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Integrating circular economy principles can help boost SA’s long-term economic growth

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Catherine Wijnberg is the Founder and CEO of Fetola, one of South Africa’s leading business growth agencies, which has propelled over 1,000 SMEs to success. Fetola is a critical ally for social investors and philanthropists focused on sustainable development and tackling Africa's pressing issues of unemployment, inequality, and poverty.

Small businesses that adopt circularity principles have been shown to grow at twice the rate of their competitors. Experience across a wide range of businesses indicates that it is possible to be both environmentally sustainable, profitable and job-creating.

There is a growing acknowledgement that economic growth and development must also address environmental and social considerations, particularly in developing countries. The UN’s Sustainable Development Goals (SDGs) reflect these economic, social and environmental aspirations.

Despite South Africa’s immense potential, it is plagued with numerous challenges including poverty, inequality, unemployment, energy insecurity and environmental degradation which hamper economic development and the wellbeing of its citizens.

One solution is the development of circular economies in more businesses and industries. A relatively new concept, a circular economy model is a reformative system which offers significant potential to deliver more inclusive economic growth, reduce unemployment and make a positive environmental impact by reducing waste, reusing resources and regenerating natural systems.

It is based on the idea that materials and products can be designed to last longer, be repaired, refurbished or recycled, and have minimal environmental impact.

Unlike the current linear process of make, use and dispose, a circular economy model keeps resources in use for as long as possible through maintenance, reuse and refurbishment, recovers materials and then regenerates these recovered materials through recycling, remanufacturing or composting at the end of each life stage.

Read more in Daily Maverick: Waste not, want not: The circular economy makes business sense

It’s a system where materials never become waste and where products and materials are kept in circulation. It’s also a system which can tackle pressing issues such as climate change, biodiversity loss, waste and pollution by decoupling economic activity from the consumption of finite resources.

Climate crisis

Circular economy activities have the ability to contribute to many of the economic, environmental and social targets of the SDGs. SDG 12, in particular, is focused on sustainable consumption and production.

Circular economy activities can also make a positive contribution to other SDGs, including reducing food waste by building regenerative, circular food systems (SDG 2 — zero hunger); reducing waste and pollution (SDG 3 — good health); ensuring inclusive and sustainable economic growth, employment and decent work (SDG 8); and resilient infrastructure, sustainable industry and innovation (SDG 9), among others.

Developing and implementing a circular economy presents significant promise for South Africa, including helping to achieve sustainable and inclusive growth by creating new jobs and income opportunities in waste management, recycling, rental, repair and re-manufacturing repurposed materials, reducing greenhouse gas emissions and resource consumption, improving social cohesion and wellbeing, and enhancing competitiveness and resilience.

It will also help to diversify our economy and reduce our dependence on imports, in the process enhancing our competitiveness.

Fetola and a circular economy

Fetola, a leading enterprise development organisation in South Africa that helps businesses grow, create jobs, and contribute to social and environmental change, offers various programmes and services for circular economy entrepreneurs and small businesses.

For the past decade, Fetola has been pre-empting the shift towards a circular economy by building small businesses that are both profitable and more environmentally sustainable in their models.

More recently, we established South Africa’s first-ever Circular Economy Accelerator (CEA) designed for small business entrepreneurs, initially as a pilot programme and subsequently as a full-blown accelerator, funded by JP Morgan, the Embassy of Finland and Nedbank.

The project is made up of three parts run over three years: a six-month business boost phase to help companies strengthen and recover post-Covid; an 18-month accelerator aimed at building the success of early-stage enterprises using the impact of circular economy activities to build sustainable jobs; and the soon to be launched green tech-exchange, Hloolo by Fetola, which is aimed at supporting easy access to green finance, markets and innovative technologies.

Those businesses which participated in the six-month post-Covid CEA Boost accelerator became more profitable and saw an average income growth of 23%. Collectively, they created 124 new jobs. Our data also indicates that all of the participating businesses added new circular principles into their business model as a result of insights gained during the programme.

Even more interesting are the results from the 18-month accelerator in which a total of 46 early-stage SMEs from across the country participated.

In this full accelerator, the cohort showed a collective improvement of 46.4% (including outliers) revenue growth. By comparison, similar businesses in acceleration during this period but which were not focusing on circular principles showed revenue growth rates of only 23.8%.

This higher performance is also supported by significant improvements in sustainability as a result of their circular economy activities with SMEs reporting a 16% reduction in waste to landfill as a result of designing out waste, a 20% increase in non-virgin materials used for production and an increase in products designed to be reused (9%), composted (6%) and recycled (20%).

Five businesses added a rental model into their business, resulting in a 108% increase in items rented rather than sold once-off. In addition, several SMEs added a training component, training a total of 1,923 individuals in sustainability or circularity in 2023, more than 2.5 times that in 2022.

Circular model understanding in SA

While our data clearly indicates that a circular model delivers to the bottom line, the challenge in South Africa is a lack of awareness and knowledge about both the concept and the benefits of a circular economy, as well as the most effective implementation strategies. Despite multiple possible circular flows, most companies fail to look beyond recycling.

We don’t yet have supportive policies and regulations in place to incentivise and enable circular economies and to address the barriers and trade-offs that may arise. We also lack adequate infrastructure and technology to facilitate the collection, storing, processing and distribution of waste and recycled materials and that supports the design and production of durable, repairable and recyclable products.

A lack of access to finance and markets for circular products is yet another inhibitor.

These issues all need to be addressed if we are to realise the full benefits of circular economies. We need more education and awareness among businesses, policymakers and even citizens about the concept and its benefits.

Supportive policies, regulations and incentives such as tax breaks, subsidies, standards and even penalties need to be developed to level the playing field for circular actors. There needs to be more investment in improving the infrastructure and technologies that enable circular operations and finance needs to be made available to develop and scale circular economy activities.

In addition to the CEA, Fetola has over the last decade offered a number of other sustainability initiatives that have assisted small businesses and entrepreneurs in various sectors. The Waste to Wing Programme, for example, was an ambitious EU-funded initiative to investigate the potential of the aviation biofuel value chain, from feedstock production to fuel distribution, to scale up and access new markets.

The Circular Economy Toolkit, a partnership between Youth Business International, Fetola and other partners, is an online resource that helps entrepreneurs and small businesses to understand and apply the principles and practices of a circular economy and to assess and improve their circularity performance.

Role players such as Acen (Africa Circular Economy Network) are also important, providing highly regarded, practical skills training and education to entrepreneurs and stakeholders.

Successes

A number of small enterprises have benefited from Fetola’s CEA. Vivacious Eco Vixon, a Cape Town-based zero-waste store which transforms discarded materials into unique soft homeware and gifting, improved both its financial performance and resilience. In total, Vivacious Eco Vixon follows seven models of circularity in the business.

The business now collaborates with a wider network of NGOs/NPOs and outsources manufacturing to local makers. It has expanded to Gauteng and seen revenue surge by 1,365%. The owner, Natasha Pearce, won Nedbank’s Green Indaba Best Women Empowerment Award and The CEA2023 Award.

Electronic Cemetery E-Waste Management, a company that is pioneering responsible e-waste disposal, was another beneficiary of the programme. The company showed remarkable progress during the programme, growing revenue by 54% and expanding its labour force from two to 22 employees.

It increased the number of e-waste items repaired from 1,000 in 2022 to 2,700 in 2023, representing a growth of 170%, provided training for 20 young people and planted 350 indigenous trees, 50 more than the 300 trees planted in 2022. The circular models the company uses include repair and maintenance, product life extension and resell.

At a time when South Africa faces multiple challenges, implementing circular economy principles and activities has the potential to help the country achieve more sustainable and inclusive growth while at the same time addressing environmental challenges.

Getting it right would be a win for all stakeholders. DM

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Comments - Please in order to comment.

  • Tim Bester says:

    This theory of economics will require, as the author notes “Supportive policies, regulations and incentives such as tax breaks, subsidies, standards and even penalties need to be developed to level the playing field for circular actors”.

    This list of governmental interventions is the essence do gooder socialism. Rather let us encourage true entrepreneurship by deregulating and allowing the market’s invisible hand to do its job.

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