Plastics SA | The State of the Nation

On Thursday evening, 13 February 2020, millions of South Africans were glued to their television sets to watch President Cyril Ramaphosa deliver his State of the Nation Address (SONA) to the joint sitting of the National Assembly and the National Council of Provinces. As the President was setting out government’s key policy objectives and deliverables for the year ahead, the plastics industry paid particular attention to the areas of focus that would have a direct impact on the state of our industry in the short to medium term:

The Current State Of The Plastics Industry

The South African plastics industry was defined as a priority sector by government and therefore forms an important part of the South African economy. It employed roughly 60 000 people during the past financial year and converted more than 1.8 million tons of polymer into plastics products during 2018 alone. Total South African converter demand also grew during 2018, reaching 1.544 million tons of virgin polymer.

Almost every conceivable sector and industry uses or relies on plastic, with the packaging, automotive and domestic sectors being some of our biggest users. The plastics industry makes a valuable contribution to the country’s output growth and employment with a multiplier effect of 3.7 % for every job created and 3.5 % for every Rand invested to grow the industry.

Ensuring that we remain competitiveis a crucial component of sustainable manufacturing growth in the local plastics industry. However, over the past year this has become increasingly difficult as the stark reality of living and working in South Africa has not left us unscathed. The negative impacts of a national economy that has not grown at any meaningful rate for over a decade, losses suffered as a result of the industrial action taken by striking workers, a weakening Rand-Dollar exchange rate, competing against cheap imports; high electricity costs and unreliable supply have forced many of our manufacturers and recyclers to lose the fight for survival. Some companies have had to dramatically scale down operations, while others have had to close their doors permanently.

Counting the HighCost Of Load Shedding On The Plastics Industry

Conversion methods for plastic fabrication are electricity intensive and accounts for approximately 15% - 18 % of a manufacturer’s operating costs. Manufacturers and recyclers rely on a consistent supply of high voltage electricity in order for their machines to operate at maximum capacity.

• Any hopes of economic recovery was crushed as persistent energy shortages disrupted businesses: machines that usually run 24 hours a day (because it requires a minimum of 2-3 hours for them to start up and reach an optimal temperature), lost power numerous times during the day and mid-operations.
• Large amounts of raw materials and resources were wasted as these machines needed to be scraped clean in order for the start-up process to begin anew.
• Voltage fluctuations are a major cause for concern during normal supply periods, but this is exasperated during load shedding. In many cases, expensive equipment and machines have had to be decommissioned or replaced as a result of damage caused by electricity spikes.
• Because local plastics suppliers were unable to meet deadlines and supply orders in time, foreign competitors gained the upperhand. South African companies were seen to be unreliable and more finished products were being imported into the country – placing thousands of local jobs at risk.

Although we have been warned that load shedding is here to stay for the foreseeable future, the plastics industry welcomes Government’s plans to negotiate supplementary power purchase agreements to acquire additional capacity from existing wind and solar plants, and the decision to allow municipalities that are in good financial standing, to procure their own power from independent power producers. We look forward to a restructured electricity industry and will closely follow the announced plans to achieve a secure supply of reliable, affordable and, ultimately, sustainable energy.

Recognising the Role of Plastics in Creating a Green Economy and Mitigating Climate Change

President Ramaphosa highlighted the Government’s plans to create a green economy and mitigate climate change by moving the country towards a low carbon growth trajectory. He made a commitment to transition South Africa to a low-carbon, climate resilient and sustainable society.In this regard, the plastics industry is keen to partner with the Government to demonstrate how plastics products and the recycling of plastics can help create an adaptive capacity, strengthen the country’s resilience and reduce our vulnerability to climate change:

• Life cycle assessments have proven that plastic products are more environmentally-friendly than other materials if they are disposed correctly and recycled effectively.
• Plastics that are fit-for-purpose and designed with their recyclability in mind offer a low carbon footprint and low environmental impact – often even lower than products that are biodegradable.
• Plastic bags manufacturers have removed fillers to produce bags that are fully recyclable and 100 % certified recycled plastic material is now used to produce some carrier bags. This creates an end-market for recycled plastic products and helps to reduce waste to landfill.
• The plastics industry has made impressive progress in developing a true circular economy where raw materials and resources used for the manufacturing of the original product, gets re-used time and time again. By ensuring that the products we create become part of a circular economy, we create a win-win situation for the environment and for the industry.
• The amount of plastics that were recycled in South Africa during 2018 alone saved enough oil to fuel 200 000 cars for one year – traveling 30 000 km/annum
• Plastics recycling in 2018 saved 246 000 tons of CO2 - the equivalent emissions of 51 200 cars
• The plastics recycling industry provided direct employment to more than 7 800 people and created a further 58 500 income-generating jobs
• R2.3 billion rand was injected into the informal sector through the purchasing of recyclable plastics waste during the same year.

Job creation through training and upskilling of workers

As an industry that has huge potential for growth, Plastics SA (representing the plastics industry) has provided input to the Job Summit aimed finding solutions to the unemployment crisis and crafting a master plan for job creation.

• Plastics SA is an accredited training provider and trains more than 3500 people annually in qualifications relevant to industry which includes learnerships, skills programmes and short courses. This training takes place at training centres around the country and is vital to equip current and future workers with the necessary skills and practical experience to create a career path for them in the plastics industry.
• Having a trained, skilled and experienced workforce make factories more effective and the plastics industry more competitive.
• Without growth there will be no jobs. It is therefore vital to stimulate the economy in order to create more job opportunities and avoid retrenchments.

Including the Topic of Plastic Recycling in School Curriculum

The President highlighted the importance of investing in technology and learning programmes in order to raise the standard of education in South Africa through initiatives such as issuing tablet computers to school students, supporting early reading programmes and introducing coding and robotics to Foundation Phase pupils in 200 schools.

The plastics industry is appealing to the Department of Education and other role players to include more relevant and correct information in the curriculum about the benefits, use and recycling of plastics as it is directly connected to the Government’s Green Deeds campaign.

Investing In Infrastructure And Structural Transformation

Structural transformation has been identified as another critical area of investment and development through the Infrastructure Fund implementation team. The President listed various shovel-ready,public infrastructure projects that are ready to be rolled out, such as the building of new dams and road construction.

We welcome this announcement and will be closely monitoring the progress on these projects as it will have a beneficial impact on the plastics industry. Thermoplastic pipes are used to provide vital infrastructure, e.g. water, sanitation, electricity, gas and telecommunications to communities around the country.

The president also hinted at an alternative rural roads programme during which four experimental road stretches of 50km each will be constructed. We are hoping that through the CSIR’sDemonstration Road Research project using plastic waste will become a blueprint for future similar projects, as this not only finds a meaningful end-market for difficult to recycle plastic waste, but also creates valuable job opportunities and has been proven to reduce maintenance costs. Mixed plastics waste can also be processed with sand to make paving blocks suitable for walkways and pedestrian paths.

Creating New Smart-Cities With Waste Management Infrastructure?

It was revealed during the SONA that a new smart-city is taking shape in Lanseria and which will be completed within the next decade.The process is being led by the Investment and Infrastructure Office in the Presidency alongside the provincial governments of Gauteng and North West, working together with the cities of Johannesburg, Tshwane and Madibeng. Working with development finance institutions, the Government says it has created an innovative process that will fund the bulk sewerage, electricity, water, digital infrastructure and roads.

Although little information is available for public consumption, we are hoping that these plans have made provision for an effective waste management system that allows for the separation, collection and processing of recyclable materials from these households. This will go a long way to reduce the 34% of citizens that does not have access to waste management of any sorts in South Africa.

The plastics and packaging industries have been working closely with the Department of Environment, Forestry and Fisheries (DEFF) and other interest groups in preparing an Industry Waste Management Plan that is built around the beneficiation of waste that will ultimately benefit the residents, the environment and the economy.

The plastics and packaging industries are in close consultation with with the Department of Environment, Forestry and Fisheries (DEFF) and other interest groups around the development of an Extended Producer Responsibility scheme.

Developing A Master Plan To Support Local Businesses

To create a larger market for small businesses, Government plans to designate 1,000 locally produced products that must be procured from SMMEs. The President announced that projects with an investment value of R9 billion have already been completed and 27 projects worth just over R250 billion are in implementation phase that will see newly-built factories that manufacture smartphones, cars, power cables, tyres and food.

The launching of a new auto SEZ hub in Tshwane (which will expand production and local manufacture of components), the Clothing and Textiles Master Plan (which aims to create 121,000 new jobs in the retail-clothing textile and footwear sector over the decade) and commitments made by retailers to buy goods locally all bodes well for the plastics industry as it promises growth at sector level. A Master Plan is also being developed for the plastics industry and we hope that the details will be release in the near future that will assist in growing the sector.

Moreover, steps taken to clamp down on illegal imports and under-invoiced products are also welcome news as we have been working closely with the DTI in recent months to develop master plan that is aimed at growth, sustainability and building the green economy, lowering tariffs and introducing incentives for local manufacturers.

We have been advocating for better control over imports, measures to stimulate local procurement and a national initiative to buy locally produced products and products with recycled content.

New tariff codes needs to be developed in order to get better control over the products coming into South Africa, and we are also working on steps that will limit the importing of plastic waste to protect the environment, the recycling industry and grow the demand for local waste.

Conclusion:
The Plastics Industry is carefully optimistic about the plans and strategies that were unveiled by the President, providing that these ambitions are acted upon and that the promises made come to fruition. We are calling for a strong political will and decisive action. From our side, we are willing to throw our weight behind Government’s ambitions, plans and appeals made to the South African public and businesses to work and persevere.

Mr President, we want to take our place in history and live with dignity. We all are eager to reach our destiny. We sincerely hope a new age really has begun!
For more information, visit www.plasticsinfo.co.za
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