Taxing times for the tyre industry

©Csaba Deli via 123RF

Alas, prospects do not look promising for motorists, and for consumers at large, with the consensus among economists being that things will get worse before they get better. Finance Minister Pravin Gordhan announced in his budget speech in February that new taxes would be implemented this year, one of them being the tyre tax.

The Recycling and Economic Development Initiative of SA (Redisa), which is a joint venture between the government (the Department of Energy Affairs, to be specific) and the private sector to ensure that tyre manufacturers - both local and imported - are accountable for what they produce, is spearheading the tyre recycling process.

Now, as part of the government's plan to reduce waste and increase recycling methods, as of 1 October this year, every new tyre will be taxed. This means that the blanket R2.30/kg (the standard current waste fee for general recycling by Redisa) on each new tyre will be phased out in favour of a specific tyre recycling fee. This will go towards environmentally friendlier ways of recycling tyres instead of them languishing in landfills, which compounds the waste issue.

In essence, the outfit has created a system that ensures that waste tyres are duly recycled, which will have a positive spin on the environment as tyre manufacturers will likely use less energy to produce new tyres, thanks to recycled materials.

Tyre homologation

According to Redisa, a PTI (Product Testing Institute) is in the pipeline and its main objective will be to test, rate and certify the environmental friendliness of any tyre. Redisa director Stacey Davidson says the establishment of the PTI is expected to be completed within the next 18 to 24 months, and its full operation as a tyre homologation facility within the next 36 months.

She says that, broadly, the PTI establishment process will comprise construction, accreditation for South African homologation, accreditation for EU/US homologation and the development of environmental rating system. This will allow the tyre manufacturer utilising greener manufacturing processes to have a lower recycling fee.

"The fees collected by Redisa means that the cost of dealing with end-of-life tyres is incorporated into the manufacturing cost of the tyres," says Davidson. "The money is directly and specifically applied to dealing with waste tyres, in an audited and accountable fashion."

We also posed a question to Redisa as to whether tyre manufacturers and/or the Department of Energy Affairs would be instrumental in the upgrading of the tyre factories.

Davidson's response was: "We cannot comment on the Department of Energy Affairs' potential involvement. Any involvement would be based on discussions that the manufacturers and the department might choose to have independently; the Redisa plan holds those who produce the waste responsible as per extended producer responsibility requirements, and to provide an incentive to manufacturers through introduction of the PTI centre. How industry takes advantage of the offered incentive is not something Redisa prescribes," she says.

"Allocation of the funds is outlined in the gazetted Redisa plan, and as part of the research and development allocation, facilitating the development of the PTI is key ... Redisa invests a lot of time and resources in research and development as well as finding new technologies and processes for the recycling of tyres."

She says Redisa's business model helps beneficiate waste tyres by building downstream industries that can process those tyres, while at the same time developing environmental standards that affect upstream production of new tyres and encourage cradle-to-cradle manufacturing techniques, thereby having less harmful effects on the environment.

Consumer cost

However, the crux in our opinion remains as to how much this will cost the end-user, the consumer, as tyre manufacturers have no choice but to transfer the cost on to the consumer to recover their own.

We managed to speak to a couple of tyre manufacturers to see how this will influence their future business and how they are planning to manage the rigours of cleaner manufacturing processes. Unfortunately, after a few days of trying to solicit comment from Bridgestone SA, the outfit simply told us that it could not comment in this regard after having promised us that they would relay our questions to the relevant department. Our attempts to contact Continental SA drew a blank.

We did receive the following response from Goodyear: "As a responsible corporate citizen, Goodyear South Africa complies with all legislation and regulations relating to tyre levies and taxes. It is our understanding from Finance Minister Gordhan's budget speech as delivered in February, that the tyre tax will replace the current tyre levy being collected by Redisa, on behalf of the Department of Environment Affairs. The new tyre tax will be implemented through the Customs and Excise Act and collected by SARS. Goodyear supports the collection and responsible recycling of waste tyres."

It seems the tyre tax topic is shrouded in secrecy, particularly as far as some tyre manufacturers are concerned, some of whom at this point seem to be distancing themselves from it. Motor News will delve further into the matter as it unfolds and we will seek further clarification on how the tax will be apportioned, and, more importantly, how this will affect you, the consumer.

Source: Business Day