Minister Edna Molewa: South Africa – European Union Seminar on circular economy

Speech by Minister of Environmental Affairs, Dr Edna Molewa, at the South Africa – European Union Seminar on Circular Economy, Durban, Riverside Hotel on the 4th May 2017

Director-General for EU,
Reginal Director for UNEP,
Members of Parliament,
Members of Provincial Legislatures,
Members of Mayoral Committees,
Captains of Industry,
Academia,
Government officials,
Members of the Media, and
Ladies and Gentlemen.

I greet you all,

In the last few years Circular Economy (CE) has been receiving increasing attention worldwide as a means to overcome the current production and consumption model based on continuous growth and increasing resource throughput.

By promoting the adoption of closing-the-loop production patterns within an economic system the Circular Economy aims to increase the efficiency of resource use, with special focus on urban and industrial waste, to achieve a better balance and harmony between economy, environment and society.

As a sustainable development model, the idea behind the Circular Economy   simple as it keeps resources at their highest possible level of value at all times thus eliminating the very idea of waste, and leaving ‘enough for all forever.’ Waste in the context of circular economy is broader than physical rubbish. It also refers to product end-of-life as well as the enormous under-utilisation of products and assets in markets. For example, a discarded product that is not recycled is a waste, but so is ending the working life of a product prematurely or letting it sit idle. A typical car, for example, is used only 5% to 10% of the time and as much as 80% of the items stored in a typical home are used only once a month.

With the right business model, products could remain in the economy much longer than a day, and consumption rates of everything from cars to consumer goods could increase tenfold by utilising innovative sharing models.  Most notably, the Circular Economy encourages companies to think about how goods can be designed, produced and marketed with reuse in mind.

A key challenge for the global economy at present is to decouple economic growth from resource constraints.  If nothing is done to address the current situation, total demand for constrained resource stocks such as biomass, fossil energy, and many metals is expected to reach 130 billion tons by 2050.

Even with an optimistic forecast for technological innovation, the economy is unlikely to be able to produce more than 80 billion tons, leaving a shortfall of around 40 billion tons by 2050. Such shortages will expose countries and companies to significant risks. That’s where the circular economy comes into play.

The lack of a concrete, coherent, and strict legislative framework often impedes SMEs’ consideration of integrating green solutions in their operations.

It is no surprise that many products are hard to disassemble or to recycle. Product designers are not waste managers and have no strong reasons to incorporate end-of-life considerations into their products. The circular economy therefore requires integrating the entire product life cycle from raw material extraction to disposal (or preferably reuse and recycling). This can be done either through intensive collaboration between companies or single ownership of the product chain or even through legislation that force manufactures to consider cradle to cradle principle in their products design.

However, such integration has many disadvantages. Firstly, if companies own the entire life cycle of products, they can easily cross-subsidise different activities, leading to inefficient production and high prices. Similarly, strong collaboration can facilitate cartel like behavior. Secondly, if producers manage the waste of their own products, it may be more difficult to benefit from economies of scale in waste management. Finally, the upfront costs of owning or managing the entire life cycle may be too high for newcomers.

Sometimes the resource loop cannot be closed within one industry. Linking up different production chains creates a web of complex interdependencies that can leave the system very vulnerable to disruptions. Similar complexities and collapses are quite common in other systems.

Many proponents of the circular economy set nature as an example.

However, nature is not perfect. The huge complexity of ecosystems means that a change in one variable – say a loss in biodiversity can create a cascade of effects ending in the collapse of the entire system. In the same way, a cascade of events led to the crash of the complex and interlinked financial system, which in turn affected many others sectors. The ramifications of a similar crash in, for instance, manufacturing would be unpleasant at least.

Ladies and Gentlemen,

Many developing countries are still behind when it comes to the implementation of circular economy. This is evident in South Africa where 90% of waste is still being disposed of in landfills.  However, there are areas where there is limited circular economy development. 

Since the Industrial Revolution consumers and companies have largely adhered to a linear economic model, which begins with extraction and concludes with end-of-life disposal. This trajectory has exposed the wastefulness of such take–make–dispose systems.

On the other hand, the circular economy is now gaining traction in many countries -- both developed and underdeveloped.

As in China, one of the BRICS member states, South Africa has adopted circular economy as one of our sustainable development models. Studies have suggested that governments should play a leading role in promoting the circular economy concept by reforming existing laws, enacting new regulations, promoting the application of new environmental technologies, and organising public education on the benefit of this concept. This is what South Africa is doing, hence the prioritisation of the four waste streams for industry waste management plans. These are tyres, paper and packaging, lighting and electrical and electronic wastes.

By prioritising the implementation of CE in line with the 2030 Development Agenda, the South African government is contributing significantly to unlocking much of the value to be found in waste products. By focusing on the development of the waste economy many more jobs can be created in the formal and informal sectors through a process led by the Department of Environmental Affairs called Working on Waste.

While implementation of the circular economy is still relatively new in South Africa, the country’s tyre industry serve as an important case study of how CE can successfully turn ‘waste into worth’. As a result, in the past few years it has succeeded in generating new jobs, establishing a number of viable small businesses, and recycling a growing percentage of South Africa’s waste tyres.

The Tyre Plan makes the entire operation possible by managing the operations of, and revenue in, the sector. It also helps what is referred to as waste pickers organise themselves into cooperatives, generate jobs for waste transporters, sets up the necessary storage depots as new small businesses, and provides financial and other aid to many of the recycling plants needed to repurpose the spent tyres.

Ladies and Gentlemen,

If the potential to generate wealth from waste is fully utilised in South Africa, we could see a situation where particularly the poor and marginalised are able to benefit through the creation of jobs, establishment of businesses and cooperatives, and ultimately improvement of their lives.

The Government has already identified a host of sectors where wealth could be extracted from the so-called dead capital of waste products. One of these is the plastics sector. 

The government is working to amend Waste legislation to allow for independent operators to run clean-up and processing operations in the different waste management sectors.  Wherever this is economically feasible, more than one operator should work in each sector, so as to encourage more participation and promote efficiency.

In addition, we are working to introduce appropriate environmental guidelines, and manage the appointment of these operators through an open and competitive tender system. 

Ladies and Gentlemen,

Youth unemployment in South Africa is worse than that experienced in many other emerging markets. Overcoming this problem and opening up opportunities for young people is vital to social and economic stability.  This is recognised in the South African Government’s National Development Plan published in 2012.

The Waste Sector Survey showed that the formal South African waste sector employ nearly 30 000 people in 2012 of which 20 092  are employed in the public sector --  mostly in local and metropolitan municipalities – and  9 741 worked in the private sector.

The public sector could absorb an additional 5 000 employees if current vacant positions in municipalities were filled.     However, if South Africa is to achieve this, the government must look towards the private waste sector for growth and employment opportunities in the present economic climate.

Moving waste away from landfills also provides considerable social, economic and environmental opportunities for a country, including job creation and enterprise development. In South Africa and developing countries, where unemployment is high, this will not only provide access to valuable resources through the development of the circular economy, but provide benefits while reducing the environmental and social impacts of waste, including greenhouse gas emissions.

The new circular economy package provides the opportunity to develop re-use activities and create jobs locally. 

It is critical to ensure a space for smaller enterprises in a sector where major industries already play a key role as these cooperatives and SMEs have the potential to create significant income opportunities across the value chain.   With a failure rate of 91.8%, research shows that creating sustainable waste and recycling cooperatives requires long-term support and investment by external stakeholders, both public and private, due to the low skill level of cooperative members.

To achieve a successful circular economy, all roleplayers must be willing to invest in training for low skilled personnel. Implementing a circular economy business model also demands continuous monitoring and improvement of the product’s lifecycle and a significant amount of resources would need to be allocated by the company to keep all parties committed.

Significant economic and environmental benefits could accrue to South Africa, particularly poorer communities,   through the development of Green jobs within the Circular Economy.  

Opportunities for job creation exist in moving waste away from landfills towards alternative waste treatment across the entire waste hierarchy.  This can be achieved through cleaner production, industrial efficiency, dismantling, refurbishment and reuse, as well as new methods of collection, sorting, reprocessing and manufacturing.

The circular economy, Ladies and Gentlemen, is a trillion-dollar opportunity, with huge potential for innovation, job creation and economic growth.

The wealth to be found in waste could generate a host of jobs and viable new enterprises, thus helping to counter any country’s unemployment rates, thus contributing to economic growth. During the Dialogue today, and the discussions between South Africa and the EU, we hope to continue with the work being done to align the global Sustainable Development Goals (SDGs) with the National Development Plan (NDP).  

The dialogue is in line with the SA-EU Trade, Development and Cooperation Agreement (SA-EU TDCA) and Strategic Partnership Joint Action Plan (JPA).  I am hopeful that this Dialogue will enhance political cooperation on Regional, African and Global issues.

I am hopeful also that the Sustainability Transition Dialogue will create an understanding of the sustainability transition implied by the National Development Plan’s 2030 vision of a “transition to an environmentally sustainable, climate change resilient, low-carbon economy and just society”; and from this   enhance South Africa’s implementation of this sustainability transition and its contribution to the global transition required by the Sustainable Development Goals through the domestication of the SDGs. 

Focusing on the circular economy is significant in order for South Africa and the EU to reach agreement on the manner in which we can cooperate on Circular Economy going forward. This includes development of actions that can be implemented as part of the outcomes of today’s Seminar.

I thank You

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