The circular economy as a pathway to growth

A resource-rich country such as Zambia sells its copper to the mining companies, but if it rented out the asset instead it could derive much longer-term benefits.


What if Zambians could be compensated not just for the extraction of their copper but also for the use and reuse of it in perpetuity?

This would solve several problems at once, the simplest being that mineral-rich countries would not fall on hard times when there was no more material to be pulled from the ground. In today’s industry structure, countries typically earn the equivalent of rents from mines and royalties payments dependent on the quantity and quality of what is pulled from their earth.

But the underlying asset – copper in this example – is owned by the mining company, which then sells it onwards to smelters, who sell onwards to product manufacturers, onwards to consumers, etc. By not selling the asset and instead renting it through the value chain, Zambia would be assured of continuous, long-term income for as long as the copper exists.

The second advantage would be creation of a positive incentive to reuse and recycle beyond the current niche industry. Manufacturers would be forced to rethink product design to enable easier extraction of materials as Zambia would require their copper to be returned after the rental period is over.

Consumers would be much more deliberate about what to do with the product once it reaches its end of utility. Rather than throwing it in the drawer to be forgotten, they would have an obligation to return it to the manufacturer as any smart manufacturer would have back-to-back agreements that ensure they can return the copper to Zambia as per agreement.

Finally, renting the use of a product has lower upfront costs than buying it outright. While this might mean lower initial revenues for Zambia, moving to this model would ensure capture of market share for them and everyone downstream, including manufacturers’ market share of their products with consumers.

With the rapid cycles of product innovation, there are few assets outside one’s home and heavy machinery that function for decades. While the idea itself might seem novel, the inspiration behind it is all the rage these days.

With Uber and Airbnb as the global poster children for the movement, what is the shared economy if not a sophisticated rental model? One that creates opportunities by sharing expensive assets and making them easier and cheaper for more people to access for just the period needed?

Returning to the source

The circular economy can provide more pathways for growth in African economies as they straddle being a key source of raw minerals on one hand, and drive rapid industrialisation on the other. And while it sounds fancy and new age, it is not a new concept – the idea of things returning to the source is not new to African civilizations. It shows up in proverbs, children-naming norms, agricultural practices – complete loops of use-recycle-reuse have always been in the African way of life.

Edwin Macharia is Dalberg Advisors’ Africa regional director and a Tutu Fellow.

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