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| The South African government will next break tyre recycling. |
WHEN Wheels asked Hermann Erdmann, CEO at the
Recycling and Economic Development Initiative of South Africa (Redisa), in April
how a new tax on tyres would impact the Redisa recycling fee, he had to plead
ignorance to government’s intentions.
Back then, we asked if the new tyre levy that was announced in the
national budget speech would replace the existing waste management fee and if
not, what other amount government wants to slap on all new tyres sold.
The amounts involved are huge — in 2014 Erdmann told Wheels the tyre levies to Redisa amounted to R620 million a year,
each cent of which was audited by three auditing firms — KPMG,
PricewaterhouseCoopers and Ernst and Young.
Erdmann has now learned government wants the Redisa fee, which adds
up to roughly two-and-a-half Nkandlas, to disappear into the deep dark pool that
is the fiscus, and he wants none of it.
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| Hermann Erdmann, before he got the taxing news |
“We are in consultation to make a 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.”
In an urgent media statement, Erdmann on Tuesday said government’s
new waste management plan funding strategy will result in job losses and destroy
the fragile recycling system Redisa has laboriously built over the past three
years.
“According to the draft Waste Tyre Regulations published on
August 12, funding of the country’s waste tyre stream management plan will go
into the fiscus on October 1.
“This means that the fledging 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,” he said.
He hinted government should stop paying lip-service to job creation
and stop over-taxing the entrepreneurs who make those jobs. “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 both develop and thrive, not create jobs
itself or even manage the process.”
The plastic bags failure
Citing the Redisa plan as “an example of the
perfect collaboration between government and private industry whereby the
platform is provided to Redisa as an NPO to operate, be accountable and report
back regularly to the Department of Environmental Affairs”, Erdmann predicts
government will fail even more dismally at collecting and recycling tyres than
it has in collecting a fee to recycle plastic shopping bags.
“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 seven percent
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.”
Erdmann reminded minister Edna Molewa that she had emphasised the
waste management fee collected would not end up in the general fiscus when the
Redisa plan was legislated. Instead the minister had made it the responsibility
of tyre manufacturers and importers to pay for 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.”
Tax vs a fee
Erdmann said 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.
He said money collected from taxes disappears into the general
fiscus, while the waste management fee on the other hand 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,” Erdmann
said.
So what next?
Erdmann said the Redisa plan provides government
with a tyre recycling solution at no cost to the fiscus that also creates jobs,
as confirmed by the Institute of Race Relations as well as McKinsey.
“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, affecting
the waste pickers working within the Redisa micro-collector programme; the
university students who are benefitting through Redisa bursaries and jobs such
as the Redisa depot at Cato Ridge.
“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 replace it with an approach that has
proven to fail, would be short-sighted and to the detriment of all involved,”
Erdmann said.
