When was the last time that you gave any thought to the purchase of a plastic carrier bag, when visiting your favourite or most convenient retailer? You know the place where the cashiers generally converse in a single word. No, not "hi" or "hello", but more of a question, "Plastic?"
For that matter, when last did you notice anyone with a reusable plastic bag, those big ones covered in an advertisement, or the "recyclers" who meticulously unwind the plastic bag of a previous purchase, only to find that the plastic bags are not as durable as was expected, and then have to purchase another?
Allow me a last question. Do you know what a plastic bag sells for? A purchase of "plastic" at each of the four major grocery retailers revealed that it ranges from R0.45 to R0.49.
The reason for asking all these questions are not to make you feel bad, or to turn you into an environmentalist, but rather to highlight something which has intrigued me for so time.
The reason why we are paying for the "plastic" is that in May 2003 the government introduced an Environmental Levy, to be more precise a Plastic Bag Levy (payable on imports and domestic manufacture), which at time of introduction was R0.03. Do you know what the current rate is? It is R0.06. (Imported plastic carrier bags are also subject to a 15% ordinary ad valorem customs duty) The motivation for the introduction of the levy was to dress to scourge of littering, which resulted in the plastic carrier bag being dubbed South Africa's "national flower". Its introduction had economic foundation, the "polluter pays principle" and the "internalisation of external costs" were cited. You might rightly ask but why only the plastic bag, but this is a question for another column. The intention of the introduction of the levy was to serve to generate funding for the creation of a recycling company, which would collect and recycle the plastic carrier bags. According the "2014 Tax Statistics", which is a joint publication between National Treasury and the South African Revenue Service (Sars) – "the plastic bag levy aims to encourage the reuse of these bags". Not quite recycling, but the intention to reuse a plastic bag. In my experience the majority of plastic bags are only good to get the product home, and cannot sustain a second use.
Up to now there is very little that you could do in faulting the levy.
In 2003 when the levy was imposed the quantity of plastic bags demanded reduced dramatically - by as much as 90% - which was expected in accordance with economic theory which holds that if a price it put on "free goods" then there would be a definite reduction in the demand for the goods. However, the quantity demanded is on an upward trajectory, implying that the demand for plastic bags is increasing. This means that irrespective of the fact that government imposes an R0.06c levy irrespective of local manufacture or imports, and 15% ordinary ad valorem customs duty on imports, more plastic bags are being purchased. In essence the levy is a Pigouvian tax in that the tax is applied to a good that is generating negative externalities. It is fair to conclude that the levy which purpose is to reduce the environmental impact by repricing is not rendering the desired results - its failing as it is, for one, not effecting a behavioural change. The economic reasoning that could be offered is that the price elasticity of demand for plastic bags have become price inelastic (to such an extent that even though the price of the good is increase the quantity demand it also increasing) – who would have guessed this of essentially "free goods"?
Adding to this, that Buyisa-e-Bag, a Section 21, which had a mandate to "promote waste minimisation and awareness initiatives in the plastics industry, expand collector networks and to create jobs, as well as to kick-start rural collection (small medium and micro enterprises), SMMEs and create additional capacity in non-governmental organizations (NGOS)", "was dissolved in 2011". It is understood that the levy is not "ring fenced" and as a consequence is absorbed in South Africa's tax revenue. This implies that that the levy is now nothing more than a fiscal measure (revenue measure), with the revenue collected not being used to remedy a designated external cost.
As a matter of interest, the levy is assessed and collected on the principles of what Sars refers to as "Duty at Source" or DAS. This raises an interesting observation, as to whether if the intention is for the polluter to pay, why not impose a levy on plastic polymer (polyethylene) or polypropylene, which could then account for the all products made from this material, but that for another column.
Let us change track slightly. Who would you think derives the most benefit (monetary) from the levy (tax)? Consider that government collects R0.06 on each plastic bag, irrespective of whether it is imported or domestically manufactured. An imported plastic bag is subject to 15% ordinary ad valorem customs duty. Now what does a plastic bag, or a printed plastic bag cost? This is the tricky bit, and where I could only rely on the worldwide web where the cost of a white plastic carrier bag (vest style) to a printed plastic carrier bag ranges from R0.02 to R0.07. Assuming the imported one pays R0.01 customs duty. Working on the imported plastic bag it is worst case, R0.07 for the plastic bag, R0.01 customs duty and R0.06 for levy, a total of R0.14 add - conservatively - R0.06 for cost to get to the plastic bag to the consumer, this means R0.20.
Consider that the consumer pays anything between R0.45c to R0.49c for a plastic bag. If my calculations are correct this is a conservative profit of at least R0.25 per plastic bag, and considering the 2,816,666,667 plastic bags on which levy were paid in 2013/14, it means a profit of R704,166,670.25
So whilst government potentially collects about R0.07 per plastic bag (R0.06 levy, plus potentially R0.01 ordinary customs duty), the sellers of the plastic bag are generating at least R0.25.
