May/June 2000
If all you know about South Africa comes from the nightly news or National Geographic, you’re in for a surprise—the country also has a scrap side. And Universal Recycling is a leader in this intriguing, far-flung market.
By Kent Kiser
Kent Kiser is editor and associate publisher of Scrap.
South Africa has many claims to fame, among them its exotic flora and fauna, its dramatic history of exploration, conquest, and colonization, its remarkable transition from apartheid to majority rule, plus its diamond, gold, and mineral mines.
But for a handful of companies, the country possesses other riches in the form of aboveground mines of scrap. Universal Recycling Co. (Pty) Ltd. is one such company. Founded 63 years ago by a European immigrant, Universal Recycling has grown into South Africa’s second-largest scrap corporation. Currently, it handles about 400,000 mt of ferrous and 10,000 mt of nonferrous scrap annually, giving it about a 23-percent share of the 1.8-million-mt South African scrap market.
Now in its second generation of family leadership, the company’s tale is one of traditional scrap industry entrepreneurship set amidst the allure and imposing economic, geographic, political, and racial challenges of South Africa.
How It All Began
Universal Recycling wouldn’t exist had Alfred Loewenthal not fled his native Germany in 1933 to escape the growing Nazi menace. Since one of his uncles lived in Beaufort West, South Africa, he emigrated there, settling in Kinross and working in the grain business.
Loewenthal moved to Johannesburg in 1936 and, in early 1937, began a scrap business with a partner. Later that year, however, he founded his own scrap company, A. Loewenthal Metals (Pty) Ltd., a trader and exporter of nonferrous scrap. Over the years, the firm expanded, establishing operations in Zimbabwe, the Belgian Congo, Nigeria, Kenya, Mozambique, and Mauritius.
The company made its first foray into ferrous scrap in 1957 and continued to grow in the subsequent decades. When Alfred Loewenthal died in 1974, his son David—who had joined the firm in 1966—took over the business.
A defining moment for Loewenthal Metals came in 1987 when it launched a joint shredding venture with Cape Gate (Pty) Ltd., one of South Africa’s largest private companies. Owned by the Kaplan family and run by Mendel Kaplan, the Cape Gate Group manufactures steel and wire in South Africa and Israel.
The success of Loewenthal Metals and the new joint shredding venture ultimately led to the merger of Universal Metal Holdings—a Cape Gate subsidiary—and Loewenthal Metals in 1992 to form Universal Recycling.
Today, Loewenthal Metals continues to exist, albeit only as an investment company, while its successor, Universal Recycling, is a major player in the South African scrap business, with three processing facilities in the Johannesburg area alone. Two of these operations are in Industria, including the firm’s 4-acre headquarters plant, which encompasses its corporate offices, technical workshops, and all nonferrous operations. The other Industria site is a 2-acre ferrous shredding facility with a 3,000-hp Newell shredder.
The firm’s third plant, in Vanderbijlpark, also has a 3,000-hp Newell shredder as well as an 800-ton Lindemann shear. This 4-acre facility sits adjacent to Cape Gate’s minimill, which consumes all of Universal Recycling’s ferrous scrap. The mill has two rolling mills—one for rod, one for long products—as well as lines for drawing and galvanizing wire and making wire-based products.
Universal Recycling’s holdings extend beyond these three plants. In 1998, the company acquired two South African scrap companies—Chamdor Metals and Gulf Metals. The first company, which now operates as UCG Recycling & Waste, is owned jointly by Universal, Gulf Metals, and Non Ferrous Metal Works, a South African semis foundry. The company, located on a 7-acre site in Krugersdorp, west of Johannesburg, has a Henschel baler, 550-ton Harris shear, 25 vehicles, and 750 containers.
As if that weren’t enough, Universal Recycling’s corporate umbrella also covers National Refiners & Smelters (Pty) Ltd., a precious metal trading company in Johannesburg, and—further afield—Limetal Lta in Maputo, Mozambique, a ferrous and nonferrous processor, foundry, and equipment-for-hire operation.
David Loewenthal, the firm’s second-generation leader, has been the mastermind behind Universal Recycling’s expansive growth since 1987. In the past few years, however, he has passed day-to-day management responsibilities to Shannon Brenner, a 32-year-old who has been with the company nine years. Brenner is the grandson of Louis Rabinowitz, one of Loewenthal’s mentors. “So when Shannon said he’d like to try his hand in the scrap business, I was happy to employ him,” Loewenthal says, recalling with humor that Brenner showed up for his first day of work in a jacket and tie. Brenner quickly learned to dress down, as well as how to run the business. Now he’s the firm’s managing director.
A History of Firsts
While Universal Recycling may be the second-biggest scrap company in South Africa in terms of volume, it’s first in many other respects, Loewenthal says, noting, “We were the first to shred, the first to float, the first to eddy-current, the first to concrete our yard, and so on. We’ve always tried to be technically ahead of the rest of the country.”
Loewenthal was introduced to shredding in the early 1980s by Werner Oberlander of Oberlander Recycling Technik, a German equipment manufacturer. If Loewenthal wanted to learn about shredders—and the scrap business in general—he had to attend a convention of the Institute of Scrap Iron and Steel (ISIS), an ReMA predecessor, Oberlander insisted.
Loewenthal took his advice, attending the 1982 ISIS convention in Miami Beach. It was at that meeting that a young Alabama scrap processor—Joel Denbo of Denbo Iron & Metal Co. Inc.—told him, “If you want to get gray hair, put in a shredder.”
Well, Loewenthal—who does indeed have gray hair—put in not one shredder, not two shredders, but three. After installing the first in 1983, he realized shredding was a “reasonable business,” so he bought shredders two and three. If his firm’s ambitions hadn’t outstripped its finances, it would have even “put in four and five.” Today, there are seven shredders and two grinders in South Africa, including the three shredders at Universal Recycling.
As the first South African shredder, perhaps it makes sense that Universal Recycling was also the first South African scrap company to install its own heavy-media separation plant to sort its nonferrous shredder residue.
In its early shredding days, the company shipped its nonferrous residue to Europe, but “the costs were extremely high and we weren’t happy with the results we were getting,” Loewenthal says.
So he began looking for options. Though he found an effective heavy-media plant in Germany, it was too expensive. Then one day, while reading the newspaper, Loewenthal saw a heavy-media plant for sale at a diamond mine on the Vaal River. He hired an engineer who had experience building heavy-media operations for coal mines. The man said he could build such an operation for $60,000—a real bargain, Loewenthal thought.
But when the plant was installed in Industria, it didn’t work. Fortunately, Mike Kruger, the company’s shredder manager, had seen a heavy-media plant in Stratford-upon-Avon, England, and was able to dismantle the failed plant and reassemble it correctly. It worked on the second attempt and has run ever since.
Now Universal Recycling has three heavy-media lines in operation at its Industria headquarters facility.
Of note, Universal Recycling not only operates heavy-media separation systems, it also builds them. To date, its plants can be found in the United States, Norway, Germany, Japan, Luxembourg, and Italy. Loewenthal is quick to point out, though, “We don’t do it as a business. We do it as a hobby.”
An Environmental Responsibility
Before he gets off the topic of firsts, Loewenthal points with particular pride to his company’s achievements in the environmental arena. And they are impressive, especially considering that the company has voluntarily exceeded South African environmental requirements and, instead, set its sights on achieving European and American standards.
“We do it for these reasons,” Loewenthal says. “We love our country and the land. We have a fear that one day somebody will come back to us and say, ‘You polluted. Look what you did to the place.’ And at some point South Africa will police its environmental laws more strictly.”
For those reasons, Universal Recycling has been steadily upgrading its operations environmentally over the past 20 years. It has installed environmental controls covering storm water, air emissions, radiation detection, and more. It also claims to be the only scrap firm in South Africa and perhaps the Southern Hemisphere to employ a full-time environmental officer—Debi van Rensburg, a Columbia University postgraduate in environmental science who has been with Universal Recycling about 10 years. The firm’s environmental commitment even includes sending van Rensburg and others the thousands of miles to ReMA environmental and operations seminars in the United States.
The payoffs of this environmental commitment are obvious just by looking at Universal Recycling’s facilities. “When you walk into our business, it’s not a scrap operation,” Loewenthal says. What he means is that its plants look like any other processing or manufacturing plant. As he remarks, “Whenever we buy a business, every square inch has got to be concrete. We don’t work in the mud. We like the floor clean. We like our scrap in neat heaps.”
Loewenthal’s strong feelings about environmental issues extend to the Basel Convention, the international trade treaty created to halt the dumping of hazardous wastes in developing regions—like Africa. While he supports the convention and agrees that controls are necessary, he asserts that the treaty is hurting the very places it seeks to protect—again, like Africa. Offering an example, he notes that Universal Recycling has “a lot of problems exporting our recovered products to Europe, even though some of our products have been made from products shipped from Europe and America, such as computers, fax machines, cellular phones, and capacitors.”
Also, he maintains, many countries are using the convention for political purposes—to protect their domestic industries, for instance—and not to control shipments of hazardous materials. “I think the controls, which were designed to help Africa, are probably doing more harm than good to Africa,” he asserts.
In contrast to its environmental laws, South Africa’s occupational safety rules are “incredibly strict and well-policed,” Loewenthal says. Under these laws, a company’s managing director or its designated safety officer is held personally liable for employee injuries. “If we have a serious accident and the cause is found to be through negligence, I could go to jail,” Loewenthal says. “There have been some very serious fines and problems.” The laws also require companies to have an employee safety committee that meets about every two months.
Such safety laws give Universal Recycling good reason to be “very safety-conscious,” Loewenthal says, adding that the company strives to make sure its employees wear the necessary personal protective equipment and have the proper safety training. The company is also looking into implementing an incentive program to help maintain its “excellent” safety record, he notes.
Overcoming Obstacles
While scrap recycling may not be the easiest business in any country, South African scrap firms such as Universal Recycling face some unique challenges compared with their counterparts in the West.
Part of the problem stems from South Africa’s former racial policies that made it difficult for businesses to export materials, isolating the country in many ways from the world market. Now, though such policies are history, it’s “difficult to get people who have been protected for so long to become globally competitive,” Brenner says.
South Africa also has geographical obstacles, given that it’s located at the bottom of the world’s second-largest continent, putting it a great distance from many internal and external markets. From Johannesburg, for instance, Universal Recycling is 400 miles from the nearest port (Durban) and, from there, it must ship material considerable distances to reach the Asian and European markets.
Another problem for South African scrap firms is volume—the country’s scrap supplies simply aren’t that significant. “We can’t go out and buy thousands of tons of material,” Loewenthal says. “Plus, the nonferrous recovery rate in South Africa is only 1 percent.” As a result, Universal Recycling’s processing machines are “minute” compared with machines in larger scrap markets. For instance, its 3,000-hp ferrous shredders are about half the size of the 6,000-hp megashredders in North America and other Western scrap markets. “All our machines are adapted to the tonnages that we can put through them,” Brenner notes.
There are also many challenges related to South African workers, one of which is their view of the worker/company relationship. “When people come to work in South Africa, they don’t come to work to do well for the company, they come to work to earn a salary,” Brenner explains. “I don’t think their minds look at long-term improvement or earning more by helping the company do well. In the United States, Europe, and other countries, workers definitely have the mindset that if they put more in they’re going to get more out.”
A bigger employee problem has to do with education—or, rather, the lack thereof. South Africa’s high illiteracy rate is one reason why it has a staggering 35-percent unemployment rate. And the unemployment problem can pose challenges for Universal Recycling. In an effort to create jobs, for instance, the company sometimes uses manual labor in an operation rather than mechanizing the task, even though a machine may be more efficient. As Loewenthal says, “We’ve always tried to balance the mechanization to manual labor while at the same time trying to pay the unskilled worker a living wage.”
In South Africa, though the minimum wage is about $1.40 an hour, Universal Recycling pays its employees more, with some earning $4.50 to $5.50 an hour depending on their skills.
All employees also belong to a provident fund, which is like a pension. The main difference is that, when an employee retires, a pension pays the employee over time while a provident fund is paid out in one lump sum. Employees contribute 8 percent of their income while the company contributes 10 percent to the provident fund. Employees can receive their fund at 65, but if they leave the company before that age or get fired, they only receive their contributed portion and a percentage of the company’s contributions based on their length of service. Among its other advantages, the provident fund provides subsidies to help employees pay for college for themselves or their children.
Then there are the lingering racial tensions in the post-apartheid era, which can create tensions between management and labor. Given that all of Universal Recycling’s employees are unionized, these tensions have at times resulted in strikes, usually over wages or dismissals. Fortunately, strikes have been rare in recent years, suggesting that South Africa’s race relations may be entering a more positive stage. As Loewenthal notes, “With our apartheid legacy, we’ve been forced to sit down, talk with employees, and change systems, which has done a lot for the good.”
One positive result of these negotiations—employees gave up afternoon tea breaks and Friday lunch breaks to close at 1:45 p.m. every Friday, thereby giving everyone a long weekend at no loss to the company.
It also doesn’t hurt that, in addition to paying more than minimum wage, Universal Recycling rewards its employees in other ways, such as promoting from within. “When we’re looking for a forklift driver, we don’t place an ad for a forklift driver,” Loewenthal says. “We’d rather look for a good guy in our labor force, train him, and push him up. I think our employees appreciate that.”
The Next Level
Despite South Africa’s turbulent past, Loewenthal is optimistic about its future. “We’re living in historic times,” he says, pointing to “the breakdown of colonialism, the breakdown of apartheid, and now this African renaissance.”
Certainly, the continent still faces many obstacles—politically, educationally, technologically, economically—but its prospects are looking up. And eventually, Loewenthal maintains, its diverse countries will be forced to unify to participate more fully in the world economy.
Loewenthal and Brenner are equally bullish on the future of Universal Recycling. While Brenner focuses on the near-term goal of keeping the company profitable, Loewenthal is gazing strategically ahead.
To him, the scrap industry’s next level will involve a “closer combination of mechanical, pyrothenical, and chemical refining.” In other words, scrap processors such as Universal Recycling will integrate into the secondary refining niche.
As Loewenthal explains, “We’re trying to find systems where we can upgrade our material within our business, say, from zinc scrap to zinc ingots. We’re always trying to upgrade our products to get to the next level financially, and the ultimate level is to make products that compete with virgin materials. That’s where we’re trying to get.”
Could such aspirations lead Universal Recycling to become the biggest scrap company in South Africa?
Not likely. “I don’t think being the biggest is the best,” Loewenthal answers. It’s more important, he says, to make sure the company’s employees are healthy and satisfied, that it’s operating in an environmental manner, that it’s profitable. Brenner agrees. “I don’t think we’ll ever be the biggest,” he says. “We don’t chase it. We definitely aren’t chasers.” •
If all you know about South Africa comes from the nightly news or National Geographic, you’re in for a surprise—the country also has a scrap side. And Universal Recycling is a leader in this intriguing, far-flung market.