Solutions&Co 2017: Opportunity and challenge in the circular economy

From Johannesburg’s luxury shopping malls to Senegal’s cheap Chinese retailers, African consumers are increasingly gaining access to the goods and conveniences that have long been the preserve of the developed world.

A rapidly growing middle class and an exploding range of lifestyle choices mean the demand for new products will only increase. Yet with Africa facing an uncertain environmental future – the continent remains more vulnerable than any other to rising global temperatures – critics are beginning to ask whether a sudden expansion of industry and consumption could wreak havoc on Africa’s fragile ecosystems.

They point out that the transition to a modern economy will likely entail significant disruption, from a huge increase in waste to the environmental impact of new factories, transportation and energy systems. One possible antidote is to transition from the current linear economy – taking things out of the ground, turning them into products then disposing of them in landfills – to a circular economy, which reuses and recycles goods into new products rather than throwing them away.

Research conducted by McKinsey Global Institute suggests that in Europe alone, a circular economy could generate a net economic gain of €1.8 trillion ($2.1 trillion) per year by 2030, reflecting a 75% decline in the costs associated with driving and a 50% reduction in construction costs.

Transitional costs are enormous, however. The British government estimates that creating a fully efficient reuse-and-recycling system would cost around €14bn. The price for doing so throughout Europe could reach €108bn. From 2000 to 2013, the renewables transition in Germany cost €123bn in feed-in tariffs. In Africa, the added costs of R&D, asset investments, subsidies and spending on digital infrastructure would likely be beyond the means of many countries, which are only just finding their footing in the global economy.

Some experiments with the circular economy model are nonetheless moving forward. One high-profile project, the Recycling and Development Initiative of South Africa (REDISA), has thrown into sharp relief the challenges and difficulties of the concept. REDISA was set up in 2012 in an effort to solve the country’s growing used-tyre problem – some 11m are added to unsightly piles and dumps each year. Many are used to provide cheap, environmentally destructive heat for poverty-stricken townships, others are melted down for their scrap steel content, leaving most of the tyre as waste.

REDISA established processing facilities, and during the project’s first 18 months, the amount of used tyres collected for recycling increased from 3% to 70%. REDISA planned to process the majority in a high-value material recovery process by 2020, and it claimed that up to 10 full-time jobs would be created per 1,000 tonnes of collected tyres.

While the organisation was hailed by many as Africa’s foremost example of a circular economy concept in action, it turned out to be very badly managed. In late September 2017, REDISA and its private management company Kusaga Taka Consulting were placed in final liquidation by the Western Cape High Court after directors were found to have been involved in “unlawful misappropriation of public funds”. REDISA’s assets will be transferred to the country’s Waste Management Bureau, but the future of its operations is now in doubt.

The vast ambition and stunning failure of the project provide a lesson in the opportunities and dangers facing Africa’s circular economy: Get it wrong, and countries could be shackled to costly, poorly managed initiatives that lend themselves to graft and opportunism. Yet if governments can plan ahead and concentrate resources into sustainable, efficient initiatives, the circular economy could represent an encouraging response to the continent’s immense environmental and development challenges.

African Business