We should apply lessons from plastic bag fiasco to the tyre tax
GOOD FOR ECONOMY: Recycling tyres has given jobs to many low-skilled South Africans THERE is a moment at the till of your grocery store when you’re asked: “Plastic bag?”
Environmentalists had hoped that being presented with this option would create sustainable behaviour change as consumers buy reusable bags en masse.
It didn’t. It is fair to say that when faced with that question, consumers assume the money they fork out for the bag will go towards some environmental or recycling initiative. That could not be further from reality.
Of the R200-million collected annually through the plastic bag scheme, only 15% makes it out of the government’s budgetary black hole and is actually allocated to the Department of Environmental Affairs.
What started out as a meaningful campaign to ban plastic bags — which former environment minister Valli Moosa called “our national flower” — has only developed into a convenient cash cow for the fiscus.
Surely we should learn from these mistakes?
In his medium-term budget policy statement this year, Finance Minister Pravin Gordhan reiterated that several measures were being explored to raise additional tax revenue.
These included the special voluntary disclosure programme, which is in place, and two new taxes — a sugar tax and a tyre tax.
Those who support the tyre tax model, scheduled to be implemented in February next year, argue that it will generate revenue and drive economic growth.
The truth is that this seemingly reasonable initiative will have worse effects than the plastic bags fiasco.
The new tyre tax will not only deal a blow to recycling initiatives, it will inadvertently put thousands of local jobs at risk, undermine the development of black-owned small and medium-sized businesses and negate the huge economic potential of the model for South Africa’s future growth.
The Recycling and Economic Development Initiative of South Africa receives a tyre waste management fee. With this money coming directly to us we are able to mentor more than 200 SMMEs, through support made possible by the Redisa plan.
Students are benefiting through Redisa bursaries and 3 500 jobs are dependent on the network we helped to establish.
We don’t doubt the government’s good intentions. The plastic bag tax was put in place to encourage reuse and recycling while mitigating the environmental impacts of plastic bag pollution.
The money collected was meant for the expansion of waste collection. The question is why the government would want to go down a road that would lead to the collapse of a developing industry.
Understanding the difference between the Redisa waste management fee and the new tax is critical to ensuring the success of the nascent tyre recycling industry’s development.
A tax is a compulsory contribution to state revenue, levied by the 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 paid by producers to offset the cost of dealing with tyres once they reach end-of-life, in direct proportion to the volume of tyres they put on the market.
A critical difference is that this money is directly and specifically applied to dealing with the product and building the recycling industry, making it far more effective than a taxbased system where funds are diluted into the general National Treasury pool without being ring-fenced.
The funds collected from the plastic bag tax were meant to go directly to the fiscus, with the Department of Environmental Affairs having to apply to the Treasury to recoup funds in order to develop the promised recycling industry.
This has proved to be unsuccessful in the case of plastic bags. An NGO called Buyisa-eBag was started in 2004 as the implementation arm, but was wound up in 2011, unable to achieve its key objectives.
A study by the Council for Scientific and Industrial Research reported that in the February 2006 financial year, only 7% of the levies collected got paid to Buyisa-e-Bag.
When the current Redisa plan was legislated, Environmental Affairs Minister Edna Molewa emphasised that the waste management fee collected would not end up in the general fiscus, and that it would be the responsibility of those introducing the waste, such as tyre manufactures and importers, to pay for the remediation of the resulting waste.
The advantage is that Redisa is wholly accountable for what happens with the funds through strict corporate governance practices and audit requirements that ensure they are applied according to the mandates set out in the plan.
What has made the Redisa plan successful over the past three years is its funding model — in which the fees are paid directly to us and are allocated in an auditable and accountable fashion.
The Redisa plan, which is globally recognised, provides the government with a viable solution at no cost to the fiscus.
To remove the one aspect that makes it so successful and replace it with an approach that has been proved to fail, would be short-sighted and to the detriment of all involved, and of the future development of waste management in the country — an industry which we estimate is able to drive R150million for waste tyres alone in terms of economic stimulation.
The tyre tax model does not
The new tyre tax will put thousands of jobs at risk The Redisa plan proves a waste management fee is best
ensure that money is accountably directed back to Redisa, so that we can continue our work in recovering and recycling waste.
The Redisa plan proves that a waste management fee is the best solution not only to ensure an overall positive impact on the environment but also to drive economic growth, develop infrastructure and a new industry creating small business opportunities and a source of income for many low-skilled citizens.
If we take a lesson from Moosa’s campaign to control the “national flower”, we would not repeat that plan’s failure.
Erdmann is Redisa CEO