The Circular Economy: An Entrepreneurial Solution to South Africa’s Environmental Challenges?

Benjamin Algreen Adler

Student thesis: Master thesis

Abstract

South Africa faces a variety of economic and environmental challenges today. While the value of the Rand has halved over the last five years and unemployment has risen to 25 percent, air and water pollution is threatening the health of millions and could have serious ramifications as climate change intensifies. The model of a circular economy offers some remedies, but implementing it is an expensive ordeal, and the South African government hardly has the capacity to enforce existing environmental regulations. This paper therefore argues that entrepreneurs can play a role in delivering features of the circular economy that address some of these challenges. By combining circular economic theory with entrepreneurial theory, five environmentally relevant market failures are analyzed in the South African context: (1) public goods, (2) externalities, (3) monopoly power, (4) inappropriate government intervention, and (5) imperfect information. More specifically, it is shown that entrepreneurs can implement circular economic initiatives that repair these market failures, thus generating economic value while reducing environmental damage simultaneously. However, the findings show that a good amount of entrepreneurial initiative is not possible due to government regulation or lack thereof. Policy makers should therefore shift their attention away from ineffective and expensive compliance-based regulation, and instead focus on developing institutions that empower entrepreneurs to solve environmental challenges. It is shown that this would support policy goals on three fronts: (1) economic growth, (2) environmental protection, and (3) redistributing wealth to disadvantaged people. The findings of this paper seek to dispel the myth that developing countries must settle for polluting and environmentally degrading economies, and show that a bottom-up implementation of the circular economy driven by entrepreneurs can solve some of South Africa’s environmental and economic challenges.

EducationsMSc in International Business and Politics, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2016
Number of pages90
SupervisorsAndrej Savin