Hassan Farouk is one of more than 300,000 people in Cairo alone who make a living from trash. Simply removing it from the streets, however, won’t pay the bills; the real money is in culling plastic, metal, paper, cloth and other materials from the refuse for recycling.
While recycling is a fast-growing international trend, in Egypt, more than 80 percent of recycling activity remains informal, according to a study by the German Technical Cooperation (GTZ), a development agency under Germany’s Federal Ministry for Economic Cooperation and Development. Different studies estimate that there are anywhere between 2,000 and 3,000 informal recycling plants in the country. They are mainly small workshops whose workers are subject to hazardous conditions and whose owners are exploited by exporters.
The GTZ, working with CID Consulting Egypt, has been trying to help informal recyclers make their operations legal to help improve the value chain, but bureaucratic roadblocks and official antagonism are thwarting their efforts.
For those trying to help the recyclers, the number doesn’t come as a surprise as the situation of this underground industry has been escalating for years. The process to obtain legal industrial licenses requires copious paperwork, time, energy and money that informal recyclers cannot afford. Those who brave the process often find themselves penalized for operating illegally in the first place. There are few, if any, government incentives to encourage the much-needed recycling business to go mainstream.
There are contradicting opinions about why these recycling factories are informal. While some argue it is because the legal procedures are prohibitive, others claim that workshop owners stay off the official rosters to avoid taxes and bills. Whatever the argument is, it is a missed opportunity of massive proportions. In addition to the health and environmental benefits of government-regulated recycling, improving the industry’s capacity could generate up to billions of pounds each year.
Egypt generates 75 million tons of solid waste every year, according to 2009 figures from the Ministry of State for Environmental Affairs. The global research network International Consortium estimates this number to increase at an annual rate of 3.4 percent. Nader Mitry, a chemical engineer at the National Research Center and consultant at Green Consultancy, says Greater Cairo alone produces 15 to 16 tons daily, most of which is dumped in the river, landfills or remains uncollected.
Out of 650,000 tons of recyclable annual waste generated across the nation each year, only 150,000 tons are actually recycled, mostly in small informal workshops. The GTZ study estimated that by not recycling all possible waste, Egypt is losing out on an average of $500 million (LE 3 billion) annually.
From collectors to businessmen
Although widely ignored for decades, informal garbage collectors have proven over the years to do not only a better job at collecting garbage, but also a far better job recycling collected garbage than international companies hired by the state in the past decade.
It all started back in the ‘good old days,’ as cities were becoming more urbanized and attracting people from rural areas in search of work.
From among the lower economic strata of society, some started going door to door to collect garbage, see what they could personally use from it and feed the organic waste to pigs. Later, they started augmenting the income from pigs by selling plastic, paper, metals, wood and other reusable waste material to manufacturers.
The state also provided garbage collection services, and, up until the 2000s, the National Hygiene Center’s collectors gathered 50 percent of the waste; informal garbage collectors collected 35 percent. The remaining 15 percent was left in the streets for cats and dogs. Mitry explains that the national collectors weren’t doing such a good job as they didn’t have enough equipment and machinery. On the other hand, informal collectors were doing very well and were even recycling, albeit on a small scale.
In the last decade, the government pulled back from the trash business, hiring international companies to manage the solid waste disposal and recycling procedures, paying them an average of LE 80 million yearly. When looking for potential contractors, however, the state ignored the local recyclers who have been in the business since the 1940s, despite the fact that local recyclers are very good at what they do.
The foreign private garbage companies recycle no more than 20 percent from the collected waste, and dispose of the rest in desert landfills.
The locals, on the other hand, recycle an average of 85 percent of the 4,500 tons of trash collected daily.
Each group of locals has a wahi, or a manager, who originally brought them from Upper Egypt and gave them houses or plots of land to sort the garbage into plastic, wood, glass, paper, etc. The wahi then sells the sorted garbage and takes most of the money. As the business developed, the wahis created small factories to crush, wash and dry plastic trash and melt it into pellets that can be sold to plastic-using factories not just in Egypt, but also Asia and Europe. Locally, recycled plastic ends up as things such as black plastic bags, slippers and hangers.
Although local recyclers have achieved an economically and environmentally viable business model, it has all remained informal. This transition from sorters to recyclers didn’t happen with the help of the government, but rather with the help of local NGOs back in 1986 when they introduced locally made plastic crushers and cloth grinders.
Around the same time, the recycling industry was flourishing internationally, and others saw potential profits locally. Taking their raw materials from the local garbage collectors, the number of small, informal recycling factories began to increase across Egypt. Today, recycling neighborhoods exist in Shubra El-Kheima, Moqattam, Ezbet el Nakhl, Moetamadeyya, El Baragil, Tora, Helwan, and many other areas. The informal sector accounts for the majority of the nation’s recycling efforts.
Research by the Support for Environmental Assessment and Management (SEAM) Program, a joint effort between the Egyptian Environmental Affairs Agency and UK development agencies, notes that while informal factories are a strong economic force, it is mostly undocumented and unquantifiable. Rough estimates put informal plastics production, for instance, at an average of 24.77 tons monthly. Osama Salem, CEO of CID Consulting Egypt and the team leader of the GTZ program to formalize recyclers, says that informal recycling employs more than 300,000 people in Cairo alone, working at every stage of production including washing, crushing, agglomeration, pelletizing and forming.
A bureaucratic nightmare
The goal is an organized, formal sector that regulates recycling and takes it into the mainstream, one that encourages investors to help expand capacity and jobs in this much-needed industry.
The government does have a formal process for establishing a legal factory or plant, with many of the regulations meant to benefit everyone involved — the owners, workers, neighbors and the environment as a whole.
But when recyclers try to formalize their operations, they run into bureaucratic and economic obstacles. Without viable options to help them meet environmental, health and labor standards, they end up keeping their operations informal.
When Gaber Hussein* went to get his small recycling workshop legalized, the government officials said the workshop’s location was not safe because the chemicals used were harmful to the neighborhood residents. Hussein can’t get the license unless he moves his workshop, but he says that since officials never gave him an alternative location, or any help really, he never bothered trying again. Meanwhile, the workshop continues to operate even though its processes are endangering workers and others in the neighborhood.
(*All workshop owners’ names have been changed to protect their identities.)
“I crush plastic in my little workshop, produce plastic pellets and sell to hanger factories. It’s my only source of income, and I can’t become legal because of my location and other regulations that I don’t even know,” Hussein says aggressively. “The government is acting as if I am their enemy. What should I do? I will not stop, I am just trying to survive.”
Lawyer Gamal Fahmy describes the process of navigating through the legal and governmental procedures as very hectic. There are more than six approvals from more than six governmental institutions that each factory has to get to receive the final license. Some people keep trying for two years and still don’t get the license.”
According to Fahmy, the situation has only gotten worse post-January 25: “If you used to bribe the government official with LE 10 to finish the job, he now asks for LE 20, and you have to pay or otherwise nothing will get done.”
Mountains of paperwork aside, the lawyer says that the conditions for establishing a legal recycling plant are too cumbersome for workshop owners to fulfill. The plant needs to be in a secluded area, have good transportation and filters for gases to reduce the air pollution. The owner must arrange for electricity, a water source, a way to properly dispose of waste, insurance for workers, fire alarms and other safety measures, among other requirements. The plant owner must also obtain a tax card, industrial registration and district permission.
The formalization process takes a prohibitively long time. The GTZ study found that getting a tax card takes approximately 10 weeks, industrial registration takes 48 weeks and district permission takes 107 weeks and costs around LE 6,000, in addition to bribes and taxes.
Even if someone wanted to spend that much time chasing paperwork, the GTZ team found that the majority of informal recyclers do not know the formalization procedures nor the responsible authorities to contact to become formalized.
Another problem recyclers face is that, according to the law, business owners must own or rent the land on which his business operates. In most cases, recyclers live and work in slums on property they have no legal right to inhabit.
Although the regulations for setting up a plant are to ensure safety and the government rights, they effectively discourage small-scale recyclers from legalizing their operations, as there is no government’s aid or facilitation. Why bother to become legal when owners know that they can very well remain under the radar if they are only operating a small workshop?
“The formalization period takes a lot of time, energy and money, of course. I will also have to change a lot in my workshop to be considered legal, and I will have to pay taxes, and no one helps in all that,” says Helmy Saed, a workshop owner. “So why should I become formal and pay taxes to the government, which is the reason behind me being poor and barely making a living in the first place?”
Official Antagonism
As a result of the complicated formalization process, 80 percent of all small business in Egypt are informal, not just the recyclers.
“When we have laws and regulations that prevent 80 percent of the target group from becoming legal, then we have a national problem,” says Salem. “In addition to each business challenge, [informal owners] don’t pay taxes or insurance, which is very expensive for the country.”
Informal business owners who try to register their companies legally end up being penalized. “If they become formal now, in addition to the normal 20 to 40 percent of net profits that they will have to pay generally, they will have to pay taxes [retroactively],” explains Salem. “[Back taxes] account for an average of LE 40,000 to LE 60,000, which is not affordable for most of them.”
It is far cheaper to remain undocumented. The government usually can’t locate or reach the workshops as they exist in places that only locals can easily find. Even if an inspection team were able to track down an unregistered workshop, owners say they can usually bribe the inspectors with an average of LE 7,000. Some might keep a low profile by closing the workshop for a couple of days to avoid choosing between bribery and having their workshop discovered and officially closed. For the government, this sector remains nearly invisible.
Salem explains that there is a problem of trust between workshops owners and the government because officials see the owners only as lawbreakers endangering the environment. In many cases, when the owner has gone to the government to formalize his operation, the state has tried to prosecute and imprison him for breaking one or more laws.
A Ministry of State for Environmental Affairs official, who declined to give her name because she said she wasn’t authorized to speak on the subject, says the ministry’s view is that the informal-sector workshops are lawbreakers, environmentally dangerous and should be punished.
They should also pay taxes just like everyone else because, after all, they make profits. Egypt Today contacted other ministries for official comment on the topic, but received no response up to press time.
Salem says the GTZ project decided to formalize the recyclers who already have tax cards and insurance papers as they are already in the system, and they are more willing to become legal. “But, for example, out of every 240 workshops, only four have these papers,” says Salem. “Formalization procedures, tax exemption laws and the tax law in general needs to be revised by the minister of finance. These laws form a real barrier [for] the informal private sector.”
Mainstreaming a Must
Ironically, the informal recycling industry desperately needs the regulations that are keeping workshops from becoming legal. Many recyclers have been forced into the trade by high unemployment and economic hardship. The majority of recyclers live and work in very poor areas of the city, with workshops riddled with health hazards and safety problems. On any given day, they risk arrest and police harassment.
To make matters worse, recyclers are often exploited by exporters. Because the recyclers are not legal, they must export the highly demanded plastic pellets through a middleman, usually an exporting licensed office set up specifically to export the recyclers’ products. The office makes ludicrous profit as they can buy one ton of pellets for LE 5,000 and export it for ¤5,000.
In general, the total value of exports for recycled plastic alone is more than $36 million, and the main markets for export are China, Turkey, Hong Kong, France, Greece and Korea. With a formalized recycling plant that can export legally, the recyclers get the profit to invest in their industry and the government gets tax revenue.
With no fixed or predictable income, informal recyclers operate under financial constraints with almost no means or vision to develop the industry or expand it. A lack of proper machinery and resources means product quality often fails to meet local standards. In its study, the GTZ team recommended improving the quality through automation of production lines and increased know-how and machine skills.
There are an abundance of new ideas in the recycling sector, but the people trying to implement them are faced with barriers and disinterest from the government. For example, Hanna Fathi has developed a means to convert organic waste into biogas that could be used to run special household heaters, which is cheaper than all the other heaters currently on the market.
Fathi says the government didn’t show any interest or support for his biogas project in the Garbage City in Giza, adding that officials even refused to give him permission to start the project because the land was government owned. Undaunted, Fathi is implementing his project with funds and support from urban planner Thomas Culhin in California.
Hidden treasure
Informal recyclers turn garbage to resources and minimize landfill use. They are a key part of the value chain, with every ton of garbage benefiting 250 people throughout the whole process of collecting and recycling. According to Salem, recycling also saves resources, estimating that using recycled plastic saves Egypt 80 percent in imports.
As the state grapples with unemployment and budget deficits, it needs to rethink its approach to the informal recycling sector.
“If the government wants to increase job opportunities [facilitating the formalization procedures is] a very good first step because if the informals became formals they will employ more and the country will get more taxes,” says Salem.
A good first step is for the government to ease the bureaucracy involved in making an informal business legal. It could even follow several international examples to offer recyclers reduced tax rates or tax exemptions, suitable land for new plants or even offer to partner on private recycling projects.
In Sweden, the government supervises the whole waste management process and recycling industries, with almost no informals in the business. Also, the Tunisian government is responsible for solid waste management, financed by a special monthly tax, explains Mitry. If the state doesn’t have enough resources to run the process itself, the least it can do is cooperate with those already in the sector to help rather than alienate them.
The soon-to-be elected government must seek different ways to reach the 80 percent of recyclers working outside formal channels and harness their efforts in building a new Egyptian era through paying taxes and employing more people. Whether the government will capitalize on such a gold mine is a question that remains to be answered. et
Products from recyclable waste:
Most of the hangers you get from the dry cleaner are from recycled plastic waste.
Black plastic garbage bags are mainly made from plastic bottles and discarded plastic bags or food packs.
Kelim cloth used to decorate cars are made from reused waste cloth of households and cloth manufacturers.
The NGO El Nafeza makes paper and cardboard from rice straw that, when burned, is the primary reason for the annual ‘black cloud.’ The only organization recycling agricultural waste, El Nafeza produces an average of 2,000 papers per month, according to El Nafeza manager Laila Habashi. The paper is used for notebooks, photo frames, albums, cards and boxes.
