Document(s) 12 of 15

Introduction

Public concern about industry’s impact on the environment is usually directed towards large companies. Less attention is given to the environmental performance of smaller-scale industry. Yet, cumulatively, the environmental effect of large numbers of dispersed small-scale sites of industrial activity may be highly significant and not readily controlled. Given that the South African government is now actively promoting small, medium and micro-sized enterprises (SMMES), it is pertinent that the potential environmental consequences of such activity be identified and policy options considered. This chapter seeks to make a contribution to this process by discussing the environmental management of SMMES in general, and by presenting the findings of a case study on environmental management of SMMES in the automotive service sector in the Western Cape.

Our first task is to define SMMES in the South African context and to discuss the policy environment in which they operate. This chapter then reviews current initiatives in small business development in South Africa, refers briefly to international experiences in the environmental management of small businesses and then moves on to look at the current regulatory system in South Africa. A case study of the automotive service sector is then presented. This research was conducted in order to assess the environmental experiences of a sample of SMME owners and managers. By generalising the conclusions from this case study and adopting lessons from the international experience, this chapter concludes by identifying a number of policy measures which should be considered in formulating an environmental management strategy for SMMES in South Africa.

Small business development in South Africa

In the case study, the Small Business Development Centre (SBDC) definition of “small business” was used (see Box 1). Since the time of this definition, however, more complex definitions have been provided in the National Small Business Enabling Act (RSA 1995a). Clearly, SMMES include a wide spectrum of activities, different technologies, and a spectrum

BOX 1 The SBDC’s definition of SMMEs

Prodder newsletter 1994

of sophistication and competencies. There has been considerable political debate about the need to qualify SMMES more precisely with a sector-specific definition which takes account of different industry characteristics, such as levels of skills and technological development, capital investment, market share and access to finance. In December 1995, revised criteria for qualification as an SMME were proposed in the draft National Small Business Enabling Act, differentiating between two groups of industry sectors. These conditions are summarised in Box 2.¹

Qualitative criterion (compulsory)

The enterprise must be privately, and independently owned or co-operatively owned and managed and must not form part of an enterprise which exceeds the quantitative criteria referred to, but may have more than one branch.

The proposed definition requires compulsory application of the qualitative criterion, and compliance with two of the three quantitative criteria.² An important distinction made by the qualitative criterion is the exclusion of what are termed “artificially created entities (branches/units) that comply with the quantitative definition, but in reality are controlled by larger enterprise”. Thus, some franchisees, although themselves small business operators, may be excluded from specific SMME support measures on account of the franchiser’s size.

At the smallest end of the scale, micro-enterprises are generally considered to represent the informal companies which operate without business licenses, formal premises, VAT registration or accounting procedures, including, for example, street traders. Many micro-enterprises operate from home-bases or, depending on the type of operation, in industrial hives established by the SBDC. Micro-entrepreneurial activity is thought to be extensive, and the environmental impacts of such activities need to be considered.

¹ The National Small Business Enabling Act outlines the conditions in a schedule, and allows for them to be reviewed and amended by the Minister of Trade and Industry, by notice in the Government Gazette.

² It was assumed that some smaller enterprises, micro-enterprises in particular, may find it difficult to furnish information on asset value; hence this leeway (RSA 1995a).

BOX 2 Definition of SMMEs proposed in the draft National Small Business Enabling Act

At the other end of the scale, medium-sized enterprises could clearly include quite technologically sophisticated operations with characteristics more like those of large firms. The inclusion of this upper threshold in the definition is intended to facilitate support for SMMES as they grow in size and sophistication (RSA 1995a).

Government policy

Government proposals for facilitating small business development in South Africa have been presented in a white paper entitled “National strategy for the development and promotion of small business in South Africa” (RSA 1995b) (hereafter referred to as the small business white paper). The white paper was released in March 1995 and discussed extensively at a national conference in Durban shortly afterwards.

This policy document outlines a framework for the arrangement of support organisations whose various roles will be to provide finance; transfer information on commercial and technical issues; provide advice, training and education; and facilitate business linkage programmes. It is envisaged that these responsibilities will be taken up by non-governmental organisations, business organisations and the private sector, with limited direct involvement by government. However, the process of SMME development will be governed by the National Small Business Council (NSBC), consisting of elected and appointed small business representatives and experts. It is proposed that this council be empowered to negotiate with all government departments at all levels (national, provincial and local) about the impact of existing and proposed laws which are perceived to unduly inhibit the competitiveness of small businesses.

Government policy is intended principally to prioritise support for black advancement and marginalised groups such as women, disabled people and rural families. Thus, government seeks to address constraints which have prevented access of historically disadvantaged sectors to market opportunities and which have impeded their ability to grow and sustain operations in a competitive environment.

In support of government policy, local business service centres are being established as Section 21 (not for gain) companies to provide one or more core business services to SMMES, including provision of information and advice, consultancy, networking and exchange of experience. Local business service centres will be registered and their activities will be accredited by a coordinating body called Business Development Service (BUDS). BUDS’s charter for local business service centres includes the principle that businesses should comply with legal requirements, including safety, health and environmental regulations, but specific environmental assistance would be considered a specialised service.

To date, support of local business service centres has been used by and for low-tech businesses such as catering, small-scale retail and building services, and it is acknowledged that a lack of local capacity in core technology constrains opportunities in manufacturing. BUDS has developed proposals for the establishment of manufacturing technology centres in different sectoral disciplines to provide technological support to small businesses. This concept must still be accepted by government, and funding and collaboration sought from local large manufacturing enterprises.

Presently there are foreign investors who are offering integrated financial and technical support packages to facilitate the development of local manufacturing. For example, Danish support is given through their business-to-business programme, which facilitates joint ventures between Danish companies and emerging black-owned business enterprises in South Africa. The programme is described as providing technical assistance and some limited financial support, with a specific mechanism for covering the costs of environmental studies, occupational health improvements and environmental protection.

Government policy in general, however, lacks a comprehensive position on regulating and improving environmental management in SMMES. The small business white paper refers only to expectations of compliance with “reasonable health and safety standards”, and targeted assistance for “SMMES in ecologically sensitive activities”. However, based on proposals in the draft National Small Business Enabling Act, SMMES may be exempted from certain legislation which is deemed too inhibiting for them.

Organised labour

There is a concern among trade unionists that small businesses tend to pay lower wages than large companies, that they fail to safeguard health and safety and that they are hostile to unionisation, SMME representatives, on the other hand, have historically expressed antagonism towards industrial councils, trade unions and the Department of Labour, who are seen to increase labour costs and impose administrative difficulties (RSA 1995b).

South African trade unions have been especially concerned with wages, benefits and general conditions of employment, as well as skills training and opportunities for advancement. They perceive their role “as a service which can ensure fair labour practices, independent of government and [the] taxpayer’s money”.³ Worker health and safety is being given increasing attention by the unions, although they generally have had limited capacity to address broader environmental policy issues (see Magane et al in this volume).

The environmental management of SMMES

Worldwide, industry is under increasing pressure to reduce the negative environmental impacts of their operations. These impacts include the consequences of negligent safety standards, risks to employee and community health, polluting emissions from production processes and risks from waste materials, particularly hazardous wastes.

Developed industrialised countries have had to deal for longer with the consequences of environmental damage. This has necessitated costly remediation programmes while more stringent environmental control regulations, coupled with economic incentives, have been introduced to force or encourage industry to take greater responsibility for their environmental impacts and to phase out certain ecologically unacceptable products. Complying with these conditions has tended to increase production costs in these countries, forcing closure of some businesses or threatening the competitiveness of certain industrial activities in the global market. Some industries have responded by relocating subsidiaries to countries with lower environmental standards and, hence, production costs. However, more recently there has been growing pressure to harmonise environmental standards internationally and to introduce environmental criteria into international trade agreements to “level the playing field”. These measures are supported in particular by those multinational companies which subscribe to the principles of “producer responsibility” and “duty of care”⁴ and which can be held liable for environmental damage wherever it may occur. Environmental pressure has also been a stimulus for innovation in the identification and implementation of production processes and practices which avoid or minimise environmental risks and associated costs. In this way some companies have found ways to achieve competitive advantage through environmental improvements; other companies—or whole industries—have formed collaborative initiatives to address environmental problems, and governments have sought to develop new national policies for strategic technological development in a growing environmental protection industry.

³ Personal communication from Western Cape NUMSA office.

Most published information about these achievements reflect large-scale industry initiatives in developed countries. SMMES are, however, generally more constrained in their ability to adopt new technologies and business practices due to limited financial resources for new investments and a lack of appropriate skills to implement the required technical and management changes. In the interest of supporting SMMES faced with environmental problems, technical assistance and advisory support programmes have been established in many countries, with costs subsidised by national governments or international support organisations such as the United Nations. The type of support made available includes:

• technical assistance programmes coordinated by government departments and university-based technology centres;
  
  
• provision of information and training by trade associations;
  
  
• provision of grants or low-interest loans for clean-up, innovative research and pollution control by small business development corporations;
  
  
• establishment of centralised waste treatment facilities providing better treatment for specific waste types, and facilitating economic material recovery;
  
  
• assistance with implementing environmental management systems; and
  
  
• the United Nations Conference on Trade and Development’s programme, Empretec 21, which seeks to establish institutional support for SMMES at a centralised business support centre for “one-stop” training, information and consultancy services. The programme includes environmental businessmanagement and, as a principle, will not assist any activity or support any transfer of technology which is not considered to be environmentally sound.

India provides an interesting case study of an economy which relies extensively on its small-scale industrial sector, reportedly growing at 8-10% per year, from a current level which already contributes more than 45% of industrial output (Roberts 1995). However, enforcement of environmental regulations has not kept pace with small industry growth, and public opinion is now forcing closure orders against many small businesses blamed for environmental pollution and public health risk. In response, national government has established a central pollution control board to function as the main coordinating environmental agency, and state pollution control boards with responsibility for on-the-ground enforcement of SMME environmental control measures. The pollution control strategy includes development of shared effluent treatment plants (with funding provided jointly by central and state government, industry and the World Bank), reduced import duty on pollution control equipment and training in environmental auditing and environmental management systems. Given the low level of technological skills, however, use of advanced pollution control systems is not considered appropriate. The National Productivity Council runs a programme which promotes waste minimisation in small-scale industries by means of demonstration programmes. One of these is the United Nations Industrial Development Organisation’s demonstration of waste reduction methods in small industry. The National Productivity Institute also provides information on cost-effective methods of waste treatment and pollution control (Environmental Monitoring Group 1993).

⁴ One of the criteria for compliance with responsible care, a voluntary commitment to certain principles of environmental responsibility, promoted among chemical industry members.

The current situation in South Africa

During the past few years there have been a variety of environmental projects directed at developing national strategies for various aspects of environmental management in South Africa. Under the new political dispensation new concepts for a national environmental management policy have been developed with broad-based public participation, and new environmental legislation is expected in the near future.

In the meantime there is a general lack of coordinated control of environmental issues. Those companies subjected to international pressure to comply with certain environmental standards are doing so, while larger-scale industry members generally tend to adopt fairly consistent environmental standards through a mixture of regulation and voluntary action. However, management of environmental conditions in smaller-scale companies remains the responsibility principally of government enforcement agencies. These are highly fragmented and generally weak. The current regulatory responsibilities are identified in Box 3.

Health and safety

The occupational health and safety division of the Department of Labour has responsibility for ensuring compliance with national health and safety regulations.⁵ The head of the Western Cape regional office acknowledged that they are aware of many cases of noncompliance, particularly by smaller companies, but that they do not have the resources to conduct regular inspections. The SBDC hives are legally exempt from compliance with the regulations, but may sometimes be inspected informally and problems brought to the attention of the SBDC authorities who are responsible for the conditions in the hives. Other industrial premises are only inspected at the request of the Workman’s Compensation Commission, in cases where there has been an unacceptable number of accidents—and, therefore, claims on the fund—or when a complaint is made by an employee, trade union or member of the public. Hence, inspections tend to be made retrospectively. Most accidents reportedly involve heavy-duty equipment, with injury to limbs.

⁵ Regulations include the Occupational Safety and Health Act, asbestos regulations, lead regulations, regulations concerning the certificate of competency and regulations for hazardous chemical substances.

BOX 3 Government responsibilities for environmental control of industry

Safety conditions and the responsibilities of employers and employees in maintaining safe working practices have been legally defined for many years in the Machinery and Occupational Safety Act, No. 6 of 1983. This has been replaced more recently by the Occupational Health and Safety Act, No. 85 of 1993, which has been extended in scope with additional control measures for preventing work-related illness. These include medical check-ups, workplace environmental monitoring, compulsory training for all employees in health and safety and the establishment of a collective consultation process for health and safety issues. In mid-August 1995, new regulations for hazardous chemical substances were promulgated, requiring more extensive biological monitoring of employees exposed to specified hazardous chemicals. The local health authorities expect that companies which already have health monitoring programmes will be able to extend these as required, but acknowledge that small companies will have greater difficulty in accommodating the prescribed measures.

Monitoring of occupational health conditions is a joint responsibility of the departments of Health and Labour. The latter report, however, that, as this is a recent addition to its brief, it has limited experience in this field. It outsources some monitoring work to recognised occupational health authorities.

Waste management and pollution control

At the time of the study, Western Cape local authorities comprised different municipalities and regional service councils or transitional metropolitan councils, each authority being empowered to promulgate by-laws governing sewage and solid waste management in the areas under their jurisdiction. There is evidence of considerable disparity in the standards and control systems which are applied in different areas. Consider the following comparisons between different authorities in the Cape metropolitan area:

• The Bellville municipality does not charge its industries for heavy metal contamination in industrial discharges to the municipal sewage treatment works;
  
  
• The Cape Town municipality monitors and charges registered heavy metal waste-generating industries, but penalties for illegal discharge have, until recently, been too low to encourage improved effluent management; and
  
  
• the Western Cape Transitional Metropolitan Council has a policy of enforcing compliance by means of rigorous monitoring and high penalties.

The modus operandi of different local authorities would appear to depend significantly on the mind-set and competence of the designated staff responsible for aspects of waste management. The sewage branch of the Cape Town municipality acknowledged that its by-laws are not strictly enforced. Most of its office work involves processing permit applications by new businesses for permission to discharge to the municipal sewer. Reportedly there is a backlog of about five years in inspecting these premises to verify the permit conditions. The municipality explains that it has a limited budget and staff, and that the remuneration levels do not attract qualified staff for the posts of pollution inspector. This is the person interacting most closely with industry members, but who often lacks the knowledge or experience to advise companies which seek advice on waste management issues. As a principle, local government authorities assert that their role is not “to act as consultants” to industry, and that they will only direct businesses to the appropriate consultants for advice.

In contrast, the pollution control officer for the Western Cape Transitional Metropolitan Council, has developed what he perceives to be a small, but well-qualified and experienced division for effluent monitoring and operation of the sewage treatment works. He indicated that he is willing to provide companies with general advice and guidance in improving their effluent management, although he is not authorised to provide comprehensive technical support, which is seen as the work of consultants. He described his policy as “fair, but strict” enforcement. For example, through negotiation a concession was granted to a company to discharge higher levels of one type of restricted contaminant, in return for the company’s undertaking to eliminate one of the other restricted contaminants. Defaulting companies have been prosecuted successfully.

Since the new local government structures were set up after the 1996 local government elections, it has been agreed in principle that all local authorities in the Cape metropolitan area should standardise their effluent discharge conditions, although it is not clear which standards would be used and how enforcement would be effected. The pollution control officer for the Western Cape Transitional Metropolitan Council suggested that industry within the Cape Town municipality’s borders would be “shocked” by the stricter regulations enforced by its by-laws. In the meanwhile, the existing facilities remain unchanged.

It should be noted that, unlike health and safety regulations, there are no legal provisions which exempt the SBDC hives from compliance with local by-laws. However, several draft regulations issued in terms of the Environment Conservation Act No. 73 of 1989 contain clauses referring to “sectoral differences” which “should be taken into account in enforcing compliance with prescribed standards”. No one who was questioned about this provision could explain to whom and under what conditions it would apply.

There are also serious environmental problems with the collection and disposal of solid waste and hazardous liquid wastes. There are vast quantities of solid waste which must be collected, including that from households, commercial and industrial premises, as well as litter and other discarded materials. Littering and dumping are particularly serious problems in areas of informal trading and in areas which lack appropriate waste collection facilities. This is one of many problems faced by the municipal cleansing departments who are under great pressure to develop innovative solutions for urban waste management in collaboration with business and the public.⁶

Other, more insidious, wastes are those hazardous wastes generated by small businesses (sometimes referred to as small quantity generators) who lack the appropriate knowledge or interest to manage their wastes effectively. Typical small quantity generators include academic and commercial research laboratories, laundries, automobile service facilities, municipal government, building contractors, paint manufacturers, pest exterminators, funeral services, photographic processors, garden centres, plumbers, tanneries and swimming-pool chemical suppliers. It is known that some of these wastes are being dumped illegally, for example, drums of solvent waste removed from businesses by private contractors for a small fee, with “no questions asked”. Such wastes should be disposed of at registered hazardous waste landfill sites, but even domestic landfill sites may receive mixed wastes contaminated by hazardous constituents.

Many landfill sites do not comply with what are considered minimum acceptable standards of environmental control. There is particular concern about contamination of surface and groundwater by run-off and leachate from landfill sites (see Goldblatt in this volume). In some areas, the Department of Water Affairs and Forestry is forcing closure of polluting sites. There is ongoing conflict about the location of new sites, resulting in an expected shortfall of disposal capacity, with serious environmental consequences.

⁶Presently in the Western Cape there is an initiative which seeks to drive the provincial government towards developing an Integrated Waste Management policy and strategy for the whole province. Members involved in this initiative include local government, the regional department of water affairs, health officials, academics, NGOs, community groups, the public and industry.

Given the reality of these problems in waste management in the Western Cape, it seems inexplicable that proposals for a sustainable development path for the Cape municipal area (City planner’s Department 1993) have neglected to consider infrastructural requirements for the management of waste and pollution generated by industry, as well as increased domestic and commercial waste. This situation is symptomatic of a lack of collaboration and cooperation between different local government departments and a lack of authority given to environmental practitioners. The lack of appropriate and safe waste management facilities is a constraint on economic activity.

Nationally there are similar problems of waste and pollution control, but local authorities in other provinces may have different strategies for addressing specific problems to accommodate local industry characteristics and other regional conditions. In Durban, for example, metal plating companies have reportedly been requested to undertake greater responsibility for the treatment of their effluents, so that the limited capacity and resources of the local municipal facilities can be used for other industrial effluents.⁷ Again, there appears to be very little collaboration nationally between different local authorities, by way of exchange of information and benchmarking against others’ activities.

Air pollution control is a responsibility which was transferred from the Department of Health to the Department of Environmental Affairs and Tourism in April 1995. Due to a lack of departmental resources at a regional level, this function is presently centralised in Pretoria and there is no regular regional control programme. Proposals for allocation of regional functions are reportedly being developed^.8

The significance of environmental concerns for SMME development

SMMEs and environmental conditions cannot be isolated from environmental issues affecting industry and manufacturing as a whole. Environmental pressures will affect all sectors of industry to a greater or lesser extent. What needs to be considered is the ability of SMMEs to respond effectively to these pressures.

The case study which follows seeks to ascertain the perception of environmental problems and the issues identified above by various role-players involved with small business activity. The industry perspective is specific to the automotive service sector although, to some extent, it will be possible to extrapolate the findings to SMMES in general.

Case study: SMMES in the automotive service sector

This sector was selected for the following reasons:

• its contribution to numerous employment opportunities;
  
  
• the wide spectrum of activities by small and medium-sized businesses;
  
  
• the variety of inert and hazardous waste generated by this sector;

⁷Source: news release by Toyota Corporation explaining why the expertise of their Japanese holding company was being used to improve their onsite effluent treatment capabilities.

⁸Source: Western Cape Directorate of Environmental Affairs.

• the similarity of activities and waste types in different areas in South Africa;
  
  
• the perceived environmental impacts associated with these activities and waste types; and
  
  
• the availability of literature on these environmental issues;

Input to this study has been provided by site visits, interviews with company management and employees (where permitted), as well as discussions with representatives of trade associations, business support organisations and trade unions. The objectives were to assess actual conditions at different local business premises and the perceptions of environmental problems by various role-players in the industry.

The study focused on the situation in the Cape metropolitan area and was directed principally at formal small business operators. Although informal activity is extensive, it was difficult to obtain access to informal businesses such as those operating at the SBDC hives and in township areas.

Description of the industry

Automotive service activities encompass sales, service and repairs of automobiles, parts and accessories, as well as sale of fuel. In each area of service there are operators ranging from micro-operators to the high end of small-scale operators, and from street-corner booths to modern, high-tech workshops and display showrooms. There are an estimated 40 000 people formally employed (that is, registered with the industrial council) in such activities in the Western Cape,⁹ making this sector a large employer. The extent of employment in the informal sector is not known, but can reasonably be assumed to be significant, given the large numbers of small businesses in the SBDC hives and township areas.

Primary automotive engineering is not a feature of Western Cape industry, although there is some component manufacturing for the after-market—for example, shock absorbers and radiator cores. These were included in the sample for two reasons: firstly, these businesses are typically medium-scale, with more sophisticated technology and management systems than many of the small service businesses (some are producing for the export market) and, secondly, there is a conflict of interests between the manufacturers and retailers of new components and the component reconditioners. These issues are discussed in more detail below.

Another commercial activity associated with the automotive trade is the processing of vehicle scrap for material recovery. Although most material is handled in large scrap yards equipped with the appropriate facilities, some small-scale and informal waste recycling takes place and such activities are increasingly being promoted as job opportunities.

The ownership of businesses in our sample can be divided into three groups: franchises, subsidiaries and independent operators. In terms of the proposed definition of SMMEs given in the draft National Small Business Enabling Act, franchises and subsidiaries may not be categorised as SMMEs if they are controlled by large enterprises. However, franchisees probably consider themselves small business owners.

⁹ Source: Motor Industries Federation

Franchises are most common for service stations, new car dealerships and retail outlets for parts and accessories. Franchise opportunities are, however, emerging for businesses in the more technical areas of component servicing and repair, such as radiator repair. Franchisees are usually minority shareholders in the business. The franchising company provides technical and marketing support and the advantage of group advertising, while the franchisee is expected to comply with certain prescribed business conditions which are intended to protect the franchiser’s interests and reputation. Environmental auditing and incentives are not yet common practice in franchising arrangements, even though the controlling company—for example, the auto manufacturers or oil companies—may use such systems at their large production sites.

Independent, privately owned operators are more typical in the retail of secondhand cars and in repair and reconditioning activities, where businesses are often family-owned and managed. These types of businesses show the greatest variation in business practices. Some businesses are efficiently managed and duly accredited by the various institutional authorities, for example, the Motor Industries Federation (MIF) or the Automobile Association (AA). Others appear to be more haphazard, but may be faring well commercially because of the individual skills of the owner.

Commercial activity in automotive servicing is described as being highly competitive and information is not readily shared between companies. There does appear to be some informal networking for exchange of information, but only where there are no obvious competitive gains or losses.

There are 11 trade associations which represent automotive service sector activities. Collectively these make up the MIF, which provides an umbrella organisation and a channel of communication to government, the automobile manufacturers and to trade unions. By collectively representing 54% of formal sector business operators in the Western Cape, the MIF acts as a powerful lobbying body for its members.

The MIF does not have a prescribed environmental code of practice, but does from time to time arrange seminars to address issues such as occupational health and safety.

Some member companies interviewed for the case study expressed disenchantment with the type of support given by the MIF, which is perceived to be colluding with big business and labour to the disadvantage of smaller member companies. This situation may partly be a consequence of the lack of capacity of smaller companies to participate actively in organisational roles outside their own business commitments, not having the time, resources and/or inclination to do so.

The role of the South African Motor Industries Employers’ Association (SAMIEA) is to represent the interest of employers in collective bargaining and industrial relations. SAMIEA membership in the Western Cape is reported to be 61% of formally registered businesses, covering 85% of employees in the formal automotive service sector. Employees of SAMIEA members are members of one of the following three trade unions:

• the Motor Industry Employees’ Union for journeymen, that is, qualified artisans;
  
  
• the Motor Industry Staff Association for clerical staff; and
  
  
• the National Union of Metalworkers of South Africa (NUMSA), a Cosatu affiliate.

Given the lowering of import tariffs in the industry, and the opening up of the sector to increased global competition, it is likely that rationalisation will occur in most areas of the formal automotive industry. Service companies will reposition themselves to remain competitive or to increase their profitability through changing their service profile. For example, there will be fewer models of different makes of cars available on the market, as models with low sale units will be penalised. To counteract shrinking car sales, franchised dealerships expect to change from sole to dual franchise agreements so that they can market more than one make of vehicle, and extend their in-house vehicle maintenance services to different makes of vehicles. Preventative maintenance will become more specialised for high-priced and technologically sophisticated vehicles. The challenge for SMME service providers will be to remain technologically competent. The larger businesses have the advantage of resources for ongoing in-house technical training, which SMMES often lack.

Some managers of service and repair businesses referred to the potential for “auto cities” to be established as centralised service centres which incorporate one of each type of service provider in a dedicated facility. This is perceived to have the competitive advantage of being able to offer the customer the convenience of all vehicle-related service requirements in one location. Each business involved would be expected to maintain a high standard of service in the interest of all the participating businesses. The variety of automotive service businesses operating at some SBDC hives already provide the basis for such a centralised service concept, conveniently close to the townships.

Manufacturers and retailers expect a smaller product range of many locally manufactured goods with the emergence of fewer, larger companies, with greater economies of scale, to compete with imported goods. For example, imported tyres are expected to increase from about 12-15% of local sales, to 40%, with local manufacturing shrinking.¹⁰ Cheaper, imported components will also reduce demand for reconditioned components, which will threaten existing reconditioning businesses.

Environmental considerations

The automotive servicing sector is part of a much larger industry which supports a broad spectrum of vested interests in automobile use. The debate about environmental responsibility in this sector is clearly related to broader transportation issues. These include energy and resource consumption and the pollution effects of existing transportation systems, especially widespread private vehicle usage. Addressing these concerns may, in the long-term, change the profile of environmental concerns. However, the main purpose of this case study has been to concentrate on the short and medium-term environmental concerns in the industry. On this basis the problems which were considered include:

¹⁰ source: TDA chairman

• health problems caused by exposure to hazardous materials;
  
  
• emissions of volatile organic compounds from the workplace as a health hazard and a source of air pollution;
  
  
• safety problems caused by the handling of hazardous materials and high-risk equipment;
  
  
• run-off of motor oil into sewers or storm-water drains;
  
  
• impacts from waste disposal and illegal dumping of wastes; and potential soil and groundwater contamination by hazardous constituents in the discarded wastes.

Most business owners or managers claimed to be aware of the common safety concerns relating to the use of pneumatic equipment and heavy-duty machinery, use and storage of flammable liquids, welding and soldering and use of pressurised vessels. They also claimed to be familiar with the regulations governing safe working practices. Some of the managers admitted that conditions are not always as they should be, but the blame was generally put on employees for not following prescribed procedures or for neglecting to use protective equipment properly.

All the companies engaged in activities involving exposure to lead and asbestos claimed to comply with the asbestos and lead regulations (promulgated in 1987 and 1991 respectively). These prescribe maximum permitted exposure limits for these substances, control conditions—for example, ventilation and dust extraction—and occupational hygiene programmes—for example, blood sampling for lead analyses.

The more extensive and rigorous regulations prescribed by the Occupational Health and Safety Act are generally perceived to be too onerous for small businesses.¹¹ Some managers admitted that they do not comply with some of the requirements, particularly those related to supervision, training and education and functioning of health and safety committees. The following are examples of specific responses:

• Most of the business owners or managers who were interviewed were not willing to allow their actual premises to be assessed. The owner of a small radiator repair business admitted to concern about liability.¹² He explained that he conducted weekly informal discussions about health and safety issues, and that lead monitoring was undertaken by a private doctor on a contract basis.
  
  
• Another radiator repair shop (a franchise operation) had likewise contracted a doctor privately to do the necessary lead monitoring, but there was no on-site health and safety awareness programme. He reported that the parent company was in the process of organising a groupwide health monitoring programme which would be made available to all member companies.

¹¹These regulations place greater liability on company management for ensuring that prescribed safety conditions are complied with and extend management responsibility to occupational health. Responsibilities include environmental monitoring, biological screening of employees and the establishment of formal health and safety departments.

¹²Based on a superficial sighting of activities on these premises, conditions clearly were quite haphazard and would not be in compliance with regulations governing work place conditions.

• A respondent who had recently taken over a company engaged in panel-beating claimed that he wanted to improve site conditions but did not know how to go about this. He allowed his premises to be inspected and staff to be interviewed. The site was quite well-organised, although there were unsatisfactory conditions such as a lack of bunding around the oil storage tank to prevent spills. There were no health and safety representatives.
  
  
• The factory manager of a company manufacturing radiator cores also allowed his site to be reviewed. The business had recently relocated to newly constructed premises which, consequently, were modern and well-organised. New structures for health and safety committees had been established. In this case, health and safety representatives received National Occupational Safety Association training and staff members were clearly better informed about environmental issues. One of the site problems which had been identified was inadequate ventilation in one of the areas where lead was used. Management, however, did not consider changes to the ventilation system to be affordable at the time. Lead monitoring was undertaken by a private doctor on contract.
  
  
• The factory manager of a medium-sized component reconditioner reported that their factory conditions were monitored regularly by a private company of occupational hygienists under contract to the occupational health division of the Department of Labour, and they contracted out staff training to a commercial company.

At the time of questioning none of the interviewees was aware of the new regulations for hazardous chemical substances, which include volatile organic compounds contained in solvents and isocyanates in spray-paints.¹³ Exposure can be minimised by using effective extraction systems and appropriate breathing apparatus in spray-painting areas, but this type of protection is clearly lacking at many small service facilities.

The low priority given to occupational health and safety is reflected in the lack of knowledge imparted to technicians in training. The chairman of the panel-beater’s trade association reported that subjects covering the hazards of spray-painting, health and safety issues and personal protective equipment “are being considered” for incorporation in the modular training programme which is being developed for technicians in the motor body repair trade.

Primary sources of pollution are direct emissions during servicing, such as volatile organic compounds, and waste materials which are discarded. In some countries there are strict regulations governing volatile organic compounds emissions or at least proposed strategies for reducing such emissions.¹⁴ There are also visible problems caused by improper waste management. Table 1 identifies the types, sources and characteristics of typical wastes generated by automotive service activities.

¹³The Department of Community Health at the University of Cape Town has initiated a research project to investigate the prevalence of illness caused by isocyanates, thought to be carcinogenic, to workers employed in spray-painting. No results are available yet, but USA research reportedly indicates that it may be significant.

¹⁴For example, an EC directive targets industry sectors which use organic solvents, including car manufacture and damage repair businesses.

TABLE 1 Profile of wastes generated from automotive servicing

Note

¹ These hazardous materials are fixated in the automotive components and would be effectively inert as a waste, but are a source of hazard during manufacturing or reconditioning.

² If non-hazardous wastes are mixed with hazardous wastes, the waste is rendered hazardous, for example, sawdust used as an absorbent to clean up oil spills.

Local authorities consider storm water contamination by oil, solvents and contaminated aqueous effluent to be the most critical pollution problem, resulting in contamination of rivers, marine environments and aquifers to which storm water is discharged. Presently local authorities have no system for containing this contamination, except to discourage illegal discharges to the storm water system by issuing spot fines if an offence is detected.

Most of the interviewees acknowledged that they are sometimes guilty of allowing run-off of contaminated water into the storm water drains through careless practice. The fines are considered too low to be an effective deterrent. Some service station courtyards and workshops are not sloped correctly to contain oil spills or oil-contaminated wash water, or to divert this waste to oil traps. At one of the radiator repair sites lead waste had been dumped in the yard next to a storm water drain. On the day of a visit to the Blackheath SBDC hive the storm water channels in the yard were flowing with dirty water. This could possibly have come from one or more of the mini-factories used for automotive repair work.

The discard of waste engine oil is also considered a significant source of potential soil and groundwater contamination. Under pressure to address environmental problems associated with the processing and use of oil products, members of the oil-refining industry in South Africa have established an organisation known as the Rose Foundation to promote duty of care in the industry. One of its activities is the coordination of a nationwide oil collection service for waste lubricating oil which can be re-refined. Oil is collected from individual premises bulked at a centralised facility and transported in tankers to a re-refining facility at Krugersdorp. The processing operation itself has, however, experienced serious environmental problems and may be forced to close. The chairperson of the Rose Foundation was unwilling to discuss the situation during the course of this study, but he explained that they were seeking to develop more environmentally acceptable re-refining processing technology. However, any such venture had to be able to compete commercially with other processors which may operate with a lower standard of environmental controls and overhead costs.

Most of the interviewees were aware of and made use of this oil collection service which pays for the waste lubricating oil, and which removes diesel and paraffin mixtures as a service, but without payment. There are also other local companies which collect mixed oily wastes for processing into fuel, but there are also reported cases of pollution problems from these sites as a result of mismanagement of oil spills. Oily sludge and oil-contaminated effluent from on-site fixed storage facilities are periodically removed by waste contractors for treatment or disposal at a landfill site.

Another source of oil pollution is petrol leakage from underground storage tanks at service stations.¹⁵ The installation, repair and maintenance of these tanks is the responsibility of the oil company to which a service station is licensed. Reportedly a new South African Bureau of Standards standard has been developed with specifications for double-lined tanks with leak detection systems. It is expected that these tanks will be installed at new service stations, but there is no strong pressure or collective industry policy to force existing installations to be upgraded.¹⁶

¹⁵ Fuel losses are detected by daily checks on sales and inventory.

Solvent recycling is less well-established than oil recycling, although there are some local commercial solvent recyclers, and small-scale distillation units are available commercially for on-site applications. One of the companies which was reviewed uses such a unit to recycle thinners. However, most of the spray-painting businesses were disinterested in such recycling for one or more of a number of reasons: it was not considered to be economically attractive, it was potentially unsafe, or it was a bothersome extra task. Instead, some company managers or the staff admitted that they discarded waste solvents to the sewer, poured it on the ground or mixed it with their waste oils. In one case the manager professed ignorance to the fate of this waste. Others reported that they paid a private contractor to remove full drums of solvent, with “no questions asked”. This waste is often dumped illegally. Some companies reported use of formal waste contracting services for disposal at authorised landfill sites. Clearly, there is a high level of mismanagement of solvent wastes.

In addition to oil contamination, effluent from radiator component manufacturers and repair shops may contain significant heavy metal contamination. There are well-established chemical and physical treatment processes for removal of heavy metals, but few of the companies had the proper facilities for pre-treating their effluent effectively. Moreover, with one exception, none of the managers understood the principles of the bylaws governing effluent from their premises. Even though they perceived the penalties for transgressions to be high, there was not sufficient inducement to improve effluent management themselves on-site.

However, one factory manager reported that he had been assisted by the pollution control department in the Cape metropolitan area in developing a new on-site effluent treatment plant and had been advised about the penalties which would be incurred for the discharge of poorly treated effluent to the sewer system. The high penalties rendered on-site chemical treatment economically attractive. This company clearly had the advantage of being able to incorporate the appropriate facilities at the start of operation. Retrofitting of new process plant for pollution control and waste treatment into an existing operation, is more complicated and usually much more costly.

Despite the fact that effluent problems are common, there is no evidence of technical assistance being made available by franchisers to their franchisees, unlike the group response to implementing health and safety programmes in compliance with the Occupational Health and Safety Act. There is also no evidence of collaboration between similar business operators in trying to resolve these problems. Some of the interviewees agreed on the benefit of such collaboration, but suggested that competitiveness between different companies would preclude this as businesses were unwilling to share information. One of the business owners conceded that there was potential to optimise his existing process, with savings from improved environmental control, but he was unwilling to change the basic process with which he and his employees were familiar. This reflects both a lack of technological capacity and low level of environmental responsibility at all levels of business.

¹⁶ Source: Caltex environmental specialist.

Recycling and reconditioning

Much of the solid waste comprises scrapped automotive components. These may be recycled to recover component materials, reconditioned or discarded either by illegal dumping or authorised disposal to landfill.

Material recycling is well-established for those materials which have value as raw materials, for example, steel, copper, brass, zinc and lead. Most foundries own scrapyards so as to secure supplies of ferrous (iron) and non-ferrous (copper, brass, zinc) feedstock, with automotive scrap being a major source of material. Scrap is purchased from government, industry, small-scale waste merchants and informal traders. After fragmentation and magnetic separation of ferrous and non-ferrous material, ferrous material can be smelted locally, while most non-ferrous material is transported to Gauteng for smelting. In the separation process, lightweight residue material comprising rubber, cloth, glass and plastic is extracted via a cyclone system and discarded to landfill.

The manager of a battery retailer reported that battery recycling is at a high level in South Africa as a consequence of a refundable deposit of R8,50, included in the scrap value of batteries.¹⁷ Old and new batteries are exchanged on a one—for—one basis between consumers and retailers and between retailers and manufacturing wholesalers who return stocks of old batteries to a company in Gauteng for recycling. The acid may be treated for reuse or disposal, battery cases are pulverised to recover plastic granulate for recycling and lead is re-refined. Batteries contained in scrapped motor vehicles escape this material recycle as dealers do not pay when there is no sale to balance the books. So, batteries have no value for scrap dealers. One scrap dealer explained that he decanted the acid into drums, used the acid for floor-cleaning, and gave the battery cases to anyone interested in recovering the lead—to make fishing sinkers, for example!

In the formal sector battery reconditioning is not considered viable compared with the economy of scale of manufacturers equipped to produce thousands of new batteries daily. There are reportedly some small informal operators who either recharge batteries with new acid content, or rebuild batteries. This involves breaking the cases, smelting the lead to make new plates and refilling with fresh acid—a labour-intensive process.

Plastic bumpers may be re-granulated and incorporated in the manufacturing of recycled plastic products such as Polywood (plastic wood), but only limited quantities of this hard plastic can practically be used. Alternatively, there are about five companies in the Western Cape which restore plastic bumpers using a welding process. This market niche is considered to be saturated.

¹⁷ This was an inducement for the return of old batteries, introduced at the time of World War II because of the strategic value of lead, and retained in South Africa.. Elsewhere, for example, in the USA, where no such inducement is made, disposal of batteries is a serious environmental problem.

Some material recycling of tyre rubber does take place, for example, to produce a rubber granulate used for road surfacing and some small-scale production of products such as mats and shoes. Some tyres find reuse as stabilisers in soil embankments or as artificial reefs. Burning of tyres as a fuel substitute in cement kilns has also been proposed by the cement manufacturing industry. However, while technically possible, large-scale tyre recycling is constrained by logistical problems and operating costs associated with collecting discarded tyres and dumping or landfill disposal of tyres remains common practice with its attendant environmental problems.¹⁸

A tyre and rubber recycling committee has been formed by the manufacturers, retailers, retreaders and the MIF to find solutions to the tyre disposal problem. Among proposals made to the committee by a cement manufacturer is the addition of a levy on the price of tyres, funds from which could be used to finance the establishment and operation of small businesses for the collection and transport of tyres to the cement kilns. Certain members of the tyre industry, however, resist imposition of any additional cost for this purpose on the retail price of tyres, for a complexity of reasons. These include the unwillingness of local manufacturers to take responsibility for imported tyres, the unwillingness of tyre retreaders to contribute to the costs of tyre collection and recycling on the grounds that they already provide a solution by extending the life of tyres which would otherwise become waste. Manufacturers have yet to agree on an industrial response, but are under increasing government pressure to do so.

In those industrial sectors where recycling of certain materials does take place, it points to the environmental responsibility of the sector. At the same time the business sector admits that such activity does not take place unless it is commercially viable. For example, lead recycling is threatened by a drop in lead prices. Recycling which has been successful to date uses a refundable deposit on the value of the material as an incentive for consumers to return goods for recycling. Low prices for new components have also detracted from the relative value of recyclable components. For example, the core deposit paid as an incentive for the return of clutch components was reduced from R20 to R5 during the latter half of 1995. This, in turn, reduces the income of collectors of such components and increases the discard of material to waste.

Other solid waste components are usually disposed of through normal municipal waste or in rented skips and removed by municipal services. Potentially hazardous wastes may also be discarded in this way—for example, oil and paint containers—thereby contaminating what would otherwise be inert waste material. This raises concerns about the potential for pollution from domestic landfill sites which are not designed to contain hazardous wastes, and therefore is a health risk to persons who may scavenge from the waste bins and skips.

¹⁸ Tyres consume significant space in landfill, are difficult to compact and, therefore, tend to move, and are combustible. There is also increasing awareness of the problem of tyre burning in the township and squatter areas for the purpose of recovering the steel for sale as scrap. The value of this is reputed to be about 40 cents per tyre.

Response to environmental pressures

Internationally there is pressure on the automotive sector as a whole to address its major environmental impacts, including risks from processing fuel and fuel storage; huge infrastructure requirements for widespread private vehicle use; energy consumption; air pollution by vehicle exhaust gases; and disposal of discarded vehicles and components. Compared with these impacts, those of manufacturing and servicing seem insignificant. However, in the hazardous waste management field, automotive repair activities are considered to be the greatest source of hazardous waste by small quantity generators. It is one of the industrial sectors which has been targeted by federal and state pollution prevention programmes in the USA, which seek to assist companies to improve their waste management practices and to comply, cost-effectively, with federal and state regulations. The emphasis in the USA experience has been on waste minimisation.

Stricter legislation governing manufacture and use of some hazardous materials, including oils and solvents, has been introduced in some countries. German law includes limits on the toxicity of materials such as mineral oils while, in Sweden, “producer responsibility” compels producers to develop less harmful alternatives to hazardous materials. Water-based paints have been developed as an alternative to spray-painting with solvent-based paints, requiring, in addition, new technology for paint application. More efficient technologies for application of solvent-based paints have also been developed, with reduced emissions and wastage, coupled with the recovery of solvents. A carbon fibre or glass fibre alternative is available for asbestos, another hazardous material, used in car brake linings.

The large-scale problem of discarded automotive scrap is being addressed by different national governments through specific policy measures directed at enforcing or encouraging greater material recycling in the automotive industry. For example, Japan, Germany and Sweden have introduced specific legislation which prescribes conditions relating to:

• producer responsibility for wastes associated with automotive manufacture;
  
  
• use of recyclable materials in vehicles;
  
  
• identification of plastics to facilitate separation for recycling;
  
  
• compulsory return of vehicles to manufacturers or dealers; and
  
  
• dissemination of information about recycling.

As a result, vehicle disassembly and salvaging operations have increased in some countries. Le Roy (1991) reviews initiatives by automobile manufacturers in France where a collection network and centralised reclamation centres have been established for the recovery of precious metals in catalyst, exhaust pipes, battery lead, solvents and polypropylene from bumpers and battery cases, as well as treatment of waste battery acid and waste oils. In Italy, Fiat has introduced the Fiat auto recycling system for recycling of scrapped cars.¹⁹ This comprises a national network of demolition firms which disassemble and remove plastic components, seat foams, glazing, catalytic converters, carpets and chloro-fluorocarbons (CFCS) from air conditioners. This material is reused in other cars or directed to other markets. These initiatives demonstrate the benefits that material recycling has a) for its contribution to the supply of raw material, b) the economic value of activities, in recovery and reconditioning of used components and c) reprocessing of materials from scrap.

¹⁹Source: Engineering News and information forwarded by Nissan’s marketing division.

There is also evidence of technological developments which can extend the life of worn components. For example, Jackson (1993) makes reference to a novel, low-temperature vacuum retreading process for vehicle tyres which allowed a $500 truck tyre to be retreaded for $175, giving a further 65 000 miles of life. However, the market for retreadable tyre casings in South Africa has declined because of low-cost imported tyres. Jackson (1993) also refers to “early estimates of product life extension in the vehicle industry which suggest that the use of improved corrosion-resistant materials, appropriate assembly methods and periodic maintenance could double the useful life of the vehicle with only a minor (10%) cost increase”.

Most of the interviewees expressed broad-based concern about problems of environmental quality, but admitted that environmental concern is largely given lip service because no competitive advantage in substantive action is perceived. They did not believe that the general public has the level of environmental awareness or sophistication to pressurise industry for more environmentally defendable actions. One business manager suggested that some aspects of environmental concern were inflated in the interests of creating a demand for environmental services. He felt that control should not be prescriptive, but conditions were needed which would be an incentive for companies to improve environmental conditions. In particular, he argued for more information to be made available both to industry and to the consumer. Industries could then position themselves strategically and the public could drive initiatives by making appropriate environmentally-based decisions. Only then would companies benefit from marketing their goods on environmental grounds.

Presently, regulation is seen as the primary inducement action to improve environmental conditions. However, few of the businesses respect existing environmental legislation, which is perceived to be too complicated and weakly enforced. Furthermore, almost all the interviewees were resistant to any measure which would potentially increase production costs. One business owner did, however, refer to the higher environmental standards in Japan, where industry, nonetheless, is able to remain competitive because of high productivity. Against the broader trend, one trade association chairperson supported the concept of stricter regulatory control, as he believed in the need to pay a higher price for a cleaner environment. He suggested that smaller businesses which could not afford higher costs should perhaps be subsidised in the interests of job protection.

None of the interviewees had any experience with the principles of waste minimisation and, in general, were disinterested in the potential to effect production cost savings. This lack of interest can be attributed to many reasons, one of which is the low priority given to environmental performance. Consequently, there has been no motivation to implement technological improvements for environmental benefits.

Only two of the interviewees identified technology changes in response to environmental concerns. One was the substitution of CFCS as a refrigerant in automotive cooling systems; the other was the introduction of new water-based paints. One business owner in the spray-painting trade reported that they were experiencing problems with some imported cars which had water-based coatings, which rusted their spray-painting equipment. He suggested that only the larger shops would be able to afford to invest in new spray-painting technology.²⁰

Most of the interviewees supported the principle of recycling which provided opportunities for people to earn a living, referring principally to informal collectors. The plant manager of a component manufacturing company supported the concept of recovery of material for recycling as feedstock, with benefits in job creation, but opposed manufacturing activities which would reduce profitable turnover of new products. He argued that high labour costs render repair and reconditioning more expensive than replacement with new goods, which are also more convenient for the consumer.

Only one of the interviewees, whose company manufactured components, was interested in the export market. He felt that environmentally-based trade constraints would apply only to original equipment, and not to components for the after-market or reconditioned components.

Lessons for the environmental management of SMMES

The preceding case study has highlighted some of the short and medium-term environmental and occupational health and safety issues relevant to the automotive service sector. Extrapolating the findings, reasons for the apparent incapacity of small businesses in general to respond effectively to environmental pressures may be summarised as follows:

• Regulatory enforcement is ineffective due to the lack of the resources of regulatory authorities to carry out their responsibilities timeously, and the costly system of monitoring and enforcement.
  
  
• Market conditions do not encourage self-regulation or collaboration between different companies to address common problems.
  
  
• Many SMMES do not have appropriate skills or the experience to address environmental problems. Typically there is a:
  
  
  • lack of awareness of global trends in legislation and technological alternatives for improving environmental performance;
    
    
  • lack of knowledge about the environmental hazards of certain materials;
    
    
  • lack of insight into the causes of, and potential solutions to, waste problems;
    
    
  • resistance to more sophisticated technology and increased skills requirements; and reliance on off-site waste processing facilities and neglect of in-house responsibility for addressing waste related problems.

²⁰ Water-based paints will generate an aqueous effluent rather than a solvent waste, which could become a more difficult waste to treat. An alternative is the use of more efficient spraying systems and recovery systems for solvent-based paints.

• SMMES have reduced economies of scale with lower production capacities. Consequently, they have less financial resources for capital investment, and are less able to meet recurrent costs.
  
  
• There is no effective infrastructure for the dissemination of information and for technology transfer.

There are few coordinated services such as specialist waste collection and recycling.

• There is limited institutional support from, for example, trade associations.
  
  
• There is limited commercial interest from environmental consultants who focus on large industries.
  
  
• There has been limited commercial interest from equipment suppliers for small-scale process development, due to a historical lack of demand. Hence, there are technological few options currently available on the local market.
  
  
• Seminars, training programmes and expert assistance are often too costly and time-consuming.

These difficulties are not unique to South African SMMES, as evidenced by international initiatives to direct specific assistance to small business enterprises. In South African, however, there is an opportunity to address the environmental impact of SMMES as part of increased state support for this sector. There is a need both to address environmental problems caused by existing SMMES and to assist new business enterprises to establish themselves on a sustainable basis. This has implications for broader government SMME policy.

Implications for SMME policy

SMMEs will have more difficulty complying with requirements for higher standards of environmental control than larger, corporate enterprises. SMMEs experience a disproportionate cost associated with environmental requirements. Cumulatively, SMMEs may also have disproportionately critical environmental impacts. A policy of promoting dispersed, small-scale business activity will also spread environmental problems, which increase the difficulty of providing environmental controls, including the containment of pollution and management of waste. In more developed countries there has been a trend towards the establishment of centralised waste treatment facilities with advantages of economies of scale and the use of best available technology for processing specific waste materials. Economic incentives and technological capabilities are needed to drive such developments, which are probably most suited to built-up urban areas where such centres will be close to sources of waste. They may not be the best solution, however, for businesses in more dispersed locations where distances for transport of wastes are much greater.

The absence of conditions to stimulate interest in environmental control for SMMES has also discouraged investment in innovative technological development of cleaner processes for small-scale production, as well as pollution control and waste management. Such developments have been encouraged in other countries by enforcement of regulation and by economic incentives. In developed countries the environmental services and product sector has become very valuable commercially, while developing countries which lack this technological expertise have become dependent on foreign assistance. South Africa could benefit highly from supporting national capacity-building in environmental expertise, particularly in relation to SMME management.

A lack of serious attention to environmental performance may threaten the sustainability of SMMES. The Indian example (discussed previously) illustrates the extent to which the public may revolt against unacceptable environmental degradation caused by lack of control of industrial activity, even though they may be economically desirable. SMME operators should be aware of their environmental responsibilities, as their future social responsibility may depend on it.

Environmental trade constraints are also an important factor. SMMES established in South Africa with a view to international trade will need to be able to adopt environmentally acceptable production processes and be prepared to be audited to verify product and performance acceptability. Thus, poor environmental standards may be a constraint to the ambitions of potential exporters in the SMME sector.

Broadly speaking, government policy should provide leadership by stating an environmental policy position in such a way that commerce, industry and the public will respond proactively to environmental challenges. Specific government measures or programmes may be necessary to address critical environmental problems, control specific business activities which are most threatening to health, safety and environmental integrity, or subsidise activities which may have long-term environmental and socio-economic benefits but which are not supported by existing market conditions. These principles apply to SMME development as a component of broad industrial environmental policy.

The Department of Trade and Industry has, since 1994, given more attention to environmental issues and sought ways to link environmental performance to state assistance. The directorate dealing with SMME development has also indicated its interest in integrating environmental concerns with broader SMME development programmes.

It is unlikely, however, that environmental support, services or regulations for SMMES will be sustained separately from other services. It is, therefore, desirable to integrate environmental issues into the broader support services already in place. The principles and mechanisms proposed in the Small Business White Paper could be supplemented by the inclusion of environmental policy objectives in each of the proposed areas of support. Appendix 1 (see E189) summarises these principles as well as some possible new objectives. Environmental competence can then improve simultaneously with other skills.

A number of specific recommendations are outlined below. These strategies seek to draw on existing infrastructure or programmes in order to avoid the creation of new institutions.

Environmental services in local business service centres

The Department of Trade and Industry, in cooperation with the Department of Environmental Affairs and Tourism, should sponsor environmental services at the local business service centres currently being established. This could initially be done on a pilot basis where environmental specialists could be placed in the service centres to advise and train entrepreneurs in environmental management. This training and advice could be offered on a group and one-to-one basis, and could be tailored to the specific needs of the businesses concerned. There could also be seminars for entrepreneurs working in the same sector which would focus on the particular environmental challenges facing that sector. Larger companies in the same sector could be brought in to discuss their environmental perspectives and clarify what they expect from suppliers. Service centres may also need to supply grants or loans to support the acquisition of equipment to be used for health, safety or environmental protection. The local business service centres could also be used to coordinate various other initiatives as described below.

Hazardous waste and materials recycling services

We have seen that one of the main problems facing small companies in the automotive service sector is the lack of appropriate facilities for the collection of hazardous wastes and for recycling of materials. This does not, off course, refer to paper and glass recycling, for which there is already an adequate infrastructure, but rather to various other industrial materials, and chemicals in particular.

International experience shows that, in many cases, materials recycling can be self-sustaining or even profitable if sufficient economies of scale can be achieved. Economies of scale require coordination between SMMES. Similarly, SMMES are more likely to comply with hazardous waste regulations if there is a coordinated service which would take waste off entrepreneurs’ hands without entailing major cost.

This suggests that municipalities and local business service centres could usefully set up waste and recycling services at a local level—specifically to service SMMES. The exact nature of these services and the types of wastes/materials that should be targeted would depend on the sectoral breakdown of activities in various areas. In metropolitan areas where a wide range of activities are likely to be present, a wider range of waste collection and recycling services would need to be established.

Sectoral workshops in key sectors

The automative services case study presented here suggests that interventions need to be made on a sectoral basis in order to address the specific needs of particular kinds of enterprises. One way to upgrade the environmental consciousness and capacity of SMMEs would be to establish closer links between large and small enterprises working in the same sector. The larger enterprises would be able to assist smaller enterprises (especially if these enterprises are their suppliers) in addressing environmental as well as health and safety problems. In some cases larger enterprises could also provide waste collection and other infrastructure.

This could be taken a step further if government were to charge larger enterprises with the responsibility to ensure that their suppliers were meeting with key environmental or health and safety requirements. This may be useful with regard to critical issues such as controlling particular hazardous wastes currently entering the waste stream or combating common health and safety problems.

This would fit in well with international trends which encourage duty-of-care responsibility for larger enterprises using a cradle-to-grave approach. This would mean large companies taking some responsibility for the environmental performance of suppliers. Larger companies could, therefore, be encouraged to give greater assistance to their suppliers, customers, subsidiaries, franchisees, and other smaller businesses who are involved with their products.

Information and training services

Government and non-governmental organisations also have an important role to play in providing information and training to SMMEs. On the information side a number of services could be envisaged. This would include the possibility of seminars at the local level which seek to inform small entrepreneurs of their legal responsibilities and point out the environmental effects of their activities. Such seminars could also inform people about services that are available, and ways in which they could be assisted in meeting their responsibilities. There would have to be a mix of general information relevant to all SMME operators, and sectoral information relevant to particular types of enterprises. These seminars could potentially be arranged by local government in cooperation with national departments such as the departments of Trade and Industry and Environmental Affairs and Tourism. Publications could also be sent out to entrepreneurs with useful information and lists of resource institutions. This requires, of course, that the relevant institutions would have the capacity to reach small businesses.

Similarly, it may be useful to provide training opportunities for SMME operators. Short, focused training courses, which would ideally be certified, could be offered to operators. These courses would empower operators to manage their environmental, health and safety impacts more effectively and to take proactive steps to solve environmental problems.

Enforcing regulation

The measures outlined above all aim to offer some sort of support to entrepreneurs and operators. This is undoubtedly necessary in order to raise levels of environmental awareness and capacity. However, in addition to these services, SMMES also need to be put under some pressure to meet their environmental responsibilities and legal requirements. There are a number of ways in which this could be done. Firstly, inspection services could be strengthened. However, given resource constraints, this is likely to be limited. It may, therefore, be preferable to emphasise strategies which link government support to businesses’ willingness to meet their environmental and health and safety responsibilities. This could include making preferential loans and access to support services, conditional on the demonstration of sound health, safety and environmental performance. Again, this will require coordinated action by government departments and local service providers.

Concluding remarks

In recognition of growing international concern about the environmental impacts of industrial activity, this study was conceived to explore the significance of environmental problems linked to SMME activity. The case study of selected automotive service activities in the Cape metropolitan area cannot reflect fairly the situation in all sectors. However, it highlighted weaknesses in skills, awareness, ethics, institutional support and government policies. This impacts on the sustainability of SMME activity and, therefore, environmental issues should be integrated with SMME policy development at an early stage, and not neglected until environmental problems become critical barriers to SMME growth.

This chapter has identified some ideas for short to medium-term strategies to address the environmental problems of small business, as well as longer-term policy. More detailed studies are required to identify and assess specific policy mechanisms for sound environmental management of SMMES in a range of industrial sectors and geographical locations.

References

Baldwin, D., “Future environmental legislation and the small chemical waste producer”, paper presented at a seminar and workshop on environment and waste management technology, NASREC, 22-24 October 1991.

City Planner’s Department, “Environmental evaluation for the Cape metropolitan area”, publication prepared by the City Planner’s Department of the Cape Town City Council for the Metropolitan Development Framework, August 1993.

Coleman, A.E., “An assessment of the potential for waste minimisation in small and medium-sized enterprises in South Africa”, M. Sc. thesis, Department of Chemical Engineering, University of Cape Town, February 1994.

Environmental Monitoring Group, Clean production: a preliminary assessment of the need and potential for the introduction of clean technology in some industrial sectors in South Africa, Environmental Monitoring Group, Western Cape, 1993.

Huntley, B., Siegfried, R. and Sunter, C., South African environments into the 21st century Cape Town: Human & Rousseau, 1989.

Jackson, T, Clean Production Strategies, Stockholm Environment Institute, Lewis Publishers, Boca Raton, USA, 1993.

Le Roy, E., “The waste strewn path of an automobile”, paper presented at the cleaner production strategies for the automotive sector seminar, Sweden, 11-12 December 1991.

Department of Trade and Industry, “Strategies for the development of an integrated policy and support programme for small, medium and micro-enterprises in South Africa”, discussion paper released by Ministry of Trade and Industry (South Africa), October 1994.

Prodder Newsletter, Vol. 6. No. 3, August 1994, Human Sciences Research Council.

Roberts, M., “India cracks down on industrial pollution”, Chemical Week, June 7,1995.

RSA (1995a), National Small Business Enabling Act, published in draft bill form, Government Gazette, No. 16876,15 December 1995.

RSA (1995b), “White paper on a national strategy for the development and promotion of small business in South Africa”, Government Gazette, No. 16317,28 March 1995.

Toy, WM, “Waste rninimisation in the automotive repair industry”, JAPCA, Vol 38, No. 11, November 1988.

APPENDIX 1 Summary of environmental policy objectives for the SMME sector

Document(s) 12 of 15