By Hugh Tyrrell
The cards are up in the air for the recycling industry in South Africa and major changes are due.
Following the Department of Environmental Affairs’ (DEA) call, the paper and packaging industry has now submitted five-year plans on how they will take Extended Producer Responsibility (EPR) for the end-use of their products, and how they intend to address transformation of the industry at the same time.
The DEA meanwhile is empowered by the Waste Act of 2008 to introduce a tax on waste generators, which it is seriously considering. This tax would profoundly affect the wider recycling and packaging industry, consumers and especially the Producer Responsibility Organisations (PROs).
These organisations, such as The Glass Recycling Association, PETCO, Polyco, PRASA/PAMSA and others were established by the raw material producers, reprocessors, and brand owners who pay regular levies their PROs to support and promote the recycling of their respective material packaging.
These PROs have been the mainstay of the recycling industry in South Africa for decades, and have made this country’s recycling rates a success story worldwide.
Figures for the recycling of plastic PET beverage bottles for example, reached 2.15 billion in 2017, or 5.9 million bottles collected for recycling every day. This is on a par with international standards. This activity, driven mostly by industry is supporting more than 60 000 jobs.
The vertical integration of the recycling PROs with their industry material producers and reprocessors (like MPact, SAPPI, ArcelorMittal, Consol) has over the years, helped the recycling industry to stabilise into a well-running system generating revenues for all participants, including those at the bottom of the pyramid – such as pickers on the streets and landfills as well as emerging entrepreneurs.
Government however is on the look-out everywhere especially at these times, for sources of revenue to add to the general fiscus, which has social grants and all the rest to pay. Revenue from a proposed waste tax too will (according to Treasury rules) not be able to be ring-fenced for the recycling economy.
This is being seen by industry as unfair. Worse still, if the tax hits the large producer companies and brand owners who fund the PROs, they may not want to pay a ‘double’ tax – both the government tax and their own industry levy, to the PROs.
As a tax would be mandatory, the PROs’ main source of income from levies could be in jeopardy which would disrupt their functioning. The country’s recycling industry infrastructure which has taken decades to develop, may be in danger of collapsing like the proverbial pack of cards.
Income and job losses could be significant, particularly in a section of society that needs it most. DEA has also not undertaken a socio-economic assessment of the effects of the proposed tax, which should have been done. They will however consider funding for PROs depending on the plans put to them.
There are some sticking points in that, should the proposed tax be introduced, collections from it by Treasury and diversion back into DEA will only start in a year’s time – i.e. in the 2019/2020 budget. This may put the implementation of the tax on hold until then.
At present, the DEA is considering the industry waste management plans which were submitted on 5 September. Their responses will be open for public comment from mid-December to January.
Government’s decision whether to introduce a waste tax or continue with the industry’s own levy system, and how much government and industry can work together for development of recycling as an economic sector, are due to be announced on 28 February next year.
Only then will the cards have landed back on the table for all stakeholders to see. The recycling industry will certainly be a new game in town.
An edited version of this post was published by Business Day on 17 October 2018 and is at: https://www.businesslive.co.za/bd/opinion/2018-10-17-recycling-the-recycling-industry-could-lead-to-major-job-losses/