Critical analysis of current quantum models to calculate closure costs for municipal waste sites in the North West Province
Abstract
In South Africa (SA) Waste landfill sites are known polluters and cause negative
impacts on the receiving environments. They need to be rehabilitated and closed
upon reaching capacity or reaching the end of their operational lifespan. It is also a
legal and financial requirement to make financial provision for these final
rehabilitation and closure costs. The lack of a standardised basis or guidelines
complicates the accurate determination of the provision amounts reflected in the
Annual Financial Statements (AFS) of municipalities. Consultants or determiners of
these amounts currently use different bases, methods and means for the annual
valuations and this has resulted in discrepancies or uncertainties in determining the
correctness (over- or understatement) thereof. Godschalk et al. (2015:27) referred to
the lack of a standardised methodology as a limiting factor for municipalities in
calculating the provision disclosure. Auditing the AFS and notes particular to the
waste landfill and closure provisions supported and collaborated with the aforementioned.
Although there is a serious lack of a proper framework or guidelines in the financial
provision cost determination, there are some comprehensive specifications or
legislative requirements for the actual rehabilitation and closure of the waste landfill
sites. Most waste landfill site licences include or impose an obligation to rehabilitate,
repair and close these sites in conformance with Section 12 of the Minimum
Requirements for Waste Disposal by Landfill, further referred to as Minimum
Requirements (DWAF, 1998:1-8). Section 12 is specific to rehabilitation, closure and
end-use and emphasises the environmentally acceptable rehabilitation or reparation
of the landfill site as a prerequisite for proper closure (DWAF, 1998:1-8). The fact is
that legislation in South Africa is more focused on ascertaining rehabilitation and
closure of waste landfill sites and to prevent further pollution after closure, with an
obvious absence of specific guidelines or criteria to ensure uniform, accurate and
reliable determination of these provision amounts.
In the 2013/14 financial period the nineteen local municipalities in the North West
Province of South Africa used nine different consultants or external specialists to
determine their waste landfill rehabilitation and closure provisions. Only two of the
local municipalities performed their own determinations, based and elaborated onprevious external calculation models. By scrutinising the various quantum
calculations and basis for determination as well as physical visits to the applicable
waste landfill sites, a critical evaluation of the determination basis or criteria used in
determining the waste landfill financial provision was done. The research
methodology also included a questionnaire completed and submitted by the
consultants or specialists as well as the AFS and waste landfill specifics (status quo).
The expectation or outcome perceived was that the basis used to determine the
waste landfill rehabilitation and provision costs might differ per calculator or costing
model.
The research results emphasized the fact that some of the determiners of waste
landfill rehabilitation and closure costs used different bases or criteria for calculating
the provision disclosures as well as some significant discrepancies in calculating the
provisions for similar types of facilities or operations. Comparisons between the
waste landfill site specifics, AFS figures and notes (2014 and 2015) as well as the
quantum models used for determination, however, also reflected some basic
similarities in the parameters used for valuation. Although there is no obligation to
use or follow a particular base or guideline in the provision determination process,
there is a pressing need to establish standardised guidelines or specific criteria to
align or be used in costing models. This will ensure a more consistent, comparable
and reliable determination of the final provisions reflected in the AFS and would also
be in line with the processes established and followed in developed countries. The
different bases, variables or parameters used in South Africa ensure confusion and
uncertainty in determining the accuracy of waste landfill provision calculations.