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South Africa is home to roughly 90,000 waste pickers, recyclable collection companies and entrepreneurs who earn a living by collecting, sorting and delivering recyclable waste to Mpact Recycling’s branches.
These men and women are the life blood of the recycling value chain. They contribute a large portion of the volume of recyclables that Mpact Recycling is able to trade and sell on to re-processors of the material. What affects the money they can get for recyclables they collect?
Trading recyclables is an industry that has come about because the materials traded have an end use after they’ve served their purpose as packaging material. Boxes, punnets, glass bottles, cans and PET bottles are all examples of this material that can be turned into new products again. Thus, there’s a market for this material, which means we can trade.
As with all markets, recyclables are susceptible to market forces and are affected by economic laws such as supply and demand. Simply put, the amount available in the market (supply) should be calculated according to the amount of people who want it (demand).
At Mpact Recycling, we provide a platform to trade in recyclables, which we buy, bale and sell on to Mpact’s sister divisions and other customers, both locally and abroad. These divisions use the material in the production of new packaging.
But, if less packaging is needed in South Africa because consumption is lower and brands’ products remain on shelves, fewer products will be bought by South Africans and so, less packaging material is needed to make the boxes, bottles or cans to package products. This is but one example of the multiple factors that could lead to oversupply.
When oversupply happens, this means we end up with more recyclable materials than what our local industry can use. While Mpact Recycling’s branches still buy the recyclables, when the supply exceeds the demand, the value of these materials decreases, affecting the prices we can offer to our collectors.
The recycling industry is a fast moving and competitive industry. It’s sensitive to many factors. Anything that brings operations to a halt can severely affect the way we’re able to trade.
Recently, winter in our country has brought harsh extremes in the weather with heavy rains, hail and floods. For example, in 2022, our recycling branch in Pinetown, Durban was hit by the floods. The waterlogging of cardboard stock and having to momentarily halt operations was very damaging. Even though little structural harm came to the branch, the cost of not being able to trade hurt our capacity to pay collectors.
Another example lies in consumption patterns. If for example, hot summers see consumers drinking more soft drinks packaged in PET plastic bottles than in winter, producers fluctuate in their demand for material. It’s a constant balance in capacitation of the recycling value chain that sees the price of material fluctuate according to the supply and demand.
South Africa cannot process certain recyclables due to limited facilities. This leads us to export these materials to countries equipped for their processing. This strategy not only ensures effective recycling but also helps in reducing the burden on our local landfills.
However, the costs associated with exporting recyclables can fluctuate significantly. When it becomes too expensive to export, we, along with other local companies, might opt to keep these materials in South Africa. While this might seem beneficial at first, it can also lead to oversupply.
Adding to this complexity is the impact of global policy changes. China is the largest importer of waste in the world, accounting for over 50% of the total waste imports. In 2018 their government actioned a policy to curb China’s own environmental concerns, banning the import of 24 categories of solid waste, including plastics, paper, glass and metals that only China has the means to process at high volumes. This effectively cut global demand in half.
The loss of this outlet, combined with the fluctuating costs of exporting to other countries, has had a profound effect on recycling operations in South Africa. We now must navigate these global market changes while managing the local oversupply, striving to maintain a balance that allows us to continue our essential recycling work effectively and sustainably.
In addition to natural disasters, wars and international policy changes, other unexpected events can impact pricing too.
The COVID-19 pandemic, for example, led to an unprecedented surge in the demand for boxes. This was because people all over the world were in lockdown, and they turned to online purchasing for their household needs and recreation.
Even though our facilities were in lockdown too, Mpact Recycling worked hard to meet this spike in the global demand for cardboard boxes by paying more for the materials required. And of course, once the pandemic ended, the overall demand for cardboard recyclables normalised too.
In 2021, the South African government initiated Section 18 of the Waste Act which changed the landscape of waste disposal and recycling in SA. Through it, the burden of responsibility shifted away solely from individuals, toward manufacturers, distributors, and importers of products.
This “extended producer responsibility” (or EPR) tasks these businesses with collecting, recycling and sustainably disposing of products once end users have exhausted their use. It also states that these businesses should develop partnerships with waste management companies and informal collectors to establish working EPR schemes. This led to the formalisation of Producer Responsibility Organisations (PROs) like Fibre Circle and Petco, who take the responsibility on behalf of their member businesses for administering the schemes for various identified materials.
Whilst failure to adhere to EPR can result in heavy fines or even jail time, complying can be extremely beneficial to businesses. For the producers who commit at a policy level, PROs can grant access to government subsidies, thus making the recycling of products that would have otherwise gone to landfills a lucrative exercise for businesses.
Recycling isn’t static. Every year brings new advancements, and each one has the potential to completely transform the industry as we know it. This rapid advancement in technology, alongside academic research in the area, means that for us to stay relevant as a business and champion of sustainability, our acceptable practice must evolve as well.
For example, in the past, it was difficult to accurately measure how much of the material’s mass was comprised of water, but water-testing technology has improved markedly in recent years. This (alongside similar measures for other materials) plays a part in ensuring we can find and provide the best possible materials.
The technology isn’t perfect, however. We still end up paying for that water weight on collection, and that excess can be detected at the mill, meaning lower fees for Mpact Recycling than anticipated.
The recycling industry is fiercely competitive and countless factors affect pricing in the landscape.
The packaging sector we service is worth R200 billion (estimated to grow to over 250 billion by 2028) and we directly compete with roughly 300 recycling companies.
These competitors are free to set their costs to gain a leg up on the rest of the market, forcing the rest of the industry to respond in kind. With lower earnings, there’s less available to pay collectors.
People are more knowledgeable about their environmental impact than before. Consumers now demand products that are not only sustainably sourced but packaged sustainably as well.
The packaging industry needs to be able to respond to these trends by ensuring containers meet expectations. Suppose the market desires that a product’s packaging should be sourced in a certain way or use certain materials only – it will mean less demand for materials that don’t measure up to the market’s standard, lowering their value.
For Mpact Recycling, these changes in consumer behaviour can mean less demand for certain materials we trade. Again, this impacts the value of the materials we sell to our customers or partner Mpact divisions and has a knock-on effect on what we can pay for collected recyclable waste.
There’s no hiding from the fact that South Africa has its own set of unique problems.
Loadshedding, for example, is a concern for every citizen and this is especially true for our branch staff. Our entire collecting and sorting operation requires electricity. But with rolling blackouts, our output falls and we earn a fraction of what we’d make under normal circumstances. With loadshedding, the plants we provide materials to become less productive too, and we can only earn as fast as they can process what we bring them.
Rising transport costs are also a concern. Waste we sort through needs to be trucked to mills and other processing facilities to be processed into usable material for new packaging products. These heavy loads (oftentimes waterlogged cardboard) need vehicles that are expensive to run and maintain, and it takes many trips back and forth.
Our branches are also manned by sorting staff on payroll. We often need to hire additional staff to handle the ever-increasing load of a workday.
Our working relationship with collectors is critical. These people perform a difficult service that not only adds value to the greater community but enables us to honour our business commitments, along with our commitment toward building a conscious and working circular economy.
But, as we’ve seen, the recycling value chain is a collection of components that are susceptible to a myriad of external forces and is always in a state of flux. This ultimately always affects the price collectors can get for their recyclables at our branches. While this volatility is a fact of our industry, Mpact Recycling, as part of the Mpact group, will always strive toward smarter, sustainable solutions. We will continue to buy all relevant collected materials, in our guarantee to those who collect, and keep the mills and processing plants supplied with the best quality material to ensure our drive to circularity.
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