Cash Flow from Financing
Liabibilites (Debt)
Equity
Donation of Foundations for financing
this specific project
Contribution of the villagers to buy the
land
Cash Flow from Financing Activities
4.964.512
0
0
0
0
Net Cash Flow
2.782.953
-2.181.559
33
789
1.576
0
2.782.953
2.782.953
2.782.953
-2.181.559
601.395
601.395
33
601.428
601.428
789
602.218
602.218
1.576
603.793
Cash Position
Beginning period
Changes
Ending Balance
29
Timeline
Headquarters Together Egypt
2011E
2012E
Construction of the 1st
treatment plant for 5 villages
2013E
2014E
2015E
1st treatment plant in operation
Construction of the 2nd and
3rd treatment plants for 10
villages
Income (P&L) Statement
REVENUE
Operating Revenue
2011E
2012E
2013E
2014E
2015E
0
0
0
0
0
Total Revenue
0
0
0
0
0
COGS
Operating Costs
0
0
0
0
0
Total COGS
0
0
0
0
0
-294.408
-261.089
-111.900
-74.595
-74.595
-31.081
-2.238
-298.884
-265.565
-116.376
-74.595
-74.595
-31.081
-2.238
-303.539
-270.220
-121.031
-74.595
-74.595
-31.081
-2.238
-308.381
-275.061
-125.872
-74.595
-74.595
-31.081
-2.238
-313.415
-280.096
-130.907
-74.595
-74.595
-31.081
-2.238
-294.408,3
-298.884,3
-303.539,3
-308.380,6
-313.415,4
0
0
0
0
0
0
0
0
0
0
-294.408
-298.884
-303.539
-308.381
-313.415
0
0
0
0
0
0
0
0
0
0
-294.408
-298.884
-303.539
-308.381
-313.415
2011E
-294.408
0
2012E
-298.884
0
2013E
-303.539
0
2014E
-308.381
0
2015E
-313.415
0
-294.408
-298.884
-303.539
-308.381
-313.415
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Operating Expenses
Operating Expenses Total
Administrative Expenses
Salaries
Travel Expenses
Communication equipment & fees, bank expenses, office supplies,…
Real Estate Expenses (Rent)
Other Operating Expenses
EBITDA
Depreciation & Ammortization
Depreciation & Ammortization Total
Depreciation on PPE & Intangible Assets
EBIT
Interest & Taxes
Interest, net
Taxes
Tax Rate 0%
Earnings (Net Income)
Cash Flow
Operating Cash Flow
Net Income
Change in Net Working Capital
Cash Flow from Operating Activities
Cash Flow from Investing
- Ch. Financial Assets
- Capital Expenditure
Cash Flow from Investing Activities
Cash Flow from Financing
Equity
Donations of foundations for financing
Together Egypt
Cash Flow from Financing Activities
Net Cash Flow
Cash Position
Beginning period
Changes
Ending Balance
30
296.000
0
0
0
0
0
-294.408
-298.884
-303.539
-308.381
-313.415
0
-294.408
-294.408
-294.408
-298.884
-593.293
-593.293
-303.539
-896.832
-896.832
-308.381
-1.205.212
-1.205.212
-313.415
-1.518.628