The Ethiopian entrepreneur who wants to disrupt the paper industry

How We Made it in Africa

During the first year of her studies at Addis Ababa University, Bethelhem Dejene Abebe visited the Atkilt Tera market, the biggest fruit and vegetable market in Ethiopia, with her mother. The conditions at the market shocked her enough to decide that waste management was what she wanted to commit her life to.

“It was surprisingly dirty, it smelled really bad. It really was not healthy,” she says. “It was at that moment that I decided that I should do something to try and make a difference.”

Bethelhem is co-founder and CEO of Zafree Papers, a company that is introducing a 100% tree-free paper pulp made from agricultural waste. Instead of using wood to create paper pulp, Zafree Papers’ process utilises wheat and barley straw, preventing smallholder farmers from burning this waste material that leads to air pollution. The company’s processing facility is currently being constructed in Debre Berhan, about 120km north-east of Ethiopia’s capital Addis Ababa.

In her own words, the road to where Zafree is today has not been easy. It has been tough. “I think I have lost count of how many times I have failed,” she says.

From concept to business plan

Since the visit to the market there have been a few attempts that did not reach the goals Bethelhem had in mind. “However, I believe that when one door closes, another opens. One failure leads to another success,” she says.

First, she only recycled the paper waste from her own household. Then she embarked on research on how to scale that recycling business to something more commercial. She eventually decided to move away from recycling, to producing wood-free paper pulp that could be provided to paper manufacturers, utilising agricultural waste without sacrificing the quality of the eventual end product.

Then came the knocking on doors. “I have knocked on all the doors,” she laughs. “We have more than 20 private banks in Ethiopia and I have been to all of them, knowing nothing, simply asking loans without having any collateral.”

She eventually got project finance from the Development Bank of Ethiopia and procured land in Debre Berhan’s industrial park. All that was required from her, was 25% equity. “I didn’t even know what an investor was at that stage,” she says.

Friends then recommended that Bethelhem enrol for an entrepreneurship training workshop offered by the Entrepreneurship Development Centre in Ethiopia. “This was a turning point for me. I learnt about entrepreneurship, I learnt the dos and don’ts and I met a lot of people that showed me the way to start my business and raise funds,” she says.

Soon thereafter, in 2018, Zafree Papers was selected as part of BlueMoon, an incubation programme for startups in Ethiopia. BlueMoon provided seed money and Zafree Papers was on its way.

And in 2019, Bethelhem was chosen for the Tony Elumelu Foundation Entrepreneurship Programme, landing $5,000 along with nine months of training and mentorship. She also received the Seedstars DOEN Land Restoration Prize of $10,000 in that same year.

Finding innovative funding solutions

The seed money from BlueMoon, the grants, personal finances as well as support from family and friends provided enough capital to get construction started on the processing plant.

“This money is covering our pre-operational activity and construction costs,” Bethelhem says. “It is a bit challenging when you are a startup as investors, especially local investors, want a majority share, which we did not want at this stage.”

Zafree Papers does have an international investor lined up for the machinery it requires, but as the final terms of the agreement are still being put in place, Bethelhem did not want to divulge too much.

Zafree Papers already has purchase commitments in place from various customers; some are even willing to pay 50% or 100% upfront before delivery. This can be used if working capital is required before production starts. According to Bethelhem, Ethiopia has seven paper manufacturing companies and Zafree Papers has commitment letters from all seven. Due to foreign currency shortages in Ethiopia, these companies often struggle to import the paper pulp required for production; they are therefore eager to supplement their raw material supply from local producers.

“We have customer commitments in Ethiopia, Nigeria, Eritrea, Kenya and Tanzania,” says Bethelhem. Furthermore, the company is conducting feasibility studies in both Zambia (where it is working with a commercial farmer willing to supply land for a processing plant) and in Nigeria for possible future expansion.

“We would first like to finalise the pilot project in Ethiopia before we jump to Nigeria or Zambia,” she says.

The company also has agreements with more than 8,000 smallholder farmers from the immediate surrounding area where the plant is being constructed. This number was raised significantly when Bethelhem and her team tapped into the barley supplier base of some of the malt manufacturers in Debre Berhan – an ideal source of agro-waste.

Production to start in 2021

Construction of the factory is currently underway and the plan is to start production early in 2021. However, the impact of the Covid-19 pandemic has cast doubts over whether this timeline is still feasible. The machinery required for the pulp-making has to be imported from Italy, which was at the epicentre of the initial European outbreak.

Not one to wait and see, Bethelhem has already started to look for solutions. Zafree Papers is checking whether a locally manufactured machine is not a feasible alternative. The company is conducting this research and design trials with mechanical engineers from another startup in the paper industry that has previously produced locally manufactured paper recycling machinery.

“We are mixing our knowledge and theirs and merging that to come up with a really great design that is cost effective and can actually disrupt the paper industry. I am excited to see if we could not perhaps also push this machine into the paper manufacturing market in Africa,” she says.

If the local idea works out, production could start before the end of the year, Bethelhem says.

Paper remains a growth market

In a world moving towards digital, Bethelhem is not concerned that her product, paper pulp, would become obsolete.

“The funny thing is that the demand is increasing. I know the world is going digital and I always get this question, even from investors. But when you think of paper you should not only think of stationery. I don’t even believe that A4 stationery paper will disappear, eventually it will become a luxury item, perhaps,” she says. “When you think of paper, you need to realise that there are a lot of products that come from paper pulp. Packaging, especially in Africa, is still showing a lot of growth. Sanitary products are a growth market. Tissue paper… well, when Covid happened, it was suddenly the most wanted thing,” she notes.

The Ethiopian government and policymakers have put in place various incentives to support the manufacturing industry in the country. Some of the focus areas are textiles, agro-processing and pharmaceuticals.

“Because I am in agro-processing the business receives various incentives, for example not being taxed for four years and being able to import machinery duty-free,” she says.

The next goal is the completion of the processing plant.

Bethelhem believes that to make a success of any business requires a good supply of perseverance, discipline and confidence. “You also have to take calculated risks. These are the things that have been pushing me, otherwise you are just going to get stuck somewhere along the way,” she says.

Source How We Made it in Africa