Tuesday, March 10, 2009

Creating Wealth From Waste

Economy stimulus is not just about aggressive money spending to keep the economy moving. One of the important aspects of economy stimulus is fiscal prudence, which is easily and conveniently ignored in the overzealous move to fasten economy recovery. Least you forget the current financial crisis is due to economy mismanagement. The need to return to fiscal prudence is more urgent than ever, yet our leaders chose to resort to pump pimping without given due consideration to the need of fiscal prudence when talk about economy stimulus.

We need to create wealth from waste, not waste from wealth. This is the reason why I look into vermi-culture as the first initiative for stimulus spending. Vermi-culture provides a possible way to create wealth from waste.

Even without the impending recession, the landfills in Penang are running out of space. The need to look for
alternative solid waste management is getting more and more urgent as day passed by. More over the pollution caused by the leakage of leachate from the Pulau Burung Sanitary Landfill is getting worse.

Penang state government under the leadership of Lim Guan Eng is not different from that of Koh Tsu Koon when come to dealing with solid waste management; it still prefers to look for new landfill sites as a convenient method of getting rid of unwanted waste materials.

According to the previous state government of Gerakan, the average Penangnite throws away about 1.1 – 1.3 kg of waste per person per day and the increment is a cause for concern.

A new policy approach should be adopted to instil a sense of common responsibility towards waste, and to create overall strategies for waste management that do more than pay mere lip service to the concept of sustainability.

Therefore it is imperative for us to look into vermi-culture, to see how much revenues we can generate from it and how it can solve our solid waste problem.

One of the places to learn about vermi-culture is no other than Australia, where compost facilities as shown below are the primary means of getting rid of bio degradable solid waste.











This compost facility is a Vermicrobe system consisting of elevated and covered pits with liquid tanks

















The Vermicrobe twin tank recirculation system for creating liquid cast is part of the final system

The detail of the compost facility is as follows:



A 16 modular Vermicrobe International modular earthworm pits stocked with a minimum of 250,000 earthworms (plus cocoons)



B Each modular pit is fitted with pit stands, moisture sprays, two liquid tanks, two sump tanks, three pumps, liquid collectors, control valves, filters and Vermitent frame system



C One pH / moisture meter



D One thermometer



E One Conductivity meter to measure liquid cast concentrate



F One 200 L Compost tea brewer, microscope, one dissolved oxygen meter



G One VI2000 Worm Separator/Harvester


Table 1: Compose Facility


Let look into the initial cost of investment in this facility and the return of investment.

Initial Investment Cost


Capital Investment

Vital Earth Modular Pits

16

Earthworms Kgs Per Pit

75

Cost Per Earthworm Pits

$3,250

Earthworm Modular Pits -Complete Package consist of 6 pits

$66,999

Additional 10 Pits

$32,500

Total Equipment Cost

$99,499

Table 2: Capital Investment


Capital Requirements



Earthworm Modular Pits -Complete Package with 16 pits

$99,499



$99,499

Mobile Office, Store & Fencing

$25,000

Box Trailer

$600


Phone/Fax

$700

Pager

$200



Mobile
Phone

$200



Computer/Printer

$2,000




$28,700

Table 3: Capital Requirement


Finance Requirements


Capital Equipment & Training



$128,199

Working Capital



$41,801

Initial Investment



$170,000

Table 4: Finance Requirement

The initial cost of investment for this facility is US$170,000 or RM 680,000

Worm Breeding Program

Worms are prolific breeders - and double in number every two months. Let see how fast the worms will grow.



Worm Reproduction Rate





Days

120

to double worm weight

Reproduction Rate

1.1920727

per month

Table 5: Worm Reproduction Rate


Month

Opening Stock

Purchase

Natural Increase

Sales

Closing Stock

Jun


1200

230

1430

Jul

1430


275

1750

Aug

1750


328

2033

Sept

2033



390



2423

Oct

2423



465


2889

Nov

2889

555


3443

Dec

3443

661

4105

Jan

4105


788

4893

Feb

4893


940

5833

March

5833


1120


6954

April

6954


1336


8289

May

8289


1592


9881

Table 6: Worms on Hand (kg) for Year 1



Month

Pit Required

Vermicast (kg)

Liquid Cast

(liter)

Jun

19

3433

9411

Jul

23

4092

11255

Aug

27

4879

13416

Sept

32

5816

15993

Oct

39

6933

19065

Nov

46

8264

22727

Dec

55

9852

27092

Jan

65

11744

32296

Feb

78

14000

38499

March

93

16688

45893

April

111

19894

54709

May

132

23715

65217

Table 7: The Projected Pit required and By Products of Vermi-culture in Year 1

With the reproduction rate shown on Table 5, if the initial worms stock is 1200kg, by year end it can grow to 9881 kg. That means by year end you will have sufficient stock to open additional 7 compost facilities. The
total vermicast produced will be 129310 kg with market value of US$64,655. The total liquid cast produced will be 355603 liters with market value of US$889,008. That means total revenue of US$953,663 can be expected within the first years of production, which means by first year the state government can almost recoup the cost of investment.

Let see what happened after Year 2.


Month

Opening Stock

Purchase

Natural Increase

Sales

Closing Stock

Jun

9881



1898

77

11702

Jul

11702



2248

82

13868

Aug

13868



2664

88

16443

Sept

16443



3158

94

19508

Oct

19508



3747

100

23155

Nov

23155



4447

105

23254

Dec

23254



5281

111

27497

Jan

27497



6275

117

32668

Feb

32668



7457

122

46161

March

46161



8866

128

54899

April

54899



10545

134

65310

May

65310



12544

139

77715

Table 8: Worms on Hand (kg) for Year 2


Month

Pit Required

Vermicast (kg)

Liquid Cast

(liter)

Jun

156

28085

77236

Jul

185

33282

91526

Aug

219

39463

108524

Sept

260

46818

128749

Oct

309

55571

152822

Nov

367

65993

181481

Dec

436

78402

215606

Jan

518

93181

256249

Feb

615

110785

304661

March

732

131757

362334

April

871

156744

431046

May

1036

186516

512920

Table 9: The Projected Pit required and By Products of Vermi-culture in Year 2

By end of year 2, the worm stock will grow to 77715 kg. That means you will have sufficient stock for total 64 compost facilities without the need to put in extra money.

The total vermicast produced will be 1,026,603 kg with market value of US$513,301. The total liquid cast produced will be 2,823,160 liters with market value of US$7,057,900. With the sales of 1297kg of worms at retail price of $30 per kg, this will bring in revenue of $38,895. That means total revenue of US$7,610,097 can be expected within the second years of production.

Let see what happened after Year 3.

Month

Opening Stock

Purchase

Natural Increase

Sales

Closing Stock

Jun

77,715



14,927

5,000

87,642

Jul

87,642



16,834

5,000

99,476

Aug

99,476



19,107

10,000

108,582

Sept

108,582



20,856

10,000

119,438

Oct

119,438



20,856

12,000

130,379

Nov

130,379



25,042

15,000

140,421

Dec

170,470



26,971

16,000

151,392

Jan

151,392



29,078

10,000

170,470

Feb

170,470



36,727

12,000

191,213

March

191,213



36,727

16,000

232,648

April

232,648



40,708

20,000

211,940

May

211,940



44,685

14,000

263,333


Table 10: Worms on Hand (kg) for Year 3

Month

Pit Required

Vermicast (kg)

Liquid Cast

(liter)

Jun

1169

210,341

578,437

Jul

1326

238,741

656,540

Aug

1,448

260,597

716,643

Sept

1,593

286,651

788,291

Oct

1,738

312,909

860,500

Nov

1,872

337,010

926,779

Dec

2,019

363,341

999,188

Jan

2,273

409,129

1,125,104

Feb

2,550

458,911

1,262,006

March

2,826

508,656

1,398,803

April

3,102

558,354

1,535,457

May

3,511

631,999

1,737,998


Table 11: The Projected Pit required and By Products of Vermi-culture in Year 3

By end of year 3, the worm stock will grow to 263,333 kg. That means you will have sufficient stock for total 219 compost facilities without the need to put in extra money. With this capacity, the compost facilities will be enough to handle the bio-degradable waste in the whole Penang state without the need to look for new landfill. 

Take a look at the cash flow report and balance sheet, you will realise that this is an investment with very high return.


Cash flow Report





Year Ended



May-10

May-11

May-12

Cash Receipts





Sales – Worms

0.00

19,500.00

6.380,000.00

Sales - Worm Buyback

12,800.00

12,800.00

12,800.00

Sales – Other

707,967.79

5,791,402.81

30,467,302.57

GST Collected

0.00

0.00

0.00

Capital Introduced

170,000.00

0.0

0.00

Bank Loan

0.00

0.00

0.00

Total Receipts

890,767.79

5,823,702.81

36,860,102.57







Cash Expenses




Accountancy

1,500.00

2,000.00

2,000.00

Advertising

84,956.13

694,968.34

4,421,676.31

Bank Charges

14,415.36

116,474.06

737,202.05

Capital Purchases

377,000.00

2,938,000.00

8,043,750.00

Feed

8,081.89

53,987.6

307,790.17

Freight

35,398.39

975.00

1,842,365.13

General Expenses

4,800.00

14,400.00

86,400.00

Insurance

800.00

1,000.00

5,000

Loan Repayments

0.00

0.00

0.00

Motor Vehicle Expenses

7,800.00

7,800.00

46,800.00

Purchases

72,076.78

582,370.28

3,686,010.26

Telephone

2,400.00

2,400.00

14,400.00

Wages

46,800.00

308,966.67

5,509,183.33

GST Paid

0.00

0.00

0.00

Total Expenses

656,028.55

4,723,341.99

24,702,577.24







Net Surplus/(Deficit)

234,739.23

1,100,360.81

12,157,525.32







Table 12: Projected Cash Flow Report





Balance Sheet


As At


May-10

May-11

May-12

Owners Equity


Opening Balance

0.00

908,178.28

6,981,554.50

Capital Introduced

170,000.00

0.00

0.00

Add Profit After Owners Salaries

738,178.28

6,073,376.22

25,769,812.69

908,178.28

6,981,554.50

32,751,367.19






Represented By





Assets





Cash At Bank

234,739.23

1,335,100.05

13,492,625.37

Worms On Hand At Wholesale Values

296,439.04

2,331,454.45

7,899,991.82

Capital Purchases At Cost Not Depreciated

377,000.00

3,315,000.00

11,358,750.00



908,178.28

6,981,554.50

32,751,367.19














Liabilities




Bank Loan (Including Prepaid Interest)





Opening Balance

0.00

0.00

0.00

Less Repayments

0.00

0.00

0.00

Closing Balance

0.00

0.00

0.00





Net Assets

908,178.28

6,981,554.50

32,751,367.19













Reconciliation of Profit after salaries











Cashflow report surplus

234,739.23

1,100,360.81

12,157,525.32

Increase in value of stock on hand

296,439.04

2,035,015.41

5,568,537.37

Capital introduced

(170,000.00)

Capital purchases

377,000.00

2,938,000.00

8,043,750.00

Bank loan repayments

0.00

0.00

0.00

Less loan balance

0.00


0.00





Net Profit after Salaries

738,178.28

6,073,376.22

25,769,812.69

Table 13: Projected Balance Sheet

Vermi-culture appears to be an innovative sustainable technology for waste treatment, which holds a promising future in the field of solid waste management.It is a technology that is easy to implement, has low risk with high return of investment. The core activity taken up in this initiative is based on sustainable use of biodiversity. In this activity the organic waste is converted into effective bio fertilizer or vermi compost. The only asset involved is earthworm, which get doubled as day passed by. The operator of vermi-culture earns by selling them and the compost. This initiative is very easily replicable and is financially self-sustainable in the long term.

If Penang state government is sincerely interested in real economy stimulus, it should look into the possibility of creating wealth from waste.

The final question you may want to ask is where to get the funding. The Penang state government has
boasted about its aggressive and quarrelling approach that save Penangites of more than RM10 millions for year 2008.

The state government should allocate RM 6,800,000 out of the RM10 million to build 10 compost facilities which in 3 years time will provide more than sufficient capabilities to process our bio degradable waste. Within 2 years, this initiative will create more than 2,000 jobs with minimum wages as suggested by the labor unions. The state government should also set year 2012 as the target to achieve zero waste. This initiative is totally different from the pump pimping initiative which cost Malaysians billions and billions of ringgits, without giving Malaysians a single clue about where the money go.

This initiative will bring sufficient funds for the state government to be self-sustainable in the long run, without the need to worry about the deprival of funding by the federal or the local councils in the event it
loss in the local election.

Lim Guan Eng boasted about the need of spending RM50 billions of our money for economy stimulus, but has no gut or wisdom to look into this initiative which cost from RM680, 000 to RM6, 800,000 depend on his budget. The impact of this initiative is far reaching, it will make Penang a more livable state, it will solve the pollutions caused by landfills, it will solve the financial woes of the state government, it will help to eradicate hard core poverty, it will improve the Feng Shui of Penang, it will save the Penang state government of at least RM700 million and the political embarrassment in looking for new landfill site. Best of all, it kill the businesses of BN cronies.

For your information, the factory that manufactures the compost system in this article is in Ipoh. The state government does not have to go too far to find out about this technology.

This article signal the beginning of a series of initiatives that set a very high standard for Lim Guan Eng to achieve since he can’t stop talking nonsense with our hard earn monies.

For more information, you can look for this book; Creating wealth from waste by Robin Murray.

Next change a Curitiba type of transport system that will save the government RM 4 billion and lead to the
eventual take over of Penang Bridge,if the state government has the wisdom.

7 comments:

  1. Very interesting write-up. My hometown is Ipoh - where in Ipoh is the factory producing the compost machinery?

    ReplyDelete
  2. I am not sure where is the factory, but I saw a photo showing the equipment and said it is in a Ipoh factory.

    ReplyDelete
  3. is there really a demand for the vermicast in malaysia.seen many adverts holding classes charging hundreds of ringgit and selling worms at over rm300/kg. but who is really using the vermicast. is it commercially viable???

    ReplyDelete
  4. if you produce in huge quantities the company Vermicrobe will buy from you including the worms. The fertilizer market in Malaysia is over RM 1 billion. If you hook up with big palm oil plantation, sign a supply contracts with them, you no need to worry about sales

    ReplyDelete
  5. Hi, Read about your artical. It was interesting. How big of an area do you need?
    who will buy this?

    ReplyDelete
  6. This comment has been removed by the author.

    ReplyDelete
  7. Hi there,
    I am live in Brisbane and interested with this business. I would like to set up my own worm farm. How can i have more information about government support? Can you please let me know who/whom I should contact to discuss this issue.
    Thanks

    ReplyDelete