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National Environmental Management: Waste Act, 2008 (Act No. 59 of 2008)

Notices

Guideline and Toolkit for the Determination of Extended Producer Responsibility Fees

3. Key Legislature and strategies that informs the determination of EPR fees

 

3.1 Context

 

South Africa is a developing economy with over 60 million people, making it the fifth largest country in sub-Saharan Africa. Endowed with natural resources, it continues to face the triple challenge of unemployment, poverty, and inequality, which is aggravated among others by low levels of economic growth. While the global demand for finite resources remains strong, being a resource-extractive economy with limited local beneficiation puts the country at risk of resource depletion or over-exploitation. The high carbon intensity nature of the economy coupled with the electricity supply challenges and water scarcity in some of its regions further jeopardise the ability to achieve the recovery and development, necessary to reverse the negative socio-economic trends observed in the past few years.

 

The persistent challenges facing the country demand a fresh look at resource use. The introduction of more efficient and effective means of deriving value from waste would benefit both the current and future generations. Globally, the circular economy has been recognised as one of the new development paradigms that can unlock opportunities for growth and employment. South Africa, while also being a signatory of the Sustainable Development Goals (SDGs) and the Paris Agreement on climate change, is well positioned to pursue these opportunities.

 

A cornerstone tool for a transition towards a circular economy is EPR. The implementation of EPR obligations is done by the PROs on behalf of producers or by the producers themselves. To provide sufficient funds to fulfil producers’ obligations, PROs and producers implementing EPR schemes need to determine the fees that producers should pay. The following sections discuss the legislation and strategies that drive the determination of such fees in South Africa.

 

3.2 Key legislation that informs the determination of EPR fees

 

This section introduces the framework of legislation and strategies that inform EPR fee determination. The critical components of the legislation that have a direct bearing on the determination of EPR fees have been cited for the user’s attention.

 

Key legislation that informs EPR fee determination

Critical components that impact EPR fee determination

NEM: WA
• To reform the law regulating waste management in order to protect health and the environment by providing reasonable measures for the prevention of pollution and ecological degradation and for securing ecologically sustainable development;
• To provide for institutional arrangements and planning matters;
• To provide for national Norms and Standards for regulating the management of waste by all spheres of government;
• To provide for specific waste management measures; to provide for the licensing and control of waste management activities; to provide for the remediation of contaminated land;
• To provide for the national waste information system; to provide for compliance and enforcement; and to provide for matters connected therewith.

EPR Regulations
• • To provide the framework for the development, implementation, monitoring and evaluation of extended producer responsibility schemes by producers identified in terms of section 18 of NEM: WA;
• To ensure the effective and efficient management of the identified end-of-life products; and
• To encourage and enable the implementation of the circular economy initiatives

Regulation 7 of the EPR Regulations: Financial arrangements
(1) EPR fee proposals must be submitted to the Minister of Forestry, Fisheries, and the Environment (Minister) together with a motivation and any other relevant information. The Minister must obtain concurrence on the EPR fee proposals from the Minister of Finance.
(2) The fee must be based on a differentiated rate per item category, dependent on weight and recyclability of each item, which must be paid by producers (the obligated industry) to fund EPR schemes.
(3) The producer must submit a financial plan and a budget for the duration of the registration in which, inter alia, the following information is mentioned:
(a) Estimated revenue from the various product streams;
(b) The way in which the contributions shall be calculated and assessed, the total amount of the contributions that cover the full cost of the obligations incumbent on the producer applying for registration, and the collection methods for each material;
(c) Methodology for allocating and disbursing revenue for implementation to reflect changes in the obligations incumbent on the registered producer under the EPR Regulations; and methods for allocating revenue for operating the extended producer responsibility schemes amongst collection, waste minimisation, recycling and waste reuse.
(4) The administration fee of the PRO must not exceed:
• 20% of the revenue collected in the first year of implementation;
• 15% of the revenue collected in the second year of implementation; and
• 12% of the revenue collected in the third year of implementation.

 

The administration fee will be reviewed in the 3rd year of implementation and annually thereafter.

 

The National Pricing Strategy for Waste Management (NPSWM) (2016)

The NPSWM is established in terms of section 13(B) of NEM: WA and provides the guiding methodologies for the setting of waste management charges for the re-use recycling and recovery of waste.

 

The NPSWM states that “correcting market failures through pricing in such a way as to 'internalise' these externalities would therefore change the relative prices of landfilling as compared to other options, thereby creating incentives for moving up the waste management hierarchy”. It outlines the different economic instruments (EIs) including EPR fees, advanced disposal fees, product taxes, material input taxes and deposit refund schemes that can be used to promote solid waste management.

 

The NPSWM notes that EPR schemes are typically funded through the implementation of various economic instruments, levied either directly by the obligated industry, or by government.

• EPR fees are levied on identified industries (typically producers and importers) per product unit, weight, or market share.
• The main purpose of EPR fees (and hence the basis for their calculation) is to provide funding to cover the costs of establishing and implementing systems for collection, sorting and other treatment required prior to the sale of materials to recyclers; or the provision of incentives, subsidies, infrastructure and /or information to consumers, collectors and /or processors; to increase the supply of recyclables.

 

The NPSWM sets out the following considerations on the financial arrangements for an EPR scheme:

• Determination of the most appropriate economic instruments to be applied within scheme to best achieve objectives.
• What the EPR scheme will fund, e.g., partial or full contribution to product collection /takeback and recycling?
• Whether the waste management charges are likely to affect adjoining policy areas including competition law.

 

 

3.3 Cost recovery: a guiding principle for EPR fee determination in South Africa

 

The polluter pays principle has been an instrumental principle used for environmental protection in South Africa. In terms of the EPR Regulations, this principle has been adapted to “Producer must Pay” with the aim to promote sustainable waste management. The operational and financial responsibility lies with the producers that must bear the cost to manage the waste of products that are being placed in the market. The fees are aimed at achieving nett cost recovery and should be calculated in a transparent manner and well justified on any deviations from the minimum criteria outlined in regulation 7 of the EPR Regulations.

 

Section 18(1) of NEM: WA states the following:

 

“18. Extended producer responsibility
(1) The Minister after consultation with the Minister of Trade and Industry may, in order to give effect to the objects of this Act, by notice in the Gazette—
(a) identify a product or class of products in respect of which extended producer responsibility applies;
(b) specify the extended producer responsibility measures that must be taken in respect of that product or class of products; and
(c) identify the person or category of persons who must implement the extended producer responsibility measures….”.

 

Regulations 7 and 7A of the EPR Regulations stipulate, in the relevant part, that:

 

" Financial arrangements for an extended producer responsibility scheme

7

(1) The producer responsibility organisation that establishes and implements an extended producer responsibility scheme must, together with its members, determine the proposed extended producer responsibility fee and apply the extended producer fee proportionally to all members based on the identified products placed on the market. ",
"(2) The proposed extended producer responsibility fee must be submitted electronically to the Minister, including the motivation, justification and any other relevant information, who must obtain concurrence 60 days of submission. "

“7A

(1) The producer that establishes and implements their own scheme must determine and allocate appropriate extended producer responsibility funding, which will hereafter be referred to as an extended producer responsibility fee, and resources to ensure an effective extended producer responsibility scheme.
“(2) The proposed extended producer responsibility fee, including the motivation, justification and any other relevant information, must be submitted electronically to the Minister who may obtain concurrence on the proposed extended producer responsibility fee from the Minister responsible for finance within 60 days of submission.”

 

South Africa is a developing economy with over 60 million people, making it the fifth largest country in sub-Saharan Africa. Endowed with natural resources, it continues to face the triple challenge of unemployment, poverty, and inequality, which is aggravated among others by low levels of economic growth. While the global demand for finite resources remains strong, being a resource-extractive economy with limited local beneficiation puts the country at risk of resource depletion or over-exploitation. The high carbon intensity nature of the economy coupled with the electricity supply challenges and water scarcity in some of its regions further jeopardise the ability to achieve the recovery and development, necessary to reverse the negative socio-economic trends observed in the past few years.

 

The persistent challenges facing the country demand a fresh look at resource use. The introduction of more efficient and effective means of deriving value from waste would benefit both the current and future generations. Globally, the circular economy has been recognised as one of the new development paradigms that can unlock opportunities for growth and employment. South Africa, while also being a signatory of the Sustainable Development Goals (SDGs) and the Paris Agreement on climate change, is well positioned to pursue these opportunities.

 

A cornerstone tool for a transition towards a circular economy is EPR. The implementation of EPR obligations is done by the PROs on behalf of producers or by the producers themselves. To provide sufficient funds to fulfil producers’ obligations, PROs and producers implementing EPR schemes need to determine the fees that producers should pay. The following sections discuss the legislation and strategies that drive the determination of such fees in South Africa.