recession and recycling
More people are recycling now than ever before in South Africa but, with the economic downgrading and resulting recession, can waste management companies still afford to process recyclables?
Despite the attention being given to global warming and the dire need to clean up our planet, recycling markets have been in a state of fluctuation for some time now.
In 2014 when the price of crude oil plummeted, it was cheaper to manufacture plastic products from virgin raw materials than from recyclable materials. This caused in a crash in the price of recovered plastics, resulting in volume oversupply and zero-demand.
In 2013 China began its “Green Fence” policy stopping the imports of low quality recyclables. The crackdown continued into 2016 with the “National Sword” campaign. In 2017 they announced a ban on 24 types of solid waste and an almost 75% reduction on the number of import licences issued. This move alone sent the international waste industry into a tailspin and, as a result, other countries who were traditionally waste material buyers started to restrict waste imports in an effort to manage the flow of waste material being diverted away from China.
Add to this South Africa’s recent economic downgrading, the recession announcement and ever-increasing fuel prices one is justified in being concerned about the future of any industry in South Africa, to speak nothing of the waste industry.
But there is light at the end of the tunnel…
As at the second quarter of 2018, South Africa’s unemployment rate is 27.2% - the 6th highest in the world) and, given the current economic downturn, unemployment may be set to increase. A recession such as the one South Africa is currently entering can be seen as a great leveller with no-one remaining untouched by its effect.
Organisations will need to become more streamlined and focus on reducing costs in as many areas as possible. Unfortunately one of the areas first affected is the wage bill but we say rather cut waste than staff. Reducing waste on the manufacturing line is one place to start. Ensuring that the waste generated is kept clean is another way to recover maximum value from it; for example paper that is contaminated with food or oil cannot be recycled but clean paper will fetch the best prices. Attaining zero waste does not mean not generating waste. It means letting as little as possible go to landfill and generating as much income as possible from all waste generated. Even traditionally non-recyclable waste now has value as more waste management companies are providing alternative solutions for non-recyclables.
South Africa has both no money and no space to build new landfill sites and the existing ones are filling up at alarming rates. Rather than build new landfills we need to focus on ways to reduce the ones we have and eliminate unnecessary waste from entering the landfill.
Recycling has always made sense but now more than ever.
So why then do we ask the question whether waste management companies will be able to afford to process the materials?
Let’s have a look at the realities:
- The value of recyclables has dropped dramatically in recent years.
- Certain grades are in a position of oversupply which means the prices have crashed.
- Landfill dumping prices continue to increase.
- Small profit margins have taken casualties in the recyclable manufacturing sector leaving fewer mills to process the material.
- This in turn results in an oversupply of some material. and a further drop in commodity prices
- As buying prices drop, competition for material becomes more intense.
- Because of the price decrease, the informal market has less motivation to collect recyclable material and may focus on higher paying grades while neglecting lower paying though equally important recyclable grades.
- This, in turn, reduces the feedstock for manufacturing plants who have to downscale their operations, increasing the risk of staff cuts.
Of the 520 million tons of waste generated by South Africans every year, only 13% of it is recycled.
It is estimated that South African Landfills take up 450 million cubic meters of space and yet over 70% of the “garbage” in South African landfills can actually be composted or recycled.
Did you know that up to 60% of the rubbish in your dustbin could be recycled? How much of the rubbish that you discard is just packaging? It has been calculated that, on average, 16% of the money you spend on a product pays for the packaging, which ultimately ends up as rubbish.
The bottom line is that recycling is still the most cost efficient way to get rid of trash. For companies that pay for general waste removal, separation of waste at source and reducing the amount of general waste to be disposed of makes sense. For homes and schools, generating an additional income from selling sorted recyclables makes just as much sense.
It is clear then that South Africans need to rethink the way they view waste management.
Population growth rates and trends show an increased urban migration of rural populations which puts pressure on infrastructure that was never designed to support the population expansion. Municipal waste management programmes remain ill-equipped to deal with explosive waste volumes. Through education and awareness of alternative waste disposal methods such as recycling and its income generating potential, poverty can begin to be addressed and local economies boosted.
So while there may be a drop in the value of recyclable material, the need to recycle remains unaffected.
Recycling has developed into a well-established economic sector in South Africa. Despite the current downturn, the profitability of using reclaimed material as a manufacturing input source material is still greater than using virgin materials, especially in those grades that have infinite recyclability such as glass and aluminium.
Contrary to the traditional business model, recycling can be said to be recession-proof. It follows then that the activities related to recycling are also recession-proof.
While the recession may lead to a reduction in the amount of waste that consumers generate, there is still a significant amount of waste in circulation and we may not become complacent thinking that there is less going to landfill. In an effort to encourage recycling and implement Waste Act legislation, municipalities are beginning to implement recycling practices at household level. It makes sense, then, to develop recycling disciplines in our homes before punitive action is implemented. Waste management companies are recommending that residents get into the habit of sorting their waste making it more hygienic and environmentally beneficial for the informal waste collectors. By separating waste into different grades of paper, plastic, cans and glass and placing it into clear bags on the curbside, informal collectors will be able to take only the material that they are interested in and not have scrummage through the entire waste bin which is both unhygienic and makes an unsightly mess. Getting into this new routine may take some time but if all residents adopt the separation at source approach, eventually the informal collectors will catch on too.
The effect will be greater extraction of recyclables from the general waste stream, less waste going to landfill, more recyclables for the hawkers to sell to the recycling companies, greater income generating opportunities for the hawkers, increased material volumes will be supplied to recycling companies which reduces their processing costs and enables them to pay higher prices for recyclables.
All because you chose to adopt a habit of separation at source.
So to answer the question “can waste management companies still afford to process recyclables?” yes, waste management companies are the answer to staving off the effects of the recession that the man on the street may feel – if we all do our part.