Creating profit streams from waste could effect 0.5% increase in GDP

Commenting on the findings of the first phase of the study entitled, General equilibrium impacts of monetising all waste streams in South Africa, co-author, economist and head of research and development at REDISA, Dr Reza Daniels says, “Our need to grow the economic pie in SA is now more important than ever before, and waste offers us the opportunity to take what is fundamentally dead capital and bring it back to life by monetising it. The results show that, given the massive change in technology, consumer behaviour and business models, the circular economy is both viable and attractive.”

Legacy industries no longer reliable

With the ever-present threat of a downgrade to junk status, high unemployment figures and a shrinking GDP, the South African economy is facing a tough time. The depreciating rand and natural resources mean we can no longer rely on legacy industries such as mining and manufacturing to drive the much-needed industrial development and job creation.

However, one of the biggest challenges in the country is educating people about the opportunities that can be found and created in waste, all by creating a circular economy of which extended producer responsibility forms a part.

“Positively, this is something that South Africa has already successfully implemented in the waste tyre industry, but the opportunities for other waste streams are much larger. This study shows the opportunities that exist and the catalyst needed to make waste a viable economic driver locally,” says Daniels.

Daniels explains that the biggest hurdle faced in encouraging circularity, namely funding, has already been defeated. “If it were easy to recover and re-use materials profitably, then business would be doing so. At a macro level, it is not only a necessity but also profitable once you take into account all the externalities that effectively subsidise a linear economy,” he says.

REDISA Plan

REDISA has seen the results of successfully implementing a circular economy approach in their organisation. In 2015 The McKinsey Report used REDISA as a case study to show how major economic and environmental benefits can be gained from turning ‘waste into worth’. The report showed that by 2020 the REDISA Plan would deliver an annual net benefit to the economy of over R80m before even considering the environmental benefits, estimated at an additional R380m.

Using the SA General Equilibrium (SAGE) model to estimate the economy-wide impacts, and working with a scenario of 13 monetised waste streams, other key impacts of the study include:

• The potential to increase domestic supply and lower prices of commodities through the re-introduction of recycled commodities.
• The increase in waste to electricity and plastics recycling adds the most value of the 13 waste streams, due to their sizable impacts on the supply and price of commodities.
• There is a notable decrease in the level of coal mining activity due to the decrease in coal-fired power generation; however, this creates a significant upswing in gross value added (GVA) for electricity-intensive users such as non-ferrous metals, and iron and steel.
• Other key sectors such as agriculture and service experience an increase of more than 0.5% in GVA .
• Households experience an increase in income of up to 0.6% which is driven by increased returns in production factors and increased levels of employment.
• By reintroducing waste as an economic commodity there are a number of social and environmental benefits from removing waste from landfills, including impacts on health, greenhouse gas emissions, and reduced soil and water contamination, to name a few.

The research only scratches the surface of what is truly possible and shows that South Africa can significantly alter its current economic growth trajectory in the short-term to a lower-skilled and more employment-intensive path, using waste beneficiation as the strategy to achieve it.