By Hermann Erdmann

According to the draft Waste Tyre Regulations published on 12 August this year, funding of the country’s waste tyre stream management plan will go into the fiscus as of 1 October. This means that the fledgling waste industry being led by REDISA will be knocked back before it has had an opportunity to establish a strong foundation. Not only will those within the REDISA structure be negatively impacted, but existing industry players such as the re-treading industry will be hit even harder from a financial perspective, resulting in job losses and the associated socio-economic impact felt in communities.

We face massive unemployment and shrinking economic growth in the country, yet at every turn the Government calls for business to create jobs, drive an entrepreneurial spirit and empower previously disadvantaged individuals. What is often ignored is that Government needs to create an environment where small businesses can develop and thrive, not create jobs itself or even manage the process. This is outlined in Government’s own strategy, the National Development Plan.

Industry exemplar

The implementation of the REDISA plan is an example of the perfect collaboration between Government and private industry whereby the platform is provided to REDISA as an non-profit organisation to operate, be accountable and report back regularly to the Department of Environmental Affairs. This is a unique approach that has been praised by the World Economic Forum in Davos and the European Union as a success – a South African solution to a global environmental concern.

By moving to a tax based collection, not only are we looking at a large number of direct job losses but also the potential closing down of many SMME’s, something which in the current economic environment we can ill afford to do.

What has made the REDISA Plan successful over the past three years it has operated is its current funding model – in which the fees are paid directly to REDISA and spent in an auditable and accountable fashion.

In the past we have seen the failings of Government when waste management fees are injected into the fiscus. Since 2004 we have paid a levy on plastic bags to encourage reuse and recycling while mitigating the environmental impacts of plastic bag pollution. This has in no uncertain terms been an outright failure. A study by the CSIR reported that in the February 2006 financial year only 7% of the levies collected actually got paid to the implementation arm, Buyisa-e-Bag, so it is perhaps not surprising that the organisation shut down with little to show.

In contrast, when the REDISA Plan was legislated, Minister Molewa emphasised that the waste management fee collected would not end up in the general fiscus, and that it would be the responsibility of tyre manufactures and importers to pay for the remediation of the resulting waste. The advantage is that REDISA is 100% accountable for what happens with the funds through strict corporate governance practices and audit requirements that ensure these funds are applied according to the mandates set out in the Plan.

Without the waste management fee being used as prescribed in the REDISA Plan, the new tyre recycling industry would not have been established, and the creation of jobs, small businesses and other socio-economic benefits would not be possible.

What REDISA has done is create an insurance policy for the environment, one which ensures that those who create the end environmental problem, pay for fixing it and factor the cost into their cost of manufacture. The benefit of this approach is that a product’s total cost to society, including remediation, is made visible to manufacturers and consumers alike; manufacturers are incentivised to make more environmentally friendly, longer lasting products, built to be recycled, and with recyclable packaging. The lower the environmental impact of a product, the less environmental ‘insurance’ the manufacturer will need to pay in the long term. Much like the insurance industry is regulated, so should environmental insurance be regulated, but by an independent regulatory body and not directly by Government.

What is the difference between a tax and the waste management fee?

Understanding the difference between the REDISA waste management fee and a tax is critical to ensuring the ongoing success of this new tyre recycling industry’s development.

A tax is a compulsory contribution to state revenue, levied by government on workers’ income and business profits, or added to the cost of some goods, services, and transactions. Money collected from taxes goes into the general fiscus.

The waste management fee on the other hand is a fee paid by producers to offset the cost of dealing with tyres once they reach end-of-life. A critical difference is that this money is directly and specifically applied to dealing with the product and building the recycling industry. These funds are managed responsibly, in an audited and accountable fashion, making it far more effective than a tax-based system where funds are diluted into the general Treasury pool without being ring-fenced.

So what next?

The REDISA Plan has proven to be a solution that provides government a solution at no cost to the fiscus. Furthermore the Institute of Race Relations as well as McKinsey have both released reports that proves REDISA drives GDP and employment growth.

It is our opinion that if the fees currently collected by REDISA move into the fiscus, it will bring to an end the significant headway that we have achieved within three short years.

The approach undertaken by REDISA is one that was put in place to stimulate economic and socio-economic growth, and it’s working. To remove the one aspect that makes it so successful and replacing it with an approach that has proven to fail, would be short-sighted and to the detriment of all involved.

We are in consultation to make written submission to the Minister within the 30 day time frame, and firmly believe that the independent integrity of all waste management plan implementation and fee collection should remain just that – independent.

*Hermann Erdmann is the  CEO at REDISA (Recycling and Economic Development Initiative of South Africa)