Circular Economy: South Africa has a unique challenge mainly to implement good policies
JOHANNESBURG – Business models based on collaborative consumption are typically quickly developing or well established around high-value products such as vehicles and buildings. Leasing models for cars are well established and ride-sharing applications are widely available.
In the tourist sector, sharing platforms have made a serious impact, representing around more than 15 percent of all stays. In other sectors, the numbers are much lower. However, some experts estimate that the collaborative economy could add billions to the South African economy.
Therefore, there is a high potential for new businesses to seek to capture these fast-growing markets, as well as strong consumer interest. Collaborative practices are also developing in the informal sector, for example in community networks. They are not always captured by economic statistics but can nevertheless contribute significantly to the circular economy.
Funding for these Greenfield projects will be required and donors from European markets will be required to ignite these initiatives.
Circular economy products for disruptive innovations in South Africa are as follows:
Packaging, while itself, not a product, is strongly associated with products. The high impacts of packaging on the environment, particularly when littered, are widely acknowledged. South Africa must start and expedite preparatory work on Plastics Strategy’s action to work towards new harmonised rules to ensure that by 2030 all packaging placed on the market can be reused or recycled cost-effectively, in line with other leading nations, we mustn’t be behind in the future as information is available for all government to implement what’s common in the global markets now.
The food sector is one of the South African biggest sectors in terms of employment and contribution to GDP, with over thousands of businesses involved in producing, processing, transporting and selling food. The 'food system' uses many natural resources, such as land, water, nutrients and energy for food production. Subsequent processing, packaging, transportation and refrigeration use further energy, cause emissions and use materials. Food and drink production is linked to many environmental effects, including biodiversity loss, water and air pollution, and greenhouse gas emissions.
The Regulation on Food Information to Consumers has the objective to pursue a high level of protection of consumers’ health and interests by providing food information to final consumers to enable them to make informed choices and to make safe use of food, with particular regard to health, economic, environmental, social and ethical considerations.
Electrical and electronic equipment (EEE) and batteries
In today's world, semiconductors have become essential components of many aspects of our daily lives, so much so that the business of producing semiconductors is of key strategic importance to all industrialized countries. This market can build a viable pool of small and large corporates in the circular economy in partnership with industry large corporates and enterprise development can be set aside to build this new economy.
Transport and mobility
The role of mobility in a circular economy is important and complex. Developments such as alternative fuels mobility, cooperative, connected and automated mobility, car sharing, drone delivery and many others are emerging and changing our approach to transport. Several policies are in place at different levels.
The stricter CO2 emission standards for new passenger cars and light commercial vehicles resulting from the revision will ensure that from 2030 onwards new cars will emit on average 37.5 percent less CO2 and new vans will emit on average 31 percent less CO2 compared to 2021 levels. Between 2025 and 2029, both cars and vans will be required to emit 15 percent less CO2. Following the Electric Motor agreement and players participating on it, I have learnt that so many things happen while South Africa is not involved and when market disruptions emerge we are not even ready to manage complexity emanating from such innovations. We must strive to be ahead at all times, Germany, Sweden and Denmark can share experiences in areas we lack
More than a quarter of the world’s furniture is produced in the EU, representing a market of around 84 billion euros. Furniture producers in the EU are mainly SMEs. The EU is a net exporter of furniture, but production outside the EU is increasing faster than within and with it the amount of imported furniture. Furniture produced in the EU often consists of certified wood and generally enjoys long product lifetimes, but there is an indication these are decreasing and reuse options with them. In some cases, shorter product life may be caused by an increase in the use of plastic, chipboard and medium-density fibreboard (MDF) to replace more durable but more expensive solid wood and metal.
This is a big industry Mpumalanga and KZN can take advantage of mainly with their wood advantage. I was at Empangeni the past month where I witnessed attractive markets that has potential to set additional factories that can adopt the future of manufacturing technologies and develop renewal centers for waste furniture .
Textiles (apparel and fabrics)
Textiles such as garments, textile parts of footwear and home interior textiles including carpets are sold worldwide and are used in industrial applications including in construction, automotive and other mobility sectors. South Africa is no longer a competitive producer of textiles but has a huge potential to rebuild this market. Development finance institutions must have this sector developed and reduce the import of textiles to our economy.
Sustainability aspects of textiles are wide. The production of bio-based materials such as cotton or wool requires much water and other agricultural inputs, while synthetic fibres and yarns used for the production of textiles are mainly fossil-based and also have plastics related issues such as a microfiber or microplastic discharge. Concerns about environmental effects as well as the working conditions under which clothes that are sold sit south Africa are often produced outside of South Africa has led to several initiatives and approaches to improve this challenges.
Recycling of textiles takes place to a limited extent and when it takes place, it is often a matter of downcycling where the recycled material is of lower quality and functionality than the original material. There is limited knowledge of the feasibility of recycling several fibres in mixtures, from an economic and environmental point of view. Challenges include the complex combinations of materials in garments and the presence of hazardous ‘legacy’ substances, such as flame-retardants in carpets that were authorised at the time of production but are (soon to be) subject of restrictions at the time of recycling.
Buildings and Construction Products
The construction sector has large potential for the circular economy given the scale of material use, the value contained in buildings, labour intensiveness and long-term effect of measures. The overall objective for circular buildings is to reduce life cycle impact at the same time as providing healthy and comfortable spaces. This means amongst others reduced whole life carbon. The overall objective for circular buildings is to reduce life cycle impact at the same time as providing healthy and comfortable spaces. This means amongst others reduced whole life carbon consumption, increased reused and recycled content and sustainable handling of construction and demolition waste. Circularity and sustainability need to be assessed over the whole life cycle of the building to optimise the reduction of carbon emissions and material flows.
Town and Regional planners and Architectures in cities and municipalities must identify new ways of development of the smart cities, Megaprojects and other developmental projects to adapt to circular economy standards in developing resilient cities that can assist in reducing emissions and comply with sustainability standards.
National legislation on building codes is sometimes silent on materials, or not up to date with the development of building products which could increase the energy efficiency and performance of buildings from a sustainability perspective as well as replace energy-intensive materials e.g. also in tall buildings. An example is a permitting use under these codes of wood-based products, in particular, so-called engineered wood products (EWP) such as cross-laminated timber (CLT), laminated veneer lumber (LVL) and glued-laminated timber (glulam), which can efficiently retain a long-term carbon pool - especially in wooden buildings. It is therefore vital to raise awareness of these aspects.
South Africa is a big economy and we need to quickly adapt to global standards on the building and construction sectors, some of the South African REIT stocks have managed to adapt to that while many buildings are behind in sustainability standards. The Johannesburg Stock Exchange ESG summit slightly highlights this element, mainly from their sustainability reporting and environmental conscious for their listed REIT stocks.
In developed economies and emerging markets, about 85% of goods are directly linked to chemicals or chemical processes, including products mentioned above.
The deployment of different policy tools will allow for tailoring them to the specificities of the products they cover and the way they do this. However, to optimise their efficiency and contribution to the circular economy, it requires regular consideration of the overall consistency of the policy intervention.
South Africa has a unique challenge mainly to implement good policies. Transformation will only happen when we change these elements of failure to implement policies and prioritizes smooth execution. This begins with considering which products to cover, and how. When multiple policy tools apply to the same products, there should be consideration of possible synergies and avoidance of overlap or inconsistencies.
The circular economy is mega and it will need joint Department committees not only Department of Environmental Affairs and Water affairs must champion this multiset of Megaprojects but also require mainly Department of Economic Development and Department of Science and Innovation to lead in building this new economy.
The funds collected in different sectors must be ring-fenced to assist in the development of those specific sectors and that will add value in developing the South African Circular Economy industries. The circular economy encompasses environmental but also it’s not recycling, recycling is a unit within the circular economy.
Miyelani Mkhabela is an economist, a director of Antswisa Transaction Advisory Services and Antswisa Private Equity. [email protected]