SUBMISSIONS BY THE METAL RECYCLERS ASSOCIATION
TO THE PARLIAMENTARY PORTFOLIO COMMITTEE ON ENVIRONMENTAL AFFAIRS
ON THE NATIONAL ENVIRONMENTAL MANAGEMENT:
WASTE BILL [B39-2007]
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”).
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
The metal recycling
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;
· it avoids and minimises the generation of waste - 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;
· it prevents pollution and ecological degradation.
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,
(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”.  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.
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.
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.
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