Contrary to the ignorant belief that urbanization is the greatest woe of Africa, it is rather the greatest opportunity for development. The increase in population associated with urbanization is a creator of markets and a stimulant of production of goods and services. It is no surprise that almost every business thinks about the urban centres as preferred locations; and cities across the global including London and New York attract the best of businesses, people and resources. In the parlance of welfare economics, the upside of urbanization is a positive externality to urban inhabitants ? benefits accruing to a third party who is not privy to the contract of its provision. However, for most developing economies especially in Africa, urbanization appears to produce a contrary effect ? a lot of negative externalities (social costs) to the populace. Typical among the list of negative externalities is the effect of poor waste management which results in diseases.
In this article, I seek to propose a model that provides a remedy to the poor waste management problem in Ghana, applicable to many developing economies from a business perspective through the application of concepts in welfare economics. The model replaces the monetary charges associated with private waste management services with labour provision in the form of waste separation at home by households as the charge. The proposal is arrived at by modelling the value chain of waste generation, handling and disposal and lubricated via incentives. This paper is delimited to waste management, specifically municipal solid waste?(household trash/refuse).
At best, the poor waste management situation in Ghana is analogous to littering ? improper disposal of waste. It is normal in Ghana to see people drop waste anywhere anytime. To have a firm grasp on the problem, it is important to understand the value chain of waste management in Ghana and its underlying principles. Typically, household waste is generated in the house and ends up on a community refuse dump; which could be considered usually as a public good. Paul Samuelson, the renown economists is usually credited as the first economist to develop the theory of public goods. In his classic 1954 paper,??The Pure Theory of Public Expenditure?, he defined a public good, or as he called it in the paper a ?collective consumption good?, as follows: ? ?[goods] which all enjoy in common in the sense that each individual?s consumption of such a good leads to no subtractions from any other individual?s consumption of that good??. In other words, a?public good?is a?good?that is both?non-excludable?and?non-rivalrous?in that individuals cannot be effectively excluded from use and where use by one individual does not reduce availability to others. Examples of public goods include?fresh air,?knowledge, lighthouses, national defense, flood control systems and?street lighting.
In the rural political economy, dumping refuse at community refuse dump has for most of the time been free ? at no monetary cost. It comes at no cost because the whole community manages the refuse dumps ? community service is compulsory for all, and the community refuse dump is cleaned by all individuals sometimes in turns. So the real cost is in labour terms and not in monetary terms. Most often, the refuse sites is also owned communally. A problem of this public good is that it is often closely related to the??free-rider??problem, in which people not paying for the good may continue to access it, or the??tragedy of the commons?, where consumption of a shared resource by individuals acting in their individual and immediate self-interest diminishes or even destroys the original resource. Thus, the good which in this case is the refuse dump may be under-produced, overused or degraded. However, the rural community always have a way to punish and to restrict people and households that did not contribute to the management of the public resource from using it, which ensures some efficiency in their use.
The transition from a rural economy into an urban economy has come with increasing difficulty in mobilizing people to provide the same communal service; perhaps linked with the cosmopolitan nature of urban areas and the lack of a communal sense. Hence, public goods such as refuse dumps are usually mismanaged and the free-rider problem and the tragedy of commons prevail. This is normally associated with the lost of free labour from community members; hence, refuse dumps are woefully managed unless the community employs private people and companies to manage it properly. As a solution to the public good problem, privatization and commercialization are normally employed to restrict people and households that do not pay either in labour terms or monetary terms for the management of these refuse dumps. This approach in welfare economics is referred to as the ?Coarse Theorem? or ?Coarsian Solution?. This is the genesis of the evil.
Problem Description: The Gap between Policy Outputs and Outcomes
The privatization and commercialization approach in itself is a policy and its effect of restricting people unwilling to pay from enjoying waste management services is an ?output?. However, the ultimate expectation is proper waste management which we will refer to as the ?expected outcome?. So the output is a deliverable which facilitates the achievement of the outcome. Very often, there is almost always a gap between outputs and outcomes in policy evaluation. Now the real problem and cause of this gap is class-related and it is the issue of ?affordability?. Affordability in my opinion is not merely a monetary issue but also affordability in terms of labour if that can be made an option or an alternative. However, the latter is rarely an option and it is also the case that urban people are so-called busy and may not have the time to contribute labour-wise. It also appears to me that they may feel embarrassed to pay for it labour-wise; hence, making income or monetary affordability the sole problem. Thus, structurally, society is designed to fail. However, we will understand in the next section that labour provision model in exchange for waste management services is a potential solution to the poor waste management problem in Ghana.
In an economy of low-income levels, it should be expected that people would adopted welfare improving strategies to survive including finding ways not to pay for goods and services previous considered as public like refuse dumping. This reveals that the psyche of the people is also very important in the creation of the problem. Very often, the fee charged by the private waste management firms are expensive to the low and middle class; hence leading to their under-consumption of private waste management services. This situation is inefficient and requires government intervention in the realms of welfare economics, but with the adoption of pure market economy principles, intervention has been rare. Nonetheless, there is a cost-free alternative in many developing economies including Ghana because of the lack of proper community monitoring. Although the low and middle class largely cannot afford private waste management services, they cannot also afford to keep the smiling waste in their homes. Thus, the alternative solution is to resort to indiscriminate littering, where people nicodemusly dump refuse in open gutters and at public sites especially at night.
Incentivization Model: Aligning Waste Management Policy Outputs and Outcomes
With the expected outcome of proper waste management in perspective, a business case could be made to align outputs and outcomes. This is possible through the provision of incentives, subsidies and direct government provision to deal with the affordability problem facing the low and middle class. However, I will focus on the business case as a more efficient approach to dealing with the waste management problem with rippling effects for job creation and employment, which the nation needs badly. In other words, the business approach provides a lot of bending effects towards the achievement of other goods at virtually little cost.
Apart from the fees associated with waste disposal, the acquisition of refuse bins poses a challenge to the low and middle class. To deal with this the business way, fees must be eliminated and refuse bins provided for ?free?. This is the easiest way to align the output and outcome but this measure to many people is foolish and threaten business survival. In fact, the obvious question is how do waste management firms pay their staff and remunerate themselves for their services? Quite a genuine question, but the solution is not easily perceptible by the untrained mind.
Now how can waste management business survive this policy prescription? With the advent of waste recycling and treatment business in Ghana, a lot of the waste could serve as raw materials for many industries particularly in the manufacturing of plastics. All it takes is ensuring proper separation of liquid and solid waste, an exercise that waste management firms employ and pay people to do. Companies could however enjoy this service for free if they attach the waste separation process by households as condition for free waste collection. Thus, households and individuals would pay in-kind and indirectly for waste management services by properly separating their waste for collection by the companies. The cost-benefit analysis is based on the difference between the sum of the fee forgone plus cost of providing rubbish bins and the cost companies incur in separating the waste plus imputed cost of plastic raw materials. The fee forgone (FF) could be broken down into transportation cost (TC), vehicle maintenance cost (VMC) and remuneration (Y). Where the waste separation cost (WSC) plus the imputed cost of purchasing the raw materials (IC) (for say, the production of plastic chairs and tables) exceeds the fee forgone (FF) plus the cost of providing rubbish bins (RBC), then the benefit-cost ratio (BCR) will be greater than one (BCR > 1) indicating viability or profitability and vice versa. Mathematically, this business decision could be represented and modelled as:
? (WSC +IC / FF+ RBC + TC + VMC + Y) = BCR
i. BCR could take on values ranging from negative to positive.
ii. Positive BCR (i.e. BCR > 1) indicates viability and profitability (net gain);
iii. Unity BCR (i.e. BCR = 1) indicates break even
iv. Negative BCR (i.e. BCR < 1) indicates net loss
Where BCR is less than unity (BCR < 1), another model in which the cost of transportation could be reduced is important. For instance, instead of the waste collection car moving from home to home collecting waste for free, households could be provided with a community waste container in which households could drop their waste for free. After all, in the rural political economy, no one was collecting refuse from households for dumping, individuals executed the exercise. Therefore, the car only makes a trip or two to collect the waste, which from hence assuming that it is well separated becomes raw materials for the production of plastics in particular. Further, cost to waste management firms in the waste collection process could be reduced through government and or community subsidies; perhaps, fuel subsidy and or vehicle maintenance subsidy. Best still, households should provide their own rubbish bins to enhance profitability for waste firms.
Where the Internal Rate of Return (IRR) exceeds the Required Rate of Return (RRR), waste companies could also provide a cash incentive in addition for households that properly separate their waste and generate volumes of particular waste like rubber and plastics. The IRR is the project generated return whiles the RRR is what investors expect from their investments. The later measure is intended to elicit an external effect, whereby individuals would even collect rubbers and plastics from the community in order to increase their waste volume for higher remuneration. Some critics may say that the latter provision could lead to increasing waste generation, but that is erroneous because increasing waste generation comes as marginal cost which per the constrains of affordability would not exact that effect. Rather, it could make it more attractive for people to collect waste from the community for ?free?. This could be a business opportunity for many people, as is the case currently. In effect, a new efficient public good could be created, through private provision and indirect incentivisation from a business perspective. This public good is the ?free? collection of household waste.
Urbanisation is definitely a woe to Africa?s development if not properly managed. Proper waste management within the urban political economy could be achieved from a business approach at little or no monetary cost to households. Through this approach waste management policy outputs could be aligned with outcomes. This could be solve the affordability problem facing the low and middle class who are the main perpetrators of indiscriminate littering in Ghana and in most developing economies at large. In effect, introducing and activating the provision of labour (waste separation at home other than on the refuse dump) as an option for paying for waste management services could solve the poor waste management problem in Ghana whiles creating businesses and employment; which requires innovation. Moreover, although the proposed model is public good, the typical characteristics associated with it including free-riding and the tragedy of commons is intrinsically mitigated by the model.
Kenneth A. Donkor-Hyiaman
University of Cambridge
Department of Land Economy