Global production of municipal solid waste is expected to double in the next fifteen years. This increase is primarily attributable to the developing nations, driven by the combined effect of strong urban growth and economic development.
Waste management in these countries is a major challenge for the years ahead : the negative external impacts of solid municipal waste are serious, including in particular major impacts on the environment and on health, as open waste dumps remain the dominant processing mode in developing countries. The impacts are especially severe for the 15 million people in the informal sector who work in these dumps, processing between 15 % and 20 % of the waste produced.
The increase in volume also represents an economic challenge. The waste sector alone accounts for as much as 5 % of urban employment.
Every year developing nations spend some US$46 billion on managing their municipal solid waste, and these investments could exceed US$150 billion per year by 2025. Public authorities are finding it difficult to raise the necessary finance to meet these costs. Often they are compelled to concentrate on urgent needs – collection – to the detriment of processing, the result being that they incur high costs while achieving poor performances. In these circumstances sustainable waste management appears difficult to envisage.
Public authorities increasingly call on the private sector
Public authorities are increasingly turning to the private sector to alleviate the financial pressure on them and improve the management of their municipal waste. The private sector – intervening primarily in collection and recycling – is often better equipped to deliver a quality service at a low price, as public bodies are constrained by political factors and are poorly resourced both financially and materially.
Experience shows that succeeding in this sector calls for the closest possible proximity to the project environment : operating methods do not necessary transpose well from one country to another. In particular, companies need to dovetail their intervention effectively with the public sector, understanding its needs but also identifying its capabilities and limitations. Their business models also need to take account of the informal sector – a sector with which they are sometimes in competition, but which also offers opportunities for cooperation : it is often, after all, a source of innovation. In the case of recycling they also need to test the receptiveness of the markets they are addressing : recycled products are often poorly understood and not always accepted.
Some solutions to the problem of sustainable waste management
Yet major challenges remain to be addressed. Local authorities’ resources remain limited as their funding base is restricted and financing by state subsidy – often necessary to supplement limited local resources – cannot be regarded as a sustainable solution. The private sector, for its part, struggles to access financing, as waste projects are still regarded as very risky.
The concept of the waste sector as a whole, integrating all the various players involved within an overarching vision of the waste chain, is not yet sufficiently developed.
At the same time the regulatory environment is not robust enough to reassure investors.
Finally, public authorities need to learn to switch position – moving from the role of service provider to that of contractor and regulator.
Despite all these challenges, the waste sector can offer genuine economic opportunities. After all, in an environment where the costs of energy and raw materials are escalating, waste represents an attractive resource ; processing it can become a profitable business – leading to the establishment of sustainable management practices within the sector.
Ed. : This opinion piece is taken from issue No. 15 of Proparco’s Private Sector & Development magazine
The opinions expressed on this blog are those of the authors and do not necessarily reflect the official position of their institutions or of AFD.