SUBMISSIONS BY THE METAL RECYCLERS
ASSOCIATION
TO THE PARLIAMENTARY PORTFOLIO
COMMITTEE ON ENVIRONMENTAL AFFAIRS
ON THE NATIONAL ENVIRONMENTAL
MANAGEMENT:
WASTE BILL [B39-2007]
_____________________________________________________________
INTRODUCTION
1
These submissions
are made to the Parliamentary Portfolio Committee on Environmental Affairs by
the Metal Recyclers Association (“the MRA”).
The submissions relate to the National Environmental Management : Waste
Bill [B39 – 2007] (“the Bill”).
2
The MRA consists of
almost 100 members involved in the collection and processing of approximately
80% of all scrap metal in
3
The MRA welcomes
and appreciates the opportunity to make both these written submissions and an
oral presentation to the Portfolio Committee at its public hearing process
scheduled at Parliament on 21 November 2007.
4
The MRA also welcomes
and supports in principle the broad objectives of the Bill. The MRA and its members are committed to the
achievement of advancing the objects of
the Bill, set out in s 2 thereof.
Indeed, the very purpose of the industry in which the MRA’s members are
engaged is to recycle metals (both ferrous and non-ferrous).
5
For the reasons set
out below, the MRA submits that there are compelling reasons why the definition
of “waste” in the Bill should be revisited and its scope narrowed, to exclude
scrap metals which have a value and are disposed of or collected for purposes
of processing, reuse, recycling or recovery.
It is necessary to distinguish between scrap metals and waste in
general. Failure to do so – and
subjecting the metal recyclers industry to the provisions of the Bill – will
result in inappropriate and unjustified consequences. Ironically, it is likely to increase the harm
to the environment and the need for landfill sites. This – we shall explain below – would be the
result if the metal recycling industry is subjected to the provisions of
legislation which should have no application to scrap metals - which are not
truly waste. It would result in
additional burdens and costs which inevitably will have a serious impact on the
widespread and efficient collection of scrap metals by small operators. It will render their business operations
commercially unviable and therefore lead to a reduction in the scale of
collection and recycling of scrap metals.
Such materials that are not collected and recycled will harm the
environment and increase the need for landfill sites for their disposal.
THE METAL
RECYCLING INDUSTRY
6
The metal recycling
industry in
7
The role of scrap
metals in the South African economy – and its benefit to the environment - was
summarised as follows in a report entitled “Study of the Scrap Industry and Proposed
Measures to Maximise the Beneficiation of Scrap Metal in
“As demand for essential
mineral resources for economic and social development continues to increase, so
too does the need to ensure their availability for future generations. The pace of growth in the global economy and
demand for resources suggests that raw materials will remain the primary source
of mineral and metal commodities.
Increasingly, however, recycled materials (commonly referred to as
“scrap” or “scrap metals”) have become an important alternative source of such
resources and countries throughout the world are taking decisive steps to grow
and strengthen their secondary metal industries.
There are numerous advantages
to growing the local secondary market for metals. Most importantly, metals provide a unique environmental advantage. Due to their value, consistent performance
characteristics, durability, chemical properties, and wide-range of uses, most
metals can be repeatedly recycled.
Technological improvements in metal recovering processes over the years
have enabled the industrial smelters and foundries to increase metal yields obtained
from secondary metals. Less electricity
is used in the process and little chemical or structural change incurs in the
resultant product, engendering
significant economic cost advantages.
For example, aluminium scrap can be recycled repeatedly using only 5% of
the energy to produce aluminium ingots compared to virgin aluminium, and
generates only 5% of the greenhouse gas emissions. Recycled iron and steel and copper result in
energy savings of 74% and 85% respectively.
Steel scrap also forms an integral part in the production of stainless
steel. Lead that is recycled requires
about 35% - 40% of the energy needed to produce lead from the ore. Furthermore, recycling conserves natural
resources, extends the life of materials, reduces stress on municipal landfills
and incinerators, and results in substantial energy savings and significant
reductions in effluents, particulates and greenhouse gas emissions.
Another key benefit of scrap
metal is that it usually trades at some discount to virgin metal. Recycled metals have consequently become a
critical source of supply, and are now traded on national and global
markets. Demand for scrap metal is
particularly high in resource poor countries, particularly in
Recycling also provides a
significant input to downstream industries which use scrap to produce intermediate products of
greater monetary value. According to the
Non-Ferrous Metal Industries Associations of South Africa (NFMIA) the secondary
industry plays a vital role in support of further downstream value added
activities. Some of the key
contributions of the secondary industry are:
1
provides
competitively priced raw material inputs to downstream manufacturers below the
prices of primary metals;
2
stimulates local
fixed domestic investment in the manufacturing sector which further contributes
to job creation and export opportunities;
3
supports and
complements a metals recycling industry;
4
contributes to
energy saving and recovered metal uses much less energy than in the production
of primary metals.
Scrap is produced/generated in
a number of ways. One way is through
the industrial production process.
Metals that are shaped, cut, pressed and formed give rise to cuttings, shavings,
turnings and other left over materials.
The scrap metal that is generated is sold for processing and/or
melting. This is referred to as new or
production scrap. New/production scrap
also arises as a by-product of the metal recovery processes in the form of
dross, which arises from the oxidation and cooling of metal. The dross is recycled to recover the trapped
metal…
Scrap metal is also produced by
the ultimate user at the end of the steel product’s useful life. The old or obsolete product enters the
recycling system at that point. After
processing the scrap metal, the scrap processor will sell the processed scrap
to a mill, foundry, or other concern that will use the metal to make new
products. Examples of commonly recycled
scrap metal products are: old vehicles, old farm equipment, discarded household
appliances, old batteries, rail tracks, discarded food packaging, used beverage
cans (UBCs), old machinery and equipment, scrapped ships and metal recovered
from old building and industrial plants.”
(emphasis added)
8
The same report
summarises the types of scrap as follows:
“Scrap metal is divided into
two types : ferrous and non-ferrous.
Ferrous scrap is scrap iron and steel.
This includes scrap from old automobiles, farm equipment, household appliances,
steel beams, railroad tracks, ships and food packaging and other
containers. Ferrous scrap accounts for
the largest volume of metal scrapped.
Ferrous scrap is classified into almost 109 grades, including railroad
ferrous scrap and grades of alloy scrap.
Metal alloys are made from a combination of two or more metals.
Non-ferrous scrap metal is
scrap metal other than iron and steel.
While the volume of non-ferrous scrap is less than ferrous scrap, it is
more valuable by the pound. Examples of
non-ferrous scrap include aluminium, brass, copper, lead, tin and zinc. ….
Scrap metal, ferrous and
non-ferrous, can be categorised as either “home scrap” or “purchased
scrap”. Home scrap is scrap generated
at the mill, refinery or foundry, and is generally remelted and used again at
the same plant. Home scrap never leaves
the plant and therefore is not accessible to scrap merchants.
The other category, purchased
scrap, is further classified as either industrial (also called new scrap) or
obsolete scrap. An example of industrial
scrap is a piece of metal that is cut or drilled. The metal that is cut or drilled out and is
not incorporated into or made into the finished product is known as industrial
scrap. The largest source of
industrial scrap is the automotive industry.
Obsolete scrap, also referred to as old scrap, is scrap that is worn out
or unwanted in its form. Examples of
obsolete ferrous scrap are automobile hulks, old farm equipment, and major home
appliances.”
9
Metal recyclers
such as the members of the MRA deal essentially with the “purchased scrap”
category of scrap metals – and in particular obsolete scrap - referred to in
the passage quoted above.
10
The volumes of
scrap metals generated and recycled in this country are substantial. Ferrous scrap generated locally amounts to
approximately 2,5 million tons annually.
The market has seen rapid growth in volumes over the past few
years. The volumes of non-ferrous scrap
metals are considerably lower, but the monetary value per mass is substantially
higher than that of ferrous metals.
11
It is estimated
that the gross revenue generated by ferrous scrap metals annually in South
Africa is of the order of R3,5 billion, while that for non-ferrous scrap metals
is R7 billion. Accordingly the total
gross revenue for both ferrous and non-ferrous scrap metals is approximately
R10 billion per year.
12
This involves huge
volumes and masses of scrap metals which
are collected, processed and recycled by the metal recycling industry. Much of it is exported, generating much-needed foreign exchange.
13
The metal recycling
industry therefore plays an important role in the local economy. More important for present purposes, is the
fact that the industry plays a vital
role in the achievement of national environmental management objectives. It ensures that scrap metals are not left to
pollute the environment or to be taken to landfill sites for waste. Instead, because the scrap metals have value,
they are collected by large and small scale operators and sold to merchants and
processors who deal in, process and
recycle those metals. This recycling
means that a substantial part of the raw material needed for the manufacture of
metal products is provided through the recycling of scrap metals. This reduces the need for “virgin”
metals. As the passage quoted from the
report above indicates, it achieves other important environmental savings such
as a substantial reduction in energy required for the production of
metals. It also reduces greenhouse gas
emissions and other forms of pollution and, significantly, it reduces the need
for landfill waste disposal sites.
14
When regard is had
to the objects of the Bill, set out in s 2 thereof, it is apparent that the
metal recycling industry plays a substantial role in serving the interests of
proper national environmental management and the specific objects which the
Bill seeks to achieve. In particular it
serves the following objects:
·
it minimises the
consumption of natural resources such as iron ore and other metals and
minerals;[1]
·
it avoids and
minimises the generation of waste[2]
- in the absence of a metal recycling industry, huge volumes of scrap metals
would simply become waste which would cause pollution and require additional landfill
site provision;
·
it re-uses,
recycles and recovers scrap metals which – but for such processes – would
become waste;[3]
·
it prevents
pollution and ecological degradation.[4]
15
It is important to
note the participation of various types of operators within the scrap metals
industry. The broad categories are as
follows:
·
The so-called “peddlers”,
being individuals who purchase scrap metals and resell them to bucket shops,
scrap merchants and scrap processors. Peddlers’ operations are typically one person outfits
which collect small volumes of scrap metals which they may find lying abandoned
in the veld or in the street or collect obsolete items from businesses or
households. Many of them will move such
items by using supermarket trolleys or other basic forms of transport.
·
The so-called “bucket
shops” typically have between two and four employees and buy scrap from the one
man scrap peddlers. There are
approximately 3000 bucket shops in
·
Scrap merchants
include both small and large businesses.
Small scrap merchants perform
basic processing and sorting and then
sell the sorted scrap to the larger scrap metal merchants. There are approximately 1000 registered
scrap metal merchants. They use various
types of vehicles in their operations.
·
Scrap processors
are large businesses which handle large volumes of scrap. They process scrap metals for beneficiation
by downstream industries. Recycled
scrap metal is supplied to local foundries and steel mills as well as to
overseas customers. These operations
make extensive use of vehicles.
16
The industry is
highly competitive and highly sensitive to cost. This is of crucial significance when regard
is had to the submissions made below. The
additional cost burdens that would be associated with application of the
provisions of the Bill to the scrap metals industry would have a serious
negative impact on the cost structure and viability of numerous operators in
the industry, particularly the small scale scrap merchants, bucket shops and peddlers. If the viability of their business operations
were to be undermined, the collection and recycling of scrap metals would be reduced,
leading to inevitable harm to the environment and an increase in the need for landfill
sites.
THE BILL’S DEFINITION OF “WASTE”
SHOULD EXCLUDE SCRAP METALS
17
In is current form,
s 1 of the Bill defines “waste” as meaning –
“any substance, whether or not
that substance can be reduced, re-used, recycled and recovered –
(a)
that is surplus,
unwanted, rejected, discarded, abandoned or disposed of;
(b)
where the generator
has no further use of [sic] for the purposes of production, reprocessing or
consumption;
(c)
that must be
treated or disposed of; or
(d)
that is identified
as waste by the Minister,
but –
(i)
a by-product is not
considered waste; and
(ii) any portion of waste,
once re-used, recycled and recovered, ceases to be waste.”
18
It is submitted,
for the reasons set out below, that this definition is unjustifiably wide and
that it should be qualified so as to exclude scrap metals that have a value and
are disposed of or collected for purposes of processing, re-use, recycling or
recovery.
19
This exclusion in
para (ii) of the definition quoted above recognises that where an item which
otherwise constitutes waste is re-used, recycled and recovered, it ceases to be
waste.
20
The current wording
has the effect that scrap metals
constitute waste from the time that they are discarded until they are re-used,
recycled or recovered – in other words they would constitute waste even at the
stage when such scrap metals have been collected by peddlers, bucket shops or
other scrap merchants.
21
This, it is
submitted, extends unduly the definition of waste. It fails to take proper regard of the fact
that scrap metals at all times have a significant value. By their very nature, metals have value because
they can be recycled and re-used and there is a significant value per mass in
scrap metals.
22
The dictionary
definition of “waste” is “unusable or unwanted material”. [5] It is understandable that a specific
definition of “waste” should be included in the Bill, rather than simply
relying on dictionary definitions. But,
it is submitted, the definition that has now been included in the current
wording of the Bill goes too far, for it includes within the scope of the
legislation scrap metals that do indeed have a significant value and therefore
should not properly be regarded as “waste” as that term is generally
understood.
23
Because scrap
metals have value at the time they are disposed of or collected with a view to
their being processed, re-used, recycled or recovered, they should be
recognised as such – and not as waste – at the relevant time. They should therefore not cease to be waste
only “once re-used, recycled and recovered” as recognised in paragraph (ii) of
the definition of “waste” in s 1 of the Bill.
The approach which appears to inform the provision in paragraph (ii)
correctly recognises that materials do not constitute “waste” when they are
re-used, recycled and recovered. In the
case of scrap metals, they cannot properly be regarded as valueless waste even
before they are re-used, recycled or recovered because, unlike many other
materials which are truly waste, they have a significant value throughout. There is no rational justification at a
conceptual or practical level to regard scrap metals as being waste at the
stage when they are collected or disposed of, prior to being re-used, recycled
or recovered.
24
There is another
important practical problem created by the current wording of the term “waste”
as applied to the scrap metals industry.
If all scrap metals are to be regarded as “waste” under the current
wording of the definition, at all stages prior to their being re-used, recycled
or recovered, it would mean that the many thousands of operators in the
industry – particularly the small operators – would unnecessarily be subjected
to a system of regulation. That system,
it is submitted, not only is inappropriate for this type of product and
industry – particularly where its whole objective is to recycle – but it will
also have very serious financial costs which will threaten the viability of particularly the small players in
the industry, such as the street peddlers and the bucket shops.
25
As we have pointed
out above, the industry operates on very narrow margins. These will be threatened if additional costs are
incurred in consequence of the application of the Bill, once enacted, to the
scrap metals industry.
26
In that event,
additional costs would be incurred, such as the following in the City of
Johannesburg Metropolitan Municipality under its by-laws governing waste
disposal. If scrap metals fall under the
Bill’s definition of waste, scrap metal dealers would have to comply with those
by-laws. Each operator in the industry – including the
small scale operators - would have to register and pay an annual registration
fee, currently R125 in
27
Such requirements
for the registration and tracking of such vehicles would no doubt be justified
in the case of operators which truly deal with what can properly be regarded as
“waste”. For example, where a waste disposal contractor transports
what is truly waste material to a dump – or may be tempted to dispose of it
elsewhere – proper systems are required to ensure compliance by such operators,
for example to ensure that the material is dumped at properly designated
landfill sites.
28
Where operators are
not transporting what is truly waste material destined for dumping, but are
involved in the disposal, recycling and transportation of scrap metals, there
is no rational justification to require
that their vehicles be registered, licensed and tracked in the same way. This is for the very reason that such
operators have every inducement to dispose of the scrap metals precisely
because they have a substantial value if they are disposed of and recycled. There is no commercial sense in dumping such
scrap metals in a manner which would harm the environment. Instead, such operators have as the very
purpose of their existence the functions aimed at having the scrap metals
recycled rather than dumped. This is of
clear benefit to the environment and reduces the need for additional landfill
site provisions.
29
The members of the
MRA typically own large numbers of vehicles, almost all of which are engaged in
the transportation and disposal of scrap metals for purposes of their being
recycled, re-used or recovered. There
is no need, it is submitted, to subject such vehicles and those operations to
the provisions of the Bill and the consequential application of such provisions
as municipal by-laws dealing with waste disposal.
30
A few of the
members of the MRA may from time to time, on a relatively small scale, dispose
of materials other than scrap metals.
Those other materials can properly be regarded as ‘waste”. An example in this regard is a scrap
processor which breaks down old motor vehicles. Its primary objective is the recovery and
recycling of the metal elements of such a vehicle, but there are of course many
other elements such as plastic components, foam used in seating, glass windows etc.
Those elements are truly waste and require to be disposed of generally
at landfill sites. Such operators use a
few of their vehicles designated to transport such materials to these sites. They will properly be subjected to the
provisions of the Bill and the consequential application of municipal by-laws
such as those in
31
Different
considerations, however, apply to the operations – and vehicles involved in
such operations – which relate to the recovery, re-use and recycling of scrap
metals.
32
By applying the
provisions of the Bill to operations and vehicles which are used in relation to scrap metals, the
additional financial burden will be considerable. If one takes, by way of example, a typical scrap merchant
who operates using 15 vehicles, the cost will be substantial. The cost is of the order of R12 000 per
vehicle. For 15 vehicles this amounts to
approximately R200 000 per annum. In
addition, an environmental impact study will have to be undertaken, at an estimated
cost of R50 000. Such an operator is
likely to have to employ a staff member and incur other costs relating to
compliance by the business with the various provisions of the Bill and the
consequential application of municipal by-laws.
Such an operator would therefore face a conservatively estimated
additional cost of between R250 000 and
R400 000 per annum.
33
The inevitable
reality, from a commercial point of view, is that such an operator would have
to make up this cost by reducing what the operator pays to its suppliers, in
the form of bucket shops or street peddlers.
This is because the market in scrap metals and recycled metals is
extremely competitive and price sensitive, particularly having regard to the
international market conditions. It is
unrealistic to expect that a local operator who now has to face an additional
financial burden to comply with environmental legislation will be able to pass
that on to its purchasers, particularly those for export. It is therefore unavoidable that scrap metal
operators will have to drop their price paid to
their suppliers such as street peddlers.
34
The small operators
such as street peddlers and bucket shops are extremely sensitive to the price
which they receive from the scrap merchants and scrap processors. The margins are so small that any reduction
in the price which they receive for the scrap metals that they collect and
dispose of would undoubtedly threaten their viability.
35
By way of
illustration, the MRA refers to figures obtained from two of its members, Star
Scrap Metals and Gulf Metals, which are typical of scrap metal dealers purchasing
scrap metals from small scale customers (such as street peddlers), and from slightly larger customers such as
one or two person operations which may use a light vehicle such as a bakkie. These figures reflect that particularly in
relation to peddlers, they dispose of relatively small volumes or masses of
scrap metal on a daily basis to the merchant.
Thus for example in the case of Star Scrap Metals over a recent three
day period it purchased scrap metals from between 91 and 95 peddlers, with the
total weight in kilograms varying on average between 43 and 52 kilograms per
day per customer. The average value per
customer, which represents the gross margin derived by each of these customers,
varies between R73 and R140 per day.
36
In the case of Gulf
Metals, it dealt with a number of customers which varied between 111 and 168
customers per day. They supplied on
average between 0.82 kilograms and 24,62 kilograms per customer, producing a
gross margin of between R5,59 and R13,54 per customer per day.
37
In the case of the
so-called “larger customers” the figures for their gross profits (before
expenses such as wages and petrol) ranged between R88 and R906 per customer per
day.
38
All of this
illustrates the fact that the numerous peddlers and other small operators in
the industry derive a very modest average gross profit of barely a few hundred
rand per day per customer. This gross
margin depends almost entirely on the price which is paid to them for the scrap
metals which they sell to the larger merchants in the industry. If those merchants were to have to bear
additional costs as a result of the Bill applying to them (and necessitating
registration of vehicles, installation of tracking devices and the like), and
they then necessarily pass on such costs by reducing the price paid to the
peddlers and other small scale merchants, those peddlers and small scale
merchants would be seriously prejudiced.
Their profit margins, which are already extremely narrow, would be
threatened to the point of unviability.
39
It is of interest
to note that because those profit margins are already so slim, street peddlers
of scrap metals tend to look for more profitable alternatives when they are
available. For example, in the winter
months, street peddlers tend to sell smaller volumes of scrap metals which they
collect, because they have other economic opportunities available to them, in
the form of hawking coal and fire wood as fuel required in the winter months in
the townships. In the summer months,
when there is less of an opportunity to sell such items, they are forced to
turn to collecting and selling of scrap metals.
If their profit margins in relation to scrap metals are reduced, it is
very likely that a substantial number of them will cease to collect and dispose
of scrap metals. At the very least they
are likely to reduce the volumes or masses of scrap metals. They will simply look elsewhere for
alternative opportunities.
40
Bearing in mind
that there are tens of thousands of street peddlers who deal in scrap metals,
the implications are enormous. In the
first place, it will have a severe negative impact on the livelihood of
numerous street peddlers who survive on the very limited opportunities already
available in relation to scrap metals.
If these opportunities are threatened or diminished, it will affect
numerous such peddlers and other small scale operators. This would be subversive of the commendable
policy of government to encourage SMME operations, as they provide an important
source of employment.
41
In the second place
– and most significant for present purposes – are the serious consequences that
this would have from an environmental point of view. If there is no longer a sufficient
inducement – in the form of an adequate gross profit margin – for such small
scale operators to continue collecting and disposing of scrap metals, the
inevitable result will be that large quantities of scrap metals will lie uncollected. They will damage the environment. If they are not collected, they cannot be
recycled. We have referred previously to
the huge benefits from an environmental point of view of recycling scrap
metals. If there is less recycling of
scrap metals, natural resources such as minerals and sources of energy will be
depleted and various forms of pollution will be created. Scrap metals which are left lying uncollected
will have to be disposed of by municipal waste disposal operations, and this
will place a greater demand on waste landfill sites.
42
This is clearly
counterproductive to the objects of the Bill.
One of its purposes is to reduce the need for landfill sites and to
avoid pollution and unnecessary degradation of the environment. These objects will be undermined and,
indeed, threatened if – as a result of the Bill applying to the scrap metals industry – unnecessary
regulation results in additional costs being incurred, for that will inevitably
result in a reduction in the financial inducement currently available to small
scale operators in the industry.
CONCLUSION
43
For thee reasons,
the MRA submits that the current definition of “waste” in s 1 of the Bill
should be amended so as to exclude scrap metals from the scope of that
definition. This can readily be achieved
by the insertion of an additional sub-paragraph (iii) to read as follows:
“(iii) any scrap metals
which have a value and are disposed of or collected for purposes of processing,
re-use, recycling or recovery shall not constitute waste.”
METAL RECYCLERS ASSOCIATION
16 November
2007