Around 663m people worldwide still use unimproved drinking water sources. And the majority of these people live in sub-Saharan Africa. This is according to a 2016 update by the World Health Organization (WHO) and Unicef.
Before co-founding I-Drop Water (I-Drop), James Steere was working at a US company that develops water purification technology and was attempting to bring a certain type of this technology to market in Southern Africa. However, the challenge with the technology they were developing was that although it was “brilliant, efficient, quite low cost and ideally suited to Africa”, it was very difficult to bring the cost down enough for the market that really needed it, explains Steere.
Meanwhile, the market in Africa is in desperate need of a solution to the problem of poor access to safe drinking water.
“Wherever I went, there was bottled water being sold. And this is odd because it’s expensive, which means that it is no longer a lifestyle purchase – people are buying it for their day-to-day water needs. And people are finding a way to afford it,” says Steere.
So Steere decided to find a way to bring the tech and the market – which had signalled that it was willing to pay for clean water – together.
“Drinking water is seen now as more of a food than a government commodity, so instead of trying to sell filter products, let’s use the products to sell water. If you do that, you strip out all the costs of the bottled water industry,” Steere tells finweek.
And so Steere took over the rights to the technology from the company and embarked on the I-Drop journey with his wife, Kate Thiers, who was the chief operating officer of a non-profit operating in the healthcare sector.
Water for R1/litre
When it came to tapping into the market, the plan was to install I-Drop purifying units in grocery stores, because they provided I-Drop with what they needed: water supply and established distribution channels.
“There are roughly half a million grocery stores in sub-Saharan Africa, which is great because that means we don’t have to invent a channel,” says Steere. As for the water supply, grocery stores have water sources on site – they just need to purify this water.
The key to getting through to these established distribution channels was an incentive structure, so Steere came up with the idea that any units that were going to be installed in shops to purify water had to be free. And so, instead of paying exorbitant rentals or having to buy a capital-intensive unit for their stores, shop owners have the I-Drop purification units installed in their place of business for free.
Says Steere: “The capital asset model (whereby shops rent or finance a tech unit) is expensive. It may work for bigger, wealthier stores, but we wanted to put them in low-income areas where it’s needed most.”
However, from the outset, Steere was adamant that I-Drop had to be commercially sustainable – they were not going to work with a non-profit model. “This can work because you can strip out so much cost by purifying water in a shop; there’s margin for everyone and the price can come down massively,” explains Steere.
As such, I-Drop operates on a share-revenue model, with revenue from water that is sold being split 50/50 between I-Drop and the shop owner.
And the price for consumers is just R1/litre of purified water. Compare that to what they were paying for bottled water. Steere illustrates: “The cheapest 5-litre bottle of water I have seen on sale was R14. Typically, it’s around R20.” Going on the cheaper price, that is R2.80/litre.
One of the key features of the I-Drop unit that Steere and his team have built in is the ability to switch off the unit remotely using GSM [Global System for Mobile communication] technology.
“This is important because if a shop owner for some reason doesn’t pay us, we turn it off and the shoppers become our credit controllers in a way – because they start nagging. And once the account is settled, we just turn it on again,” says Steere. Interestingly enough, he observes, nobody has defaulted. The GSM technology also allows the I-Drop team to make sure their capital is generating revenue without hiring an army of people.
“By integrating this tech we are able to remotely monitor and control every single one of our units. Nobody needs to go and physically check water meters; we know how much each unit is selling; the status of the machine; or whether there has been a power cut, for example. It provides us with a huge amount of data,” explains Steere.
As for maintenance of the units, I-Drop’s local technician, Ben Tshabalala, whom Steere has been working with for years, will attend to anything serious. “But typically we will just have contracts with technicians in the area.”
Africa, and beyond
I-Drop has recently been chosen as a finalist in The Chivas Venture – an annual international competition that recognises social entrepreneurs across the globe. Thirty start-ups from different countries compete for a share of $1m in funding.
Starting 8 May, public voting opens for five weekly competition rounds in the lead-up to the July finals. Each week, the finalist with the most votes wins $50?000. Winning just one of these rounds could be a game-changer for I-Drop, believes Steere. Although he certainly plans to scale operations, South Africa will remain the focus for now.
“We’ve piloted in Botswana and Ghana, because when we were designing the business and the product, we needed to be sure that it could work in multiple countries, particularly around the mobile phone element (the GSM controls). We have formally launched in Zimbabwe, where the demand is extraordinary. The tough thing is that it’s a bit of a capital sink, so it limits our growth,” explains Steere.
But given that about 663m people still don’t have access to safe drinking water across the globe, and a huge portion of those in need residing in sub-Saharan Africa, Steere is confident that there are tremendous opportunities for I-Drop and the people that need them.
This is a shortened version of an that article originally appeared in the 20 April edition of finweek. Buy and download the magazine here.