PA N E L D I S C U S S I O N
Is there sufficient investment in SA’s waste sector to unlock its potential? According to GreenCape’s 2020 Market Intelligence Repor t for the Waste Sector, oppor tunities in waste organics, electronic waste, waste plastics and builder’s rubble have the potential to add considerable value to the economy. By Dr Linda Godfrey*
T
he shor t answer to the headline is no. In a 2013 thematic investment review ‘No time to waste’, the Bank of America Merrill Lynch identified South Africa as one of five emerging markets with “exciting oppor tunities” in the waste sector1. The other countries presenting significant oppor tunities included Brazil, China, India and Russia. In par ticular, the bank noted that the fastest growth was coming from emerging markets, and new oppor tunities around secondar y raw material and energy recover y from waste. In the case of South Africa, the bank noted that declining landfill space would make recycling a “cost-effective necessity”. However, the review also acknowledged that the biggest challenge facing the South African waste sector in its move away from landfilling was the low cost of landfilling, which “renders alternative technologies and practices financially unsustainable”. A recommendation to address this price failing was to build capacity in full cost accounting of waste management within municipalities. In 2014, Engineering News featured an ar ticle, ‘South Africa begins waking up to the economic potential of waste recycling’, noting that the costs that can be avoided by diver ting waste from landfill, and the benefits associated
14
M AY 2 0 2 1
|
ReSource
with recovering the resources currently lost to landfill, are significant. Nearly a decade on, I would argue that this potential has not yet been realised in South Africa. While recycling rates have increased between 2011 and 2017, the disposal of waste to landfill, often to uncontrolled or controlled dumpsites, remains the dominant technology solution for the end-of-life management of waste in the countr y. This is despite extensive policy that suppor ts the implementation of the waste hierarchy and, more recently, the circular economy. According to GreenCape’s 2020 Market Intelligence Repor t for the Waste Sector2, oppor tunities in waste organics, electronic waste, waste plastics and builder’s rubble have the potential to add considerable value to the economy. The repor t notes that private sector investments have grown, both in number and scale, which is likely to accelerate in the next three to five years. It also notes that key drivers to unlocking these oppor tunities include legislation, extended producer responsibility (EPR), government initiatives, the increasing cost of disposal, and dwindling landfill airspace. The R109.6 billion of investment announcements made at the 2020 South Africa Investment Conference saw little promise of investment in the waste sector, amounting to only 0.2% of the total announcements.
While significant oppor tunity exists in the South African waste sector, this oppor tunity has not yet been realised, and public and private sector investment has been slow to materialise. Why is this the case, when the potential clearly exists? According to the Africa Waste Management Outlook3, waste management project finance and implementation face a number of constraints in Africa, and are often considered high risk; owing to: • insufficient future cash flow • improper evaluation of project life-cycle costs • low probability of success during appraisal • lack of ability to pay back loans • lack of cost control, operational exper tise and risk management • lack of/inadequate cost recover y options • lack of effective governance frameworks • a dministrative and operational flaws, suggesting that even with suitable finance from the central government or funding bodies, with no repayment requirements, a project will fail owing to unsuitable institutional, policy and ser vice conditions. The reality is that most municipalities in South Africa are struggling and not in a position to direct public sector funding into major waste management investments. With the economy stalling, even pre-Covid-19, and with significant government funding redirected during
