Getting the Circular Economy Rolling

Hemann Erdmann of REDISA argues that, while South Africa is ahead of the EU in promoting modular economic changes, the route to achieving circularity is still being honed

By Hermann Erdmann, CEO REDISA (Recycling and Economic Development Initiative of South Africa)

Necessity has always been the mother of invention. As more businesses are realising the need to become increasingly energy efficient, while at the same time using natural resources sparingly and without restricting operations, we see inventive business models coming into play.

The basic facts of dwindling natural resources and growing demand are inescapable: it is only a matter of time - in some cases measured in just decades - before certain resources will no longer be available as virgin commodities. If we dither too long, we will be forced into a messy and inordinately expensive process of trying literally to mine landfills or to recover widely-dispersed discarded materials.

Implementing a circular economy approach is the only solution to avoid this situation, other than ceasing production of all the goods that make modern life what many of us enjoy, and billions more aspire to: the prevailing take, make, dispose linear business model has to be changed.

South Africa is ahead in this, and showing the EU particularly as to how circular economies can practically be implemented through collaboration and legislation. We have a flagship project in South Africa’s tyre industry in the form of the Integrated Industry Waste Tyre Management Plan, which provides a model that can be used to managing other waste streams, for example packaging and e-waste.

This October at the Global Economic Symposium (GES), REDISA will host a panel on ‘Re-Assessing Waste Management and the Circular Economy’ which will address the challenge of how to drive circular economies when everyday, short-term, parochial economics make it look unattractive.

We have seen that the biggest obstacle to achieving circularity in the economy is funding: if it were readily possible to recover and re-use materials profitably, then business would be doing so. It is our contention that at a macro level, it is not only a necessity, but also profitable once you take into account all the externalities that effectively subsidise widespread linear economy practices.

For instance, when we package water in plastic bottles that become waste, which ‘someone’ has to pick up and manage, the utility of the plastic bottle is being subsidised by organisations – typically local or regional governments – which deal with waste collection. Worse still are the costs of dealing with uncollected waste that becomes environmental pollution with adverse health, aesthetic and amenity costs.

Our model proposes that the cost of all the externalities be incorporated into the cost of production through a fee (typically mass- and material-based) which is added to production costs and paid to the Extended Producer Responsibility Organisation (EPRO).

Assessing all of these costs can be difficult and at times controversial, but the estimation can be greatly simplified by calculating what it costs to institute a reverse logistic network to gather all discarded material and to establish and support effective recycling and recovery. We believe that it is essential for producers to be held accountable for the lifetime cost of their products, and that the cost should be included in the production cost. Basically, the producers should “pay it forward”.

What is more, there is strong evidence that even without invoking the spectre of resource exhaustion, achieving circularity in the economy generates economic activity, creates jobs, avoids negative externalities and is net positive to GDP.

REDISA has developed a unique model for circularity on a macro scale using waste tyres as a proof of concept. It has proven to be a highly successful, practical model that delivers tangible results in very short order.

After just two and a half years from being given the formal mandate to start operating, it moved the percentage of waste tyres being dealt with from four percent, to 70 percent, created over 2,500 jobs, and more than 200 SMMEs. By the end of 2017, REDISA is on target to reach 100 percent diversion. Moreover, this is being achieved at no cost to the South African government.

We remain confident that solutions can be found, in part because we have experience on the ground with a working system in South Africa, and in part because, in the long run, it is not negotiable. Achieving circularity is absolutely necessary, our only choices are in the route we follow to get there.