CONTENTS

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CELEBRATING THE PETCO PEOPLEMaking Magic Happen Every Day

CHAIR AND CEO REVIEWA Momentous YearThe Top Accomplishments of 2015

ABOUT PETCO

END-USE MARKET DEVELOPMENTBottle-2-Fibre (B2F)Bottle-2-Bottle (B2B)Other End-Use Applications

PETCO PROJECTSRecycling ProjectsCollection and Training Projects1 PET Infrastructure and Equipment Provision2 Collector Training and Development3 Education and Awareness4 Special Projects and Joint Ventures5 Fostering Government Partnerships6 Building the Recycling Network

FINANCIAL INFORMATION HIGHLIGHTS

WHERE TO FROM HERE?The Outlook for 2016 and Beyond

CELEBRATING THE PETCO PEOPLE

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It's been 12 years since the inception of PETCOand we couldn't be more proud. In celebration,we honour the people, the companies and theorganisations that have made extraordinarycontributions to the recycling of post-consumerPET in South Africa.

At PETCO we believe that the most powerfulnetwork we have is that of our people - resinproducers, brand owners, converters, retailers,consumers, collectors and recyclers - these areachievers that give up their free time, missbeing with their families, or cancel goingon the date of a lifetime because of aspreadsheet and a deadline.

They make magic happen every day when theydesign packaging with recycling in mind,increase the quantities of recycled material innew packaging, clean up our beaches, getcloser to their target of zero-waste-to-landfill,reduce methane gas emissions and the risk ofclimate change, create income and skillsdevelopment opportunities for unemployedpeople, and raise awareness to create informedand responsible consumers.

More than anything, they make recycling a joythat is shared by more and more people,because it is the right thing to do and becauseit is making a difference.

In the following pages, you will read about thePET recycling story and the progress of PETCOand its members. As Robert Swan, polarexplorer, environmentalist and the first manever to walk unsupported to both the Northand South Poles, once said, “The greatest threatto our planet is the belief that someone elsewill save it.”

CELEBRATINGTHE PETCOPEOPLEMaking Magic Happen Every Day

“If we can re-jig the whole system,if we can agree on a certain paletteof materials, have a conversationaround the table with the rightpeople, if we can mobilise targetedinnovation ‘moon-shots’, focusedon system-wide solutions withthe potential to scale globally,and we can continue to improvethe economics and the statistics,then we really can put a pathforward to change the plasticseconomy completely."

Dame Ellen MacArthur,World Economic Forum,Davos 2016.

We hope that, like the PETCO people,you are inspired to further action.

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2015 was a momentous year for PETCOand PET plastic recycling in two ways:

Firstly, PETCO's efforts over the year led to1.7 billion PET bottles being collected acrossSouth Africa or some 4 .7 million bottlesrecycled each and every day.

Secondly, the organisation recycled anadditional 15% of post-consumer bottles incomparison to the previous year, with the totalPET market growing by 8.5% to 210 000 tonnes.

While the world is still recovering from theeconomic recession, PET recycling figures inSouth Africa continued to grow despite toughtrading conditions. PETCO is thereforedelighted to announce that, in 2015, it achievedan annual Polyethylene Terephthalate (PET)recycling rate of 52% of post-consumer bottlePET - that's more than half of all post-consumerPET bottles in the market. For the first time,PETCO recycled more bottles than those goinginto landfill.

We are proud that, for the eleventh successiveyear, the post-consumer PET bottle-recyclingrate increased, despite two of the biggest fallsin oil prices seen in recent years. Flake pricesdeclined and rPET fibre has been losing marketshare to virgin fibre. At an average of $USD30per barrel, crude oil is half the price it was justover a year ago, depressing prices all throughthe chain. In some cases, it is now moreexpensive to recover plastics and process theirhydrocarbons to recycle them than to use virgincrude oil to produce new plastic containers.

Quarter 4 of 2015 also saw significantdepreciation in the exchange rate of theRand against other major currencies, driven bythe economic instability created by the removalof the Finance Minister. Project fundamentalsremained constrained due to continued lowprices of crude oil and therefore of virgin PET.The decline in exchange rates did howeveroffset these fundamentals as indicated byimproved margins in both the food and fibresectors.

Projects therefore remain exposed to increasedfinancial pressure that might arise from anyrecovery in exchange rates.

CHAIR ANDCEO REVIEWA Momentous Year

The decline in global demand for polyesterfibre, and therefore in global fibre prices, hasplaced significant additional pressure onPETCO's fibre sector partners and we continueto engage with them on this issue.

At the end of 2014, we observed high levelsof exports of post-consumer PET bottles andflakes, especially to India. Although these docontribute to our collection targets, they causebottle prices to rise and divert some of thematerial that could have gone to local recycling.Luckily, this trend reduced considerably during2015 with 6 777 tonnes of flake and bottlesexported for the year - a 22% decline onthe previous year.

The import of PET resin into South Africawas considerable at 57.6KT.

This achievement of a 15% increase in collectionvolumes on the previous year is thus an excellentresult and would not have been possible withoutthe voluntary financial support from PETCO'smembers who pay a recycling levy of R360/ton.By paying the recycling levy and contributinggrants-in-aid, the PET Converters, Bottlers, rawmaterial Producer Hosaf, Brand Owner Coca-Cola Southern Africa, and Retailers Pick n Payand Woolworths, have all helped PETCO toexpand its collection network.

PETCO's ultimate objective is a closed-looppackaging supply chain where post-consumerbottles can be used for new bottles. In May2015, after years of research, trials and reports,this became a reality with the opening of thefirst carbonated soft drink grade (CSD) Bottle-2-Bottle recycling plant in Africa. The Ministerof Environmental Affairs, Edna Molewa, officiallyopened the R75 million plant expansion inWadeville, Johannesburg. With the capabilityto produce resin that is suitable for thecarbonated drink sector, Extrupet's PhoenixPETplant is equipped with Starlinger technology,and supplies an additional 14 000 tonnes ofrecycled PET resin per year to the PETpackaging industry. It will eventually divert anadditional 22 000 tonnes of post-consumerPET bottles from landfills each year.

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The year also saw exciting business to businessdevelopments:

· In late 2014, SABMiller, The Coca-ColaCompany, Coca-Cola Sabco and ShandukaBeverages announced their intention toform Coca-Cola Beverages Africa.With more than 30 bottling plants andover 14 000 employees, Coca-ColaBeverages Africa will be the largest Coca-Cola bottler on the continent, with the scale,capabilities and resources to capture andaccelerate top-line growth.

· Astrapak Limited entered into an agreementto dispose of Cinqpet (a division of AstrapakManufacturing Holdings (Pty) Limited) toBoxmore Plastics SA (Pty) Limited.Cinqpet is a supplier of mainly PET bottlesfor the non-carbonated soft drink marketin Johannesburg and the surrounds.The trend of customers moving in-houseto blow their own bottles and consolidatingfilling facilities in terms of centres ofexcellence, continues to further impactthe sustainability of businesses operatingin this market segment.

· Bowler Metcalf announced it would mergeits soft-drink bottler Quality Beverages,maker of the Jive brand, with anothersoft-drink bottler, Shoreline Sales andDistribution, to become a new entityknown as Softbev.

From an administrative perspective, sinceSeptember 2014, PETCO has assumed fullresponsibility for the invoicing of levies,previously done by local virgin producer Hosafand recycled resin producer Extrupet. Thisadministrative change-over had someexpected initial hiccups but is now runningsmoothly and the consolidated system enablesmembers to receive invoices and statementscovering all PET levies - from local PET importsto purchases of virgin or rPET.

Casper DurandtCHAIR

Cheri ScholtzCEO

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In celebrating these remarkable results in driving post-consumer PET recycling,we can summarise the years' highlights as follows:

1 PETCO increases the audited post-consumer PET bottle-recycling rate inSouth Africa by 15% YOY, and exceeds thetarget of 50% by 2% to achieve 52%; thisdespite two of the biggest falls in oil pricesseen in recent years.

2 Fully 'closing the loop': South Africa's firstcarbonated soft drink (CSD) Bottle-2-Bottleplant, Extrupet's new PhoenixPET plant,is officially launched by South Africa'sMinister of Environmental Affairs,Ms. Edna Molewa, in May 2015.

3 Mpact Polymers commission their newR350-million Bottle-2-Bottle plant inQ3 2015 and begin the manufacture offood-grade recycled PET resin under thebrand name Savuka. This follows thesignature on a five-year contract betweenMpact and PETCO in 2014.

4 PETCO wins one of only four Enviro Awardsat the 2015 Logistics Achiever Awards,which recognise organisations that havenot only minimised the environmentalimpact within their supply chains, buthave successfully complied with bothlocal and international regulations and greenpractices throughout their supply chain.

5 The first carbonated soft drink (CSD) bottlein South Africa is manufactured usingPhoenixPET rPET resin (by Little GreenBeverages (LGB), manufacturers of thecarbonated drink line Refreshhh brand).

6 Extrupet's PhoenixPET is recognised as thefirst recycled PET (rPET) product producedin South Africa to meet the stringent EUsafety and compliance requirements set bythe European Food Safety Authority (EFSA).

7 Woolworths launches their 'RE' denimrange of clothing, adopting an innovativemanufacturing process using 12 x 500mlrecycled plastic bottles to manufactureeach pair of recycled denims.This represents the first clothing rangemade from rPET launched in South Africaby a major retailer.

8 Astrapak's 100% food grade rPET CranberryApple bottle is entered into the SAPRO(South African Plastics RecyclingOrganisation) Best Recycled Plastic Productof the Year Competition, representing ashift in the mind-set of manufacturerstowards considering recycled plastics asa material of choice.

9 Extrupet is nominated as a finalist in theWorldStar Sustainability Awards for 2016for their PhoenixPET food-grade recycledPET resin; this nomination is a direct resultof other key accolades won by PhoenixPET,which include a WorldStar Award in the'Other' category and the Judge's GoldSustainability Award at the Gold PackAwards (the latter of which representsa first for any polymer resin in South Africa).

10 PETCO contracted recycling projectsencompass 11 projects in a range ofcategories; PETCO training and enterprisedevelopment projects include 27 workshopswhere a total of 2 059 collectors andmunicipal employees participate and gainan insight into running successful SMMEand Cooperatives; PETCO collection projectssupport 17 projects with equipment andother infrastructure, enabling the doublingof collection capacity in some instances.

11 FTE produces an innovative product forthe fruit export industry, in the form ofcorner pieces for packing fruit boxes ontopallets. These corner pieces are made from(primarily non-food and non-fibre grade)recycled PET, and commercial-scaleproduction and the introduction of theproduct into new segments of the fruitexport industry are scheduled to take placein the near future. Initial tests, usingpre-consumer material and thermoformsheeting in the product, look very positive.

12 The Tinana Recycling Cooperative isannounced as one of the winners of the2015 SEED Awards, demonstrating thatpost-consumer PET is not only a valuableresource to produce new PET bottles andother items, but that involvement with

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recycling helps to build businesses andcreate much-needed jobs. (In partnershipwith the P.E.A.C.E Foundation, PETCOhas played an important role in supportingthe co-operative towards this successthrough the provision of trolleys, a balingmachine, protective clothing and the raisingof additional sponsorship from additionalparties.)

13 PETCO hosts well-attended ExtendedProducer Responsibility (EPR) workshopsin Cape Town and Johannesburg.

14 PETCO launches an engaging andwell-received consumer-focussed digitalcampaign as well as a summer social mediacampaign to increase awareness forrecycling amongst South African consumers.PETCO increases the total Advertising ValueEquivalent (AVE) for 2015 activities to morethan R10 million, representing an11% increase on the previous year.(Within this, broadcast AVE e.g. television,radio, newspapers, magazines etc.,increased by 55%, and online AVE e.g.photos, presentations and video distributedover the Internet, increased by 12%.)

15 PETCO revises and re-launches the storyof the people behind the recycling ofPET in South Africa, those for whomthe collection of PET is an economiclife-line: www.petco.co.za/petstory.

The PETCO Board of Directors continues toshow commitment and thanks are due to themfor their efforts and insight.

It's opportune to extend a very big thankyou to Willem Pienaar and Clynt Levin for theircommitment and dedication to PET recyclingin South Africa - for always being available andfor their dedication to the cause over a numberof years.

Daniel Schoeman and David Drew have beenelected to the PETCO Board representingthe Resin Producer and Converter Sectorsrespectively.

The passing of Steven Bird of Hosaf, who servedon the PETCO Board, was a sad time for us.Our thoughts are with his family. Stevencontributed greatly to the PETCO Board andhis insights and quick wit will be greatly missed.

PETCO enjoys Associate Membership ofthe Association of European Plastic Recyclingand Recovery Organisation (EPRO) and of theGlobal Product Stewardship Council.

PETCO enjoys the support and collaborativeefforts of both Packaging SA (previouslyPACSA) and PlasticsSA.

So much already done, but still so much moreto achieve.

Finally, none of our achievements would havebeen possible without the tremendousdedication of our members, whosecontributions via the recycling levy and grants-in-aid enable PETCO to expand its collectionnetwork, fine-tune its programmes, form betterrelationships with collectors, and strive forevermore small business opportunities thatgrow entrepreneurs and our recycling tonnages.

Dr Casper DurandtCHAIRMAN PETCO

Cheri ScholtzCEO PETCO

“Plastics are too valuable to throw away.The SA Plastics Recycling Industry is highlymotivated by the challenge to recyclemore. Our targets are ambitious,but essential if we are to achieve thevision of minimising the amount ofplastic sent to landfill.”

Dr Casper Durandt,Franchise Technical Director,Coca-Cola Southern Africa,and PETCO Chairman.

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ABOUTPETCO

PETCO's unique model is built on the simpleprinciple of an industry driven and financedenvironmental solution for post-consumer PETplastic. To achieve this everyone involved, fromthe raw material producers, the converters, brandowners, retailers, consumers and recyclers areplaying their part in the solution, with PETCOfulfilling the PET industry's role of ExtendedProducer Responsibility (EPR).

PETCO is financed by a voluntary recycling levypaid by converters on PET resin purchased. PETCOalso receives grants from brand owners, resinproducers and retailers. Support for PET recyclingefforts ensures an ongoing monetary value forpost-consumer PET. This sustains collectioninterest and reduces the volume of post-consumerPET in the waste stream.

PETCO is the trading nameof the PET Recycling Company(Pty) Ltd, and represents theSouth African PET plasticindustry's joint effort toself-regulate post-consumerpolyethylene terephthalate(PET) recycling and endof life solutions.

The Company wasestablished in 2004.

THE PETCO VALUE CHAIN

BOTTLERS

BRANDOWNERS

RETAILERS

CONSUMERS

RESINPRODUCERS

CONVERTERS

RECYCLERS

COLLECTORS

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OUR JOURNEY THUS FAR

By taking responsibility for post-consumer PETrecycling, PETCO imposes accountability over theentire life cycle of PET products and packaging.This means that companies which manufacture,import and/or sell PET products and packagingare financially and physically responsible for suchproducts after their useful life.

Ongoing consumer and public education andawareness activities promote environmentalresponsibility and encourage PET recycling.

PETCO operates throughout South Africa and hasoffices in Cape Town and Johannesburg.

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2004

2005

2007

2009

2011

2013

2015 74 360 tonnes (52%) of post-consumer PET bottles recycled;closing the loop in the CSD B2B sector; 1.7 billion bottles recycled creates incomefor an estimated 50 000 people and skills development opportunities for many.

59 691 tonnes (48%) of post-consumer PET bottles recycled; PETCO shiftsfrom a partner-based to a project-based model and hosts a successful internationalcolloquium. PETCO is awarded joint winner of the business award in theMail & Guardian's annual 'Greening the Future' awards.

42 562 tonnes (41%) of post-consumer PET bottles recycled; for the first time,PETCO provides support to encourage the export of fibre made in SA fromrecycled bottles - a sign of the local fibre markets' maturation.

29 048 tonnes (32%) of post-consumer PET bottles recycled; PETCO survivesglobal economic crisis. National Waste Management Act comes into effect; pilotplant produces rPet for food and non-food grade application for the first time.

19 734 tonnes (24%) of post-consumer PET bottles recycled;PETCO doubles tonnage of PET recovered and collected.

9 840 tonnes (16%) of post-consumer PET bottles recycled;recycling levy is introduced.

PETCO is established and financed by the Industry to manage its ExtendedProducer Responsibility (EPR) in South Africa.

The South African PET Plastic Industry recognises the need for anenvironmental solution for PET, and provides guidance and financialsupport for post-consumer PET bottle recycling.

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What is PET? Who makes PET and how much?

PETFACTS

Polyethylene terephthalate (PET) forms thebasis for synthetic fibres like polyester and isalso recognised in the packaging industry asthe rigid plastic commonly used as beveragebottles for carbonated soft drinks, bottledwater, milk, juice, sports and energy drinks;jars, punnets, tubs and trays for food items;bottles for household, personal care andpharmaceutical products; and sheet and filmfor general packaging.

PET is one of the only plastics that can berecycled back into the same products that itwas originally intended for, which creates asound basis for its recovery and recycling. It is100% safe, hygienic, lightweight and shatterproof.

In South Africa, Hosaf makes bottle-grade PETresin. The remainder of the market is suppliedfrom China, South-East Asia and the Middle East.In 2015 approximately 57 600 tonnes of PET wereimported. 68% of the PET produced and importedwas used in the manufacture of beverage bottles.

Growth of PET usage in South Africa isapproximately 8% per annum:

• 140 000 tonnes of PET produced in 2010• 145 000 tonnes in 2011• 166 000 tonnes in 2012• 182 000 tonnes in 2013• 196 000 tonnes in 2014• 210 000 tonnes in 2015• 227 000 tonnes in 2016 (estimated)

What is PET recycling?

PET bottles are made of one of the few polymers that can be recycled into the same form- a new beverage bottle - again and again. This neatly closes the recycling loop and enables'cradle to cradle' packaging solutions.

PET recycling has grown steadily in South Africa over the years:(shown as % of post-consumer PET bottles recycled)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016TARGET

2017TARGET

2022TARGET

170

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96 6

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59 6

91 t

50 2

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84 t

22 7

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14 5

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9 80

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16%

21% 24

% 28% 32

%

38% 4

2% 45% 4

8% 49

% 52% 54

% 58%

70%

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What is recycled PET (rPET) used for?

There has been much confusion about the safetyof PET after concerns were raised about thesafety of a different kind of plastic, namely thepolycarbonate products containing bisphenol A(BPA), which are most often used to makereusable rigid containers and electronic devices.

There is no connection between PET plastic andBPA. BPA is not used in the production of PETmaterial, nor is it used as a chemical buildingblock for any of the materials used in themanufacture of PET.

Phthalates (pronounced tha-lates) are a class ofchemicals that include three subsets, each withdifferent properties. Polyethylene terephthalate(PET) belongs to one of these phthalate subsets,but not the one most commonly associated withthe term. Orthophthalate is the phthalate subsetmost commonly referenced and discussed inpopular literature and on internet sites, and whichhas been the subject of some negative press. Oftenused to make various plastics more flexible, thistype of phthalate is also called a plasticiser.PET does not contain plasticisers or orthophthalates.Plasticisers are never substituted for terephthalatesused in the manufacture of PET, nor are thetwo ever mixed. Current research shows that PETdoes not contain or leach oestrogen-like chemicalssuch as BPA or other endocrine disrupters.

As with virgin PET, recycled PET (rPET)can be used to make many new products,including polyester staple fibre or filamentused for apparel (clothing), home textiles(duvets, pillows, carpeting), automotive parts(carpets, sound insulation, boot linings, seatcovers) and industrial end-use items(geotextiles and roof insulation), strapping,fruit carton corner pieces and new PETpackaging and bottles for both food andnon-food products, closing the loop andcreating a circular economy. One that isrestorative and regenerative by design.It is generally blended in a ratio of virginto recycled, depending on theapplication required.

How safe is PET?

WHYPLASTICBOTTLESARE NOTTRASH?

Because they can be recycledand used again and again.

PET packaging can be made from upto 100% recycled PET, recapturingboth the material and the embodiedenergy of the original package. PETcan also be recycled multiple times.In 2015, more than 1.7 billion bottlesof PET were collected and recycledin South Africa through hundredsof community recycling programmes.

Because they can be madeinto new useful products.

Collected PET is processed andre-manufactured into a variety of newmaterials including fibre and new PETpackaging. We've helped to generateR900 million worth of investment inPET recycling infrastructure andR2.9 billion worth of new productscontaining recycled PET (rPET).

Because collectingthem creates jobs.

Plastic bottles are valuable and createincome opportunities for informalcollectors. If one person collects 200bottles per day for 240 days of the year,it amounts to 1 450 kilograms per year.The 74 360 tonnes of post-consumerPET collected in 2015 translates intothe creation of an estimated 50 000income and skills transfer opportunitiesfor informal collectors.

Because collecting them isgood for the environment.

Recycling PET bottles has saved110 000 tons of carbon, avoided using460 000 m3 of landfill space andreduced resource consumption.Recycling plastic bottles furtherdecreases the need for rawmaterials and saves energy.

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END-USE MARKETDEVELOPMENTA balance must be maintained between the collection of post-consumer PET bottles on the onehand, and the demand for recycled end-use products on the other. This balance between supplyand demand, and installed recycling capacity is critical to keeping the bottle collection and recyclingchain intact and to ensuring that the financial benefits continue to reach collectors on the ground.In South Africa, post-consumer PET bottles are collected and recycled into two types of end-useproducts for the local and export market:

Bottle-2-Fibre (B2F)

The largest end-use market for post-consumerPET bottles in South Africa is currently thepolyester staple fibre market. Polyester staplefibre/filament is used to manufacture apparel(clothing), home textiles (duvets, pillows andcarpeting), automotive components (carpets,sound insulation, boot linings and seat covers)as well as industrial applications (geotextilesand insulation).

In 2015, approximately 45 000 tonnes of PET,or 61% of the total PET volume collected, wasapplied in this end-use market.

“We must continue to develop the marketfor recyclate: creating a higher demandfor products made from recycled PETis essential. The greater the demand themore this will “pull through” the supplychain and stimulate activity. This will takeconsiderable investment in infrastructure,innovation and encouragement fromboth the private and public sector.”

Chandru Wadhwani,Joint Managing Director,Extrupet Recycling.

End-use market split for post-consumer PET bottles

Recycled tonnages by end-use since 2010, showing Bottle-2-Bottle, Bottle-2-Fibre(including industrial fibre, fibre exports, etc.) end uses, as well as Bottle and Flake Exports.The growth in the Bottle-2-Bottle end-use market is clearly visible.

2010 2011 2012 2013 2014 2015 2016TARGET

2017TARGET

2018TARGET

37 361 42 562 50 274 59 691 64 109 74 360 83 281 96 605 111 5870

Bottle-2-Bottle Bottle-2-Fibre Bottle / Flake Exports

Tonnes

20 000

40 000

60 000

80 000

100 000

120 000

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A growing end-use market is that of recyclingbottles back into packaging. This can, to somedegree, be ascribed to the growth inacceptance on the part of many companies ofthe concept of Extended ProducerResponsibility (EPR), as well as the possibilityfor savings and reputational benefits associatedwith the use of recycled materials.

The use of recycled resin in food-grade PETpackaging entails compliance with extremelystringent standards for health and safety andproduct quality. Non-food-grade recycled PETis therefore often applied as an input materialin the manufacture of packaging and bottlesfor personal, homecare, pharmaceutical andother uses.

In the food-grade sector, recycled PET resinhas been blended with virgin PET in variousratios since 2009 for use in the manufactureof containers and bottles such as sandwichcontainers, trays, tubs and non-carbonatedbeverage bottles.

In 2015, approximately 22 000 tonnes, or 30%,of the PET bottles collected were applied inthe manufacture of recycled PET resin.

PETCO anticipates that the majority of thefuture growth in South Africa's end-use marketsfor recycled PET will come from theBottle-2-Bottle market, particularly as theawareness grows amongst brand owners ofthe benefits that can be achieved through theuse of recycled PET products. In this regard,we anticipate significant opportunities forinvestment in Bottle-to-Bottle recyclingfacilities in South Africa in the coming years.

Bottle-2-Bottle (B2B)

“From a trolley to second handbakkie, to a buy back centre,I now employ 13 permanentstaff and 5 casual staff and wehave over 1 000 people whosupply us, of which about700 are women. I'm collectingover 70 tonnes of PET everymonth - the township is becomingcleaner and the people aremaking a living for themselves -they tell me that I have madea difference in their lives andthat gives me joy."

Tshepo MazibukoManaging Director, K1 Recycling

“The PET recycling process used byMpact Polymers transforms usedPET bottles into resin, meeting theneeds of the most demanding foodand beverage packaging applications.This ensures that the material can bereused to make the same bottles fromwhich it came, thereby closing therecycling loop. Our rPET product isknown as Savuka - which means revival.”

John Hunt,Managing Director,Mpact Recycling.

Hundreds of millions of Rands haverecently been invested by PETCO'spartners to install world-classfacilities for expanding Bottle-2-Bottlecapacity locally:

· In May 2015, the first Bottle-2-Bottle recyclingplant in Africa, with an additional investmentof R75 million and the capability to produceresin that is suitable for the carbonated drinksector, was officially opened by Minister ofEnvironmental Affairs, Edna Molewa inWadeville, Johannesburg. Extrupet'sexpanded PhoenixPET plant, equippedwith Starlinger technology, will supply anadditional 14 000 tonnes of PET resin peryear to the PET packaging industry. It willeventually divert an additional 22 000 tonnesof post-consumer PET bottles from landfill.

· Mpact's R350-million state-of-the-artPET recycling operation in Wadeville,Germiston produces recycled PET (rPET)plastic for food grade packaging. Nowoperational under the name Mpact Polymers,this Bottle-2-Bottle facility will increasethe amount of PET bottles collected forrecycling by 30,000 tonnes per year.The resin produced in the plant complieswith EU regulations regarding foodpackaging, and has also received approvalfrom Coca-Cola for inclusion in theirbeverage bottles.

These are world-class facilitiesand significant achievements forSouth Africa and the continentof Africa.

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END-USE MARKETDEVELOPMENT

‘We have 37 staff members -of which 8 are women.We collect with a fleet of4 vehicles, with trailers -our agents collect fromoutlying areas, like Brandfort,Soutpan, Welkom and Virginia.I have learned the hard way;perseverance, long hours -and don't give up on yourstaff or your pickers. Theydepend on me and I needto be there for them.’

Megan LeachManaging Director, Envirowaste Recyclers

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While PETCO encourages the processing ofpost-consumer PET bottles in South Africain order to promote value addition andemployment creation in the local market, weremain aware that, in certain instances, theexchange rate of the Rand againstinternational currencies makes the export ofpost-consumer PET an attractive proposition.

In 2015, the slowdown in the global economy,and the resultant decline in the demand forPET waste in countries such as China andIndia, meant that the growth in PET exportsfrom South Africa was lower than in previousyears, with approximately 6777 tonnes ofPET bottles and flake exported.

PETCO is, on an ongoing basis, activelyseeking to develop alternative end-usemarkets for recycled PET products. As aresult, we have during the course of 2015been actively collaborating with commercialproduct developers, academic institutionsand research organisation such as the Councilfor Scientific and Industrial Research (CSIR),in investigations into the technical andcommercial viability of various end-useproducts and markets. We trust that someof these products and markets will in thefuture take up an increasing percentage ofthe post-consumer PET bottles collected inSouth Africa.

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PETCOPROJECTS

In 2015, some 69% of the PETCO budget was spentassisting volume driven projects that support recyclerswho have an end-use market in their value chain. Boththe number and capacity of our recycling partnershas grown significantly over the past 12 years.

Our volume driven project partners are the investorsin new plant and equipment that is required to deliverthe tonnes of PET recycled each year. PETCOprovides funding in support of these partners toensure that its volume targets are met and that,through adverse economic cycles, these programmesare sustained. Our contracts with the recyclers givesthem the confidence to also invest downstream - incollector training, provision of baling machines andsupport of SMME's.

PETCO closely monitors the market prices and majorcost variables in its on-going assessment of subsidyrates, and adjusts these accordingly to ensure noover-subsidy occurs and that its partners do notstall against odds that are so often stacked againstthose involved in recycling activities.

In order to ensure that funds are distributed asefficiently as possible, mechanisms follow marketdynamics closely and automatically determine thelevel of financial assistance to be provided to aparticular end-use.

The cost of the PETCO model to the consumercurrently averages at approximately 1 cent per bottle,an amazing achievement by any standard.

As at the end of 2015, PETCO provided supportto eight recycling partners who have a combinedmaximum recycling capacity of approximately115 000 tonnes per annum. This maximumcapacity will be fully operational by 2018.

In 2015, Da Run Fa Chemical Fibre signed an MOUwith PETCO to become a contracted recyclingpartner. This now means that PETCO is partneringwith all three manufacturers of polyester staple fibrein South Africa.

With regard to the manufacture of food-gradePET resin, PETCO's newest partner in this market,Mpact Polymers, made significant progress duringthe year with the commissioning of their Bottle-to-Bottle plant.

Recycling Projects

These are our contractedrecycling partners:

• Da Run Fa• Extrupet• FTE Insight• Kaytech• Mpact Polymers• Propet• SAFrePET• Sen Li Da

Collectively these partners purchase post-consumerPET bottles on a nationwide basis, with theirfootprint growing all the time by:

R280 million

R600 million

74 360 tonnes

1.7 billion

4.7 million

worth of paymentsmade to collectors

injected into thedownstream economy

of post-consumer bottlescollected for recycling

bottles collectedover the year

bottles collectedevery day

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PETCO spent 5% of its 2015 budget to supportinitiatives and activities that do not necessarilyincrease the collection volumes of recycled PET,but contribute to the visible recycling of PET.

PETCO supports visible recyclingin the following ways:

1 PET infrastructure and equipment provision

2 Collector training and development

3 Education and awareness

4 Special projects and joint ventures

5 Fostering government partnerships

6 Building the recycling network

Collection and Training Projects

PETCO supports projects and initiatives throughthe sponsorship of infrastructure and equipmentwith the aim of unlocking collections, helpingcollectors improve their efficiencies as well as thequantity and quality of PET collected. We also assistwith the efficient transportation of baled material.

In partnership with local authorities, schools,Plastics|SA, our Packaging SA partners and NGO's,we have helped to facilitate the opening of over700 plastic recovery stations throughout SouthAfrica and continue to contribute, via fundingallocated to PlasticsISA, and Packaging SA, towardsinfrastructure at municipal drop off sites acrossthe country.

The focus in 2015 was to provide support in highPET volume areas as identified in conjunction withour bottler members in order to unlock collectionand grow capacity in areas where beverages arealready distributed. In 2015 we supported 17 projectsacross seven provinces, sustaining 3613 incomeopportunities. This brings the number of projectssupported in the past decade to 76.

In 2015, we provided the following equipment:

· 1 MACPAK D 14 baling machine (45 tonnesper month capacity) in partnership withPackaging SA and POLYCO

· 1 Harmony baling machine (300 tonnesper month capacity) in partnership withPeninsula Beverages

· 1 weighbridge· 1 trailer· 2 shipping containers for storage· 2 cages· 10 wheelie bins· 100 bulk bags· 2 PET collection bays· 2 m3 mesh bins· 2 platform scales· 17 trollies for 4 projects· 2 project signage boards· Masks and gloves for 4 clean-up campaigns· Supplies for 1 recycle swop shop· Feather banners for 8 beach clean-up· Protective clothing for 5 projects· 1 x Woolpress Hydraulic Double-Box

Baling machine

1. PET Infrastructure andEquipment Provision

We sponsor infrastructure andequipment to aid and growvisible recycling.

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All of our projects are monitored monthly to tracktheir performance and growth as part of ourmentoring philosophy and our efforts to movecollectors up the value chain.

Here are a few examples of infrastructure andequipment projects that PETCO supported in 2015:

RAINBOW NATION RECYCLING CLUB SOLVESSTORAGE PROBLEM WITH PETCO CONTAINER

The Rainbow Nation Recycling Club in Kini Bayjust outside Port Elizabeth comprises a small buy-back centre and a swop shop. The Club works tobring hope to the Clarendon community whererecycling is used as a mechanism to teach valuessuch as responsibility by supporting local childrenwho bring in recyclable PET bottles on a weeklybasis in exchange for credits. These are then usedin the shop to buy essentials and heavily-discountedday-to-day basic consumables. This innovativecommunity development project, staffed byvolunteers and supported by various NGOs, offersnumerous benefits to the community and childrenin particular, in addition to the obvious environ-mental and educational impact. The projectencourages children to use their own initiative andhelps them learn about responsibility, encapsulatingwhat the programme stands for: 'Tell me and I'llforget; Show me and I may remember; Involve meand I'll understand.'

PETCO donated a twelve metre shipping containerin order to provide much needed storage spacefor the expanding operation.

NOTHING TO WASTE EXPANDS RECYCLINGOPERATIONS INTO NEW AREAS

Nothing to Waste was the second runner-up ofthe 2014 International Labour Organisation's (ILO)Freestate Entreprize Job Creation Challenge.Vuyelwa Kona collects recyclables from businesses,homeowners and municipality buildings. Her biggestchallenge was transporting her materials. PETCOsupported Vuyelwa with five trollies to move therecyclables to her site as well as a manual balingmachine which enables her to expand into otherareas as well as sell her baled PET bottles to abigger buyer in Bloemfontein.

KRUGER NATIONAL PARK GAINS SECONDINDUSTRY BALING MACHINE

A baler, sponsored by Packaging SA, PETCO andPOLYCO, is now installed at the Skukuza materialrecycling facility (MRF) of the Kruger National Park.The baler will enable the separation-at-sourcerecycling project to be implemented at all the restcamps in the Park. The south is the busiest part ofthe Park and higher volumes of post-consumerpackaging waste are generated there.

WASTE WANT MOVES UP THE VALUECHAIN WITH A BALER

PETCO sponsored Waste Want with a H15 Balerin 2012. Since then, the company's PET collectionvolumes have increased more than five times andthey have expanded their operations to new areas. In 2015, PETCO donated a weighbridge, trolleysand protective clothing to assist Waste Want intheir expansion. Waste Want is currentlyimplementing separation-at-source projects forthe City of Cape Town, Grand West Casino Hotel,and Quality Beverages. Waste Want also supportsa shelter for homeless people by providing themwith opportunities to collect and sell recycled PET.

NEW TOWN RECYCLING SUPPORTS ITSCOLLECTORS WITH NEW PETCO TRAILER

New Town Recycling in Johannesburg CBDprovides a service to a few hundred inner-citystreet collectors that previously had to push theirtrollies far distances to sell their recyclables. Theyalso buy from waste pickers on a few landfill sites.New Town Recycling has grown from collectingless than five tonnes per month of post-consumerPET to over 50 tonnes. PETCO sponsored thecompany with a trailer, which has enabled themto create a number of permanent jobs as well assupport a few hundred PET collectors.

PETCOPROJECTS

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2. Collector Training and Development

PETCO sees the role of training and thementorship of collectors as being critical toimproving working conditions and assistingentrepreneurs to grow and sustain theirbusinesses. We also identify with the needto raise awareness in communities andstrengthen relationships with government,to encourage the establishment of kerbsidecollection projects, and to expand existingPET collection into new areas.

During 2015, in partnership with governmentand industry partners - in particular the PaperRecycling Association of South Africa (PRASA)who have invested considerable resources inthe refinement of training material, we:

· Conducted and participated in 27 trainingand workshop events; a total of 2 059collectors and municipality employeesparticipated;

· Offered information-sharing workshopsacross all nine provinces of South Africaand built links with 22 municipalities;

· Facilitated the promotion, establishmentand development of waste recyclingenterprises for 17 projects;

· Identified and facilitated the formation ofco-operatives and offered training tostrengthen the collective capacities ofmore than 20 co-operatives;

· Offered training and skills development inwaste identification, sorting and transportation of recyclables, reaching2 059 collectors;

· Focused on business management trainingfor entrepreneurs and SMMEs - includinglinks to business support, markets and financein 27 different training and workshopevents; and

· Conducted numerous visits to recycling plants,buy-back centres and collectors' operations.

Some examples of training projects thatPETCO supported in 2015 include:

NATIONAL ZOO OF SOUTH AFRICA

PETCO partnered with the National Zoo toimplement a separation-at-source recyclingproject where a 12 member Co-operative wasgiven the opportunity to do the sorting andcollections on the zoo grounds. PETCOfacilitated the signing of a CooperationAgreement between the Zoo and the Co-operative. We supported the Co-operativethrough the sponsoring of protective clothing,five trolleys, a platform scale and 50 bulk bags,and we are currently sourcing a small baler.PETCO also assisted with training in basicsorting and identification of recyclables. PETCOfurther connected the Co-operative to a buyerfor the recyclable material and will bemonitoring the Co-operative on a monthly basis.

RUSTENBURG'S GREEN MARCH

The Rustenburg Municipality declared 2015 theyear of Green Growth. One of the majorchallenges in Rustenburg involves illegaldumping and littering. The aim of the GreenMarch event was to create awareness aboutillegal dumping and littering by encouragingcommunity members, school children andcouncillors to participate in recycling and wasteminimisation. The March was followed by aCollectors' Training Workshop.

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3. Education and Awareness

Growing awareness and consumer educationmakes it possible to move from a throwawayculture to a recycling culture. In particular, wework to grow awareness amongst consumersthat PET plastic is recyclable and safe to use.We also encourage consumers to participatein kerbside projects (where these exist), andsupport community projects and drop-off sitesthat actively recover their post-consumerPET plastic for recycling.

Moving forward, we will look at incorporatingregular consumer surveys into our annualcalendar to better understand how the SouthAfrican consumers' understanding of thecomplexity of the subject is developing anddeepening, and what tactics can be used tohelp shift consumers along the variousstages of awareness.

Some examples of education and awarenessprojects that PETCO supported in 2015 include:

CONSUMER MARKETING

Competitions and awards supported in 2015included the Clean-up and Recycle and StudentDesign Competitions run by Plastics|SA, theRemake Challenge Design Competition,Woolworths' Making a Difference-through-Design Competition, and the IPSA StudentGold Pack Awards.

In terms of paid-advertising, despite acomparatively small overall marketing budget,PETCO's total combined advertising valueequivalent (AVE) for 2015 increased by 11% ascompared to 2014.

At the end of 2015, we launched a SummerSocial Media campaign, the overall objectiveof which is to increase awareness for PETrecycling (and general recycling) amongst theSouth African public (while simultaneouslyincreasing awareness of the PETCO message,

“Plastic bottles are not trash!”).

Examples of messages that consumers receivewhen they engage with the campaign include:

In October 2015, PETCO sponsored the'Walking the Daisies' component of thepopular annual 'Rocking the Daisies' concert,representing a new target audience for PETCO.(www.petco.co.za/walkingthedaisies)

PETCOPROJECTS

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RESOURCE DEVELOPMENT

We created specific PETCO Fact Sheets toalign with the Mpact Bottle-2-Bottle launch,planned for 2016, i.e. Who is PETCO, Whatis Bottle-2-Bottle, and a project sheet onExtrupet's PhoenixPET plant launch (whichtook place in May 2015), as well as updatedexisting fact sheets (e.g. Assisting Schools,Universities and Property Owners withRecycling, Recycling for Events, a Guide toStarting Swop Shops, and a basicEnvironmental Management Guide).

We revised the People Story (whichdocuments the story of PET collection andthe people behind the collection:www.petco.co.za/peoplestory) and startedthe planning of a Bottle-2-Bottle Story. Wedeveloped more promotional material,including a revised generic PETCO booklet,as well as branded feather banners, safetyvests and protective overalls.

SCHOOLS PROJECTS

We actively encourage and contribute tothe education of learners through nationalschools recycling competitions and schoolscollection projects undertaken with ourpartners.

In 2015, almost 500 schools, over 350 000children, and 11 000 teachers across fourprovinces were reached through PETCO'sschool projects. One of the many projectswe supported was the Operation Smile:Million Bottles for Smiles, in partnershipwith the Waste Trade Company, initiatedin 2009 as part of the Company's socialresponsibility initiative. Since then, theproject has grown to include more than 180schools in the Nelson Mandela Bay Metro.

One of the most fulfilling initiatives overthe course of 2015 has been the ABI SchoolsRecycling Competition. Through this project,over 645 tonnes of recyclable material wascollected from 404 schools; over 350 000learners and 11 000 teachers benefited; anda total of 50 young people were employedin the programme with 10 permanentlyemployed by ABI and partners.

UNIVERSITY PROJECTS

We supported the Pretoria Universitywith awareness raising during their GreenWeek, as well as the University of CapeTown (UCT) and the University of theWestern Cape with specific researchtopics for their graduate programmes.We assisted other Institutes of learningwith various projects ranging fromawareness raising and informationdissemination to outreach programmes.

"We do source separation.We give residents a bluebag for storage of PET -the hospitals are alsoparticipating as are themilitary services. Everyonewants to recycle in Lephalale

- even the Mayor is recycling.Recycling is hip andhappening!"

Joshua HlapaManager: Waste, Lephalale Municipality

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PETCOPROJECTS

PETCO embraces partnerships and sees the valueof collaborative efforts. We undertake a rangeof projects, from in-kind donations and joint-cause marketing campaigns, to joint ventureswith government, other industry bodies, our RAGpartners and our Shareholder Members.

Below are some examples of the remarkable jointventure projects that were undertaken in 2015:

THE INTERNATIONAL LABOUR ORGANISATION(ILO) ENTERPRIZE DEVELOPMENT CHALLENGE

For the third year in a row, the InternationalLabour Organization and PETCO collaboratedwith partners in the uMhlathuze Municipalityabout 180 kilometers north-east of Durban, tohost the Responsible Tourism Challenge. TheChallenge is a sector specific business plancompetition implemented with public and privatesector partners and is designed to support SMMEdevelopment and job creation. Under the bannerof responsible tourism practices, businesses inthe tourism and waste sectors were invited topresent their business ideas.

Three waste businesses in the uMhlathuzeMunicipality won prizes that included bothfinancial and non-financial support.

THE TIHANA RECYCLING AND WASTEMANAGEMENT PRIMARY CO-OPERATIVE

The Tihana Co-operative was recently announcedas one of the winners of the 2015 SEED Awards.This cooperative comprises of five women whocollect recyclable waste in the village ofSenwabarwana (Limpopo). They use donkeycarts and trolleys to collect used plastic bottles(PET), cans and glass. In partnership with theP.E.A.C.E Foundation, PETCO played an importantrole in supporting the Co-operative throughtraining and by supplying collection trolleysand a manual baling machine.

PENINSULA BEVERAGE COMPANY

PETCO has partnered with Coca-Cola PeninsulaBeverage Company by contributing 50% towardsa baling machine for the exclusive use of balingpost-consumer PET Plastic bottles.

4. Special projects and joint ventures

PETCO actively partners with government onvarious projects across all nine provinces, thanksto our collection network and the local authorities.

In 2015, PETCO supported various governmentprojects, including:

TRAINING ON WASTE MINIMISATION,SEPARATION AT SOURCE AND RECYCLING

PETCO was requested by the Department ofEnvironmental Affairs and Development Planning(DEADP) of the Western Cape Government toassist in training their separation-at-sourceawareness educators on sorting and the basiceconomics of recycling. 23 EnvironmentalProtection and Infrastructure Programme (EPIP)workers from the Cederberg and Berg RiverMunicipalities attended.

JOB CREATION INITIATIVES

Government on its own cannot create the numberof jobs required to enable the large number of jobseekers to find meaningful employment. Byengaging with the private sector, the public sectorcan achieve better value for money for itsinvestment in developmental outcomes. HencePETCO partnered with the National Departmentof Small Business Development (DSBD) and theInternational Labour Organisation (ILO) in a jobcreation initiative, in partnership with DevelopmentBank of Southern Africa (DBSA).

WORKSHOP PRESENTATIONS

PETCO was invited to present at a workshophosted by the Department of EconomicDevelopment, Environmental Affairs and Tourism(DEDEAT), District of Waste Management Forum,and the South African Local GovernmentAssociation (SALGA).

STRATEGIC PLANNING

The Mpumalanga Department of Agriculture, RuralDevelopment, Land and Environmental Affairs(DARDLA) organised a Waste Summit for all thestakeholders involved in waste management inthe Province. These included local municipalities,mining companies, packaging manufacturers andrecycling companies. The aim of the summit wasfor the stakeholders to come up with practicaland strategic solutions to address the wastechallenges in the Province. PETCO submitted adetailed strategic document highlighting currentprojects supported, workshops organised andplanned initiatives in the Mpumalanga Province.

5. Fostering government partnerships

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As a measure towards achieving an inclusiveapproach amongst stakeholders of PET recycling,PETCO implements a membership schemefor stakeholders.

There are two categories of PETCO Membership:· Shareholder Membership· Associate Membership

SHAREHOLDER MEMBERSHIP

Shareholder Membership is reserved for companieswho pay levies and grants, and for whomshareholding and voting is reserved. Percentageof shareholding in PETCO is allocated accordingto annual continuous membership contributions,which is calculated every 3 years.

ASSOCIATE MEMBERSHIP

Our Associate Membership programme involvesa diverse group of individuals and companies. Itenables anyone from a Not-for-Profit organisationto a school, from a collector to a manufacturer, tobecome a member of PETCO. The common threadis a belief in recycling.

CATEGORIES OF ASSOCIATE MEMBERS:

· Reciprocal Members: Industry Associations,Recycling Associations.

· Special Members: Schools, Students,Section 21 Companies, Drop off Centres.

· Friends of PETCO: Suppliers to PETCO,Waste Companies, Recycling Consultants.

· Professional and Corporate Members: Recyclers,Machine Manufacturers, Small Brand Owners,Waste Management Companies, Mediumto Small Retailers.

Associate Members are not allocated shares inPETCO and have no voting rights, but many otherbenefits apply.

MEMBERSHIP WORKSHOPS

PETCO hosts free nation-wide member workshops,specifically designed to be useful to members'businesses and of benefit to their employees. Theseworkshops help to ensure that members are upto date with the latest offerings from governmentand the private sector. They are packed withrelevant case studies, and information on a rangeof topics relating to PET plastic recycling andrelevant new products.

6. Building the recycling network

We hosted four events across the country in 2015,specifically focussed on educating and informingvarious stakeholder groups about what it meansto be a member of PETCO. These included:

· A 'Morning with PETCO and Partners' work-shops in PE and Durban, showcasing PETCO'sprojects and support offerings were extremelywell supported. Forming links with the localbusiness chambers in both cases was relevant.

· Thematic workshops entitled 'Spotlight on EPR'were held in JHB and Cape Town. At theworkshops we grappled broadly with the topicof Extended Producer Responsibility (EPR).

WORKING WITH PACKAGING DESIGNERS

PETCO recognises the need for innovators,designers, manufacturers and packaging decisionmakers to understand how packaging designdecisions affect container recyclability, and wherefeasible to design packaging to be compatiblewith the broadest range of recycling operationsand technologies.

In 2015, we:· Revised our 'Design for Recyclability' guideline

document in line with best practice andknowledge of our current technological capacity.We also contributed to the Design for Recyclingpackaging designer's reference manual publishedby Packaging SA.

· Hosted our annual 'Design for Recycling'workshop, and shared current thinking on designfor innovation and closed loop systems.

· Engaged brand owners around pack format anddesign, while stressing complexities and options.

· Empowered students with information aboutthe fundamentals of design for recycling, bydelivering lectures to IPSA packagingtechnology students.

Highlights for 2015 include presenting at the CapeTown World Design Capital 2015 on 'Packagingby Design: Soul Food for the 21st Century', wherePETCO enlightened conference-goers on plasticpackaging and recycling during the Cape Craftand Design Institute's (CCDI) creative exchange.

PETCO AGM

PETCO's 2015 AGM was held on Wednesday27 May at the Quartermain Hotel in Sandton. Theevent was well attended by a range of shareholdermembers who were able to reflect on what progresshas been made and to ponder the road ahead. Ourguest speaker at the AGM was Professor LindaGodfrey of the CSIR, who enlightened shareholderson the changing face of waste management andopportunities in the waste sector in transitioningSouth Africa to a green economy.

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PETCOAWARDS

At the 11th AGM, PETCO recognised and honoured the people, companies and organisations involvedin the PET recycling value chain in South Africa, which not only contributed to advancing PETrecycling, but also reflected the principles of EPR and circular economy-thinking in their practices,during the course of 2015.

Here are the worthy winners:

1. Best Recycling Information,Awareness and EducationProgramme:Gregory Player, Clean C,for his team's beach and communityclean-ups, which have helped removeover 100 tonnes of rubbish off the beachesin and around Cape Town.

2. Best Product using recycledPET (rPET):Woolworths,for their 'Re' denim range of clothing thatuses 12 x 500ml recycled plastic bottlesto manufacture each pair of recycled denims

.3. 'Designed for Recycling':

Coca-Cola South Africa,for their extensive range of clear bottles(of all sizes) that are designed to berecycling-friendly.

4. PETCO Recycling Champion:Kimberly Recycling,for increasing their total collection of PETto between 60 and 80 tonnes per monthand growing their employee numbers from11 to 45 since their inception nine years ago.

5. PET Community Outreachand Upliftment:K1 Recycling,for the work they have done in supportingand uplifting the Tsietsi Palm Ridge Co-opwith the community of Ekurhuleni;Waste Want,for creating a youth co-operative employingpeople seeking to make a change and getoff the streets; and theP.E.A.C.E Foundation (Planning,Education, Agriculture,Cooperatives and Environment),for providing mentorship and stakeholdermobilisation to the Tihana Co-operative(consisting of 5 women, previouslyworking from the Senwabarwana dumpsite).

6. Woman PET-trepreneur:Megan Leach (Envirowaste Recyclers) and Nomlindelo 'Pinky'Modisang (Lindithondo Construction& Projects).These women are tireless in the work they doto uplift and upskill their communities.They are both passionate about recyclingand its potential - not only for themselves,but also for their communities and the country.

7. PET-trepreneur:Gcina Makhoba (MpilenhleRecycling) and Brian Masemola(Boremako Recycling).Having only recently added PET to theirrecycling efforts, these gentlemen recycleda combined volume of almost 800 tonnesof PET for 2015. Furthermore, Gcina nowemploys 43 people permanently and Brianemploys 15 individuals (six of which arefull time).

8. PET Recycling LocalAuthority Initiative:Lephalale Municipality,for implementing various community wasterecovery and avoidance programmes,alongside waste education and awarenessprogrammes, throughout the municipalityto encourage behaviour change.

9. PETCO's Small- or Medium-sizedBusiness Champion:Cannibal Glass (Port Elizabeth),for becoming one of largest collectors of PETin PE after they encouraged half of their5 000 glass collectors to collect PET as well.Their PET tonnages increased from0 to over 50 tonnes per month in 2 yearsand it's still growing.

This year, we additionally introduced PETCO's'Spotlight' media award, created to recognise mediaexcellence in the area of recycling, sustainabilityand enterprise development, specifically of PET,and its importance within the overall context of theenvironment. The inaugural winners will beannounced at the 2017 PETCO Awards.

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HOW WE UTILISED OUR FUNDS YEAR ON YEAR

LEVIES GRANTS OTHER

2014 20150

10

20

30

40

50

60

70

80

90

100

2014 20152014 2015

84%

83% 86

%86

%

14%

15%

12%

12%

2% 2% 2% 2%

EQUIPMENT,INFRASTRUCTURE

AND TRAINING

RECYCLINGPROJECTS SUBSIDY

SPEND/SUPPORT

MARKETING,EDUCATION AND

AWARENESS

ADMINISTRATIONAND OPERATING

COSTS

0

10

20

30

40

50

60

70

80

90

100

2014 2015 2014 2015 2014 2015 2014 2015

9%

7% 7% 5%

77%

77% 77

%6

9%

5% 5% 5% 5%

12%

12%

12%

12%

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FINANCIALINFORMATIONHIGHLIGHTSIn order to sustain and grow PET bottlecollection, consistent demand for post-consumer PET is required. Recycling isa commodity business and, as such,is prone to significant cycles.

Unlike plastics, the steel, paper, glass andcardboard used in packaging are helpedenormously by the ability of the originalmanufacturers to recycle their own materialrecovered from the waste stream. Polymermanufacturers are unable to offer such a lowcost route because of the multiple variationsin grades of the different types of polymerproduced. Companies specifically set up forthis purpose therefore carry out the recycling.

In most cases, this leads to recyclate beingproduced, which then has to compete withthe highs and lows of virgin polymer pricesand other end uses (specifically textiles withrecycled polyester content that competewith virgin polyester staple fibre). It is greatwhen these prices are high, but when theyare low, recyclate often struggles to survive.Hence the PETCO financial model.

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WHERE TOFROM HERE?The outlook for 2016and beyond

The key factor influencing the rPET global market currently is the low virgin price of resin - theresult of the impact of the low crude oil price on the polyester chain. The impact of the fall inthe oil price since mid-2014, its effect on virgin and recovered plastic prices, and the impact onthe economics of plastic recycling are significant concerns. Plastics recyclers are particularlyvulnerable to changes in market conditions, due to their position in the middle of the supplychain. Lack of control over input quality, availability and cost means that reprocessors are atrisk of receiving lower quality material.

It appears likely that global oil prices will remain depressed, in the range of $40-50, meaningthat the pressure on virgin PET prices and therefore on recycling margins, will remain in place.

However, all stakeholders in the plastics industry need to look past recent volatility. As with allcommodities, markets tend to move in cycles and the plastics recycling industry is no different.

A business model based on the ability to supply products to a wide range of end markets, andat low cost, is most likely to be resilient and robust in the current environment.

We are particularly focussed on the following areas:

Research and InternationalCooperation:

Waste-2-Energy. An increasing number ofcountries are starting to recognise that wasteplastic should be regarded as a valuable resourcethat should ideally be recycled or, where that'snot an option, used to fuel Waste-2-Energyfacilities. Challenges associated with Waste-2-Energy (WtE) projects include being able tosecure long-term contracts beyond the usualthree-year period with municipalities, as well asbeing able to secure off-take agreements for thesale of electricity. PETCO has drafted a discussiondocument on Waste-2-Energy that is availableupon request.

Integrating the informal collection sector.A prerequisite for successful plastic wastemanagement is the existence of a legal frameworkthat supports and finances the collection systemwith the necessary infrastructure, awarenesscampaigns and training of waste pickers. It iscrucial for waste pickers to get organised intogroups, cooperatives or other collective entities. The experience of waste co-operatives in Braziland other countries and the legal framework thatsupports them, is helpful to our situation.

Consumer Awareness andUnderstanding:

We know that consumers are generally willingto recycle, when it is made easy for them to doso, but getting them to be fully efficient andmotivated, and to ultimately change behaviour,requires ongoing awareness campaigns andeducation. While consumers might be aware ofthe need for change, most residents are notacting on their awareness, and lack understandingof what they can do that would actually make adifference. Residents are also looking for anauthoritative voice they can trust to give themaccurate and reliable information about how andwhat to recycle.

By increasing the level of consumer awarenessand understanding, we can ensure thathouseholds are encouraged to take advantageof recycling processes and procedures as theybecome available.

We will conduct regular consumer researchsurveys to create campaigns that moveconsumers along the five stages of behaviourchange, i.e contemplation, preparation, action,maintenance, and relapse.

DEA have established a Chemicals and WasteAwareness Forum and PETCO serves on thesteering committee.

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A National Network of CommittedOrganisations (including Industry,Government and the Private Sector):

Our most valuable stakeholders are our membersand our success over the past 12 years is becauseof their efforts and hard work. Maintaining andgrowing these relationships is of highest priority.

Our intention is to relook at and revise ourAssociate Membership programme in order toensure that we are continuously creating anddelivering value and support. We will be creatinga toolkit for members to guide them on how bestto leverage the PETCO partnership, how to useour logo for maximum exposure, and what memberbenefits could be better utilised.

We would like to grow the PETCO family beyondthe PET value chain, to include organisations andindividuals that reflect the principles of EPR andcircular economy-thinking.

Change in Structure: Pty (Ltd) toNon Profit Company (NPC):

PETCO is mandated to use all funds received inpromoting and supporting the recycling of PET,and will continue to do so. It is our intention tochange the legal structure of PETCO from aPropriety Limited Company (Pty) Ltd to a Not forProfit Company (NPC) which is more congruentwith PETCO's mandated objectives and inherentstructure. A NPC is a company set up for publicbenefit, or communal or industry interests, wherethe income is applied solely to the promotion ofthe NPC's objectives and no retained funding canbe distributed to members.

Conduit for EnterpriseDevelopment:

Over the years PETCO has supported projectswith infrastructure, equipment and protectiveclothing, enhancing working conditions and trainingfor staff and helping collectors improve theircollection quantity, quality and transportefficiencies. PETCO has put a system in place toisolate funding that qualifies for enterprisedevelopment. Through this, acting as conduit,PETCO can provide qualifying members with thebenefit of the Enterprise Development spend ona percentage of their contribution.

Policy Shifts:

One of our main challenges for 2016 is theuncertainty about the future structure of the Paperand Packaging Industry in light of the new NationalEnvironmental Management Waste AmendmentBill from the Department of Environmental Affairs(DEA). The Act and Bill provide for a pricingstrategy for waste management charges (with awide range of potential economic instrumentsalong the product-waste value chain), theestablishment of a Waste Management Bureau(WMB) and mechanisms to oversee thedisbursement of revenue collected from wastemanagement charges. The DEA would also like toconsult on the proposed development ofregulations for the separation of waste at source,the banning of plastic waste-to-landfill, amoratorium on new landfill sites, a prohibition ofthe burning of waste, a regional approach to wastemanagement and disposal. The income from thewaste management charges would fund industryand community initiatives to recycle and recoverwaste streams. The intention is for some of thefunding collected to be used to fund industry andcommunity initiatives to recycle and recover wastestreams. PETCO has established an internal PETRoadmap Working Group, with representationfrom the various shareholder categories and otherrole players and we are working closely withGovernment and the Paper and Packaging Industryto ensure that all parties are able to meet theirrespective mandates, without compromising thelivelihoods of those who depend on an establishedand growing recycling industry, or reversing thehard-won environmental gains. PETCO would liketo see the formation of a DATA Alliance in thePaper and Packaging Sector enabling the sectorto work collectively on developing accurate andmeaningful methodology / statistics which arevital for planning, monitoring and evaluation.

Stakeholder Shifts and ContinuedIndustry Commitment:

Due to the abovementioned policy shifts andplastic falling into the spotlight in terms of theMinister's budget speech, we find that stakeholderengagement and relationships with packaging,plastics, recycling partners, DEA/ WMB will nowbe crucial.

Now more than ever, the plastics industryneeds to speak with one vision and ensureconsistent messaging. We need to speak asan organised sector.

The South African plastics industry is anadvocate for achieving world-class standardson recycling. To achieve this, everyone involved

- from the raw material producers, through tomanufacturers, retailers, consumers andrecyclers - all need to play their part in thesolution and there is a need for PET bottleindustry to stay committed to PETCO.

Standardise Waste ManagementProcedures and Processes:

Currently waste collection and management isbest described as a lottery. Most of the authoritiesin the South Africa still do not have kerbsideplastics collection, even for bottles. Substantialprogress on achieving plastics recycling targetswill not happen until best practice processes andprocedures are adopted nationwide. The higherthe targeted recycling rate, the more challengingit will be to collect more bottles. PETCO is excitedabout the roll out of additional municipal kerbsidecollection and various projects and partnershipsto achieve increased collection. In particular- theBottle-2-Bottle expansion would require cleanerfeedstock and dovetails well with Government'smandate to municipalities to reduce the amountof material going to landfill. The expansion of kerb-side collection programmes must however becarefully balanced with the needs of the informalwaste pickers, who form an important foundationfor the entire value chain.

Embedding Design for Recycling intothe Development of Packaging:

We recognise the need for innovators, designers,manufacturers, and packaging decision makers tounderstand how packaging design decisions canaffect container recyclability and where feasibleto design packages to be compatible with thebroadest range of recycling operations andtechnologies. We think it is an exciting opportunityto inspire a generation of designers to profoundlyrethink plastic packaging.

Tubs, Trays and Edible Oil:

Tubs, tray and edible oil bottles are currently notrecycled in South Africa. There is potential forother forms of recovery for these pack forms,depending on buy-in from the sector to fund theinvestment in collection and technology as wellas the generation of volumes adequate to keepthe lines running efficiently. The issue of tracking'free riders' coming aboard as PETCO membersalso comes to the fore, as they are one of thelargest end-use sectors of recycled PET forpackaging. We continue to encourage theseproducers to engage with us, as there is now apressing need for PETCO to represent the entirePET sector as a vehicle for fulfilling their EPRobligations.

End-use Market Development

Creating higher demand for products made fromrecycled plastics is essential. The greater thedemand, the more this will “pull through” thesupply chain and stimulate activity. This will takeconsiderable investment in infrastructure,innovation and encouragement from both privateand public sectors. Retailers also have aconsiderable role to play.

Together with our partners across the PET valuechain, we have a vision for an economy in whichplastics never become waste. We understand theconcrete steps that are required towards achievingthe systemic shift needed, based on the principlesof a circular economy.

End-use market developments for recycledstrapping as well as the export of fibre areopportunities to pursue going forward.

We look forward to the opportunities goingforward and anticipate that 2016 will go down inhistory as the year we further closed the loop inPET recycling in South Africa, obtaining food gradeapprovals, especially from brand owners suchas Coca-Cola.

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“I am doing recycling in Midvaal.Around where we were staying,there is a need for recycling, soa group of us decided to startpicking up recyclables. Thereare 16 of us and we collectaround 6 tonnes of plastic amonth, more in summer. Peopledon't always take you seriouslyas a women - around mycommunity I'm well known forwhat I am doing because I amsaving the planet. One lady whoworked for me, is now ready towork on her own and Iintroduced her to PETCO."

Nomlindelo 'Pinky' ModisangOwners, Lindithondo Construction & Projects

Industry Developments and Expansion

We are pleased that the Board of Directors ofHosaf has approved a R700m expansion of theirexisting plant in Durban, thereby doubling thecapacity of PET resin production. This expansionis due to come on stream in 2017.

In another exciting development, a comprehensiveset of commitments have been agreed betweenthe Coca-Cola Beverages Africa (CCBA) mergerparties - SABMiller plc, The Coca-Cola Companyand Gutsche Family Investments - and the SouthAfrican Government, that will be recommendedto the Competition Tribunal in connection withthe proposed creation of Africa's largest soft-drinkbeverage bottling operation.

The commitments address concerns regardingemployment, access to retail cooler space forsmaller competitors, localisation of productionand inputs used in the production of Coca-Colaproducts and Appletiser brands, economicempowerment and the location of the headquarters.

The company agreed to invest R800 million tosupport enterprise development for two groupsof entrepreneurs:

- Creation of a R400 million fund for enterprisedevelopment in the agriculture value chain,particularly to support and train historicallydisadvantaged developing farmers and smallsuppliers of inputs to Appletiser and CCBSAproducts on a competitive and sustainable basis;

- R400 million incremental investment to developdownstream distribution and retail capabilitieswith associated skills development and training.

This is expected to create an additional 20 000black-owned retailers.

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CELEBRATINGTHE PETCOPEOPLE

· Cheri ScholtzCEO

· Alistair SchornBusiness Development Manager

· Belinda BookerCollections and Training Manager

· Janine BassonStakeholder Relations Manager

· Carene MellorCompany Administrator

· Vainah MbuloJohannesburg Office Administrator

PETCO CONTRACTED RESOURCES

· Martin NiebuhrAccounting and Financial Consultant

· Annette SchellLevy Manager

· Deloitte SAAuditors

It's time, once again, to acknowledge and celebrate the incredible people behind this year'smany accomplishments. You will find them all listed on the following pages, but that hardlysuffices to show our appreciation for the efforts, the creativity and, most of all, the heart theyall put into sustaining and expanding our presence. May the coming year bring new recyclingpartnerships, a more stable economic environment, recovery, and further growth.

PETCO STAFF

CHERI SCHOLTZ ALISTAIR SCHORN BELINDA BOOKER

JANINE BASSON CARENE MELLOR VAINAH MBULO 33

PETCO BOARD OF DIRECTORS

EXECUTIVE DIRECTORS

· Casper Durandt - ChairmanFranchise Technical Director, Coca-Cola Southern Africa; Representing: Brand Owners

· Greg Morse - Vice ChairmanManufacturing Director: Peninsula Beverages, Representing: Bottlers

· Steven BirdSales and Marketing Director: Hosaf; Representing: Resin Producers (January - August 2015)

· Daniel SchoemanGeneral Manager: Hosaf; Representing: Resin Producers (Dec 2015)

· Tshidi RamogaseCorporate Affairs Director: SAB Miller / ABI Soft Drinks; Representing: Bottlers

· Tom MclaughlinResponsible Sourcing: Woolworths Food; Representing: Retailers

· Andre NelSustainability General Manager: Pick 'n Pay; Representing: Retailers (alternate)

· Clynt LevinChief Executive Officer: Boxmore; Representing: Converters

· David DrewChief Commercial Officer: Boxmore; Representing: Converters (May 2016)

NON-EXECUTIVE DIRECTORS

· Vukani MagubaneDirector of Public Affairs and Communications: Coca-Cola South Africa; Representing: Bottlers

· Willem PienaarManaging Director: Nampak Liquid and Petpak, Environmental Expert (Board Appointment)

Our directors serve a two-year term and areelected after being nominated by the industrysectors they represent. They may avail themselvesfor re-election.

Our board are not remunerated and pay theirown expenses to attend annual meetings.

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OUR SHAREHOLDERMEMBERS ARE THOSEWHO PAY LEVIES ANDGRANTS, AND FOR WHOMSHAREHOLDING ANDVOTING IS RESERVED:

40%CONVERTERS

25%BOTTLERS

20%BRAND OWNERS

10%RESIN PRODUCERS

5%RETAILERS

ASSOCIATE MEMBERS

Associate Members are companies, organizationsand individuals who are non-levy paying and, aspart of the PETCO family, subscribe to our values:

· A whale of heritage route· Akura· Alfrehutch· Appletiser SA· Beauty and Son Recycling· Betha Neland Consulting· Beytell Belegging t/a Anti Waste· Blue Acqua· Bonke Abantu Recycling and Waste Management· Brandhouse Beverages· Dema Trans Waste Services· Ekhmanzi Springs t/a Aquelle· eLabel· Enviroserv Waste Management· Extrupet· Garden Route Marketing· Gontse Environment and Recycling· Green Cape· Green Cycle· Green Edge Communications· Green Recycle· Hlobisa Enviro Waste· Husky· Institute of Packaging South Africa· Johannesburg Zoo· Kaytech Engineered Fabrics· Kimberly Recycling· Krones Southern Africa· Limwiz Management and Consulting· Mama She's Waste Recyclers· Move On Up 1061 t/a Waterval Minerale· Mpact Recycling· My Waste· Oasis Water· Perfect Water· Pikitup· Postwink Recycling Products· Propet· Purea Fresh Water Co· Recycling Solutions t/a Don't Waste Services· Remade Recycling· SC Johnson and Son Inc· Sen li Da Chemical Fibre· Silver Stars Trading· South African National Bottled Water Association· T-CUP· The Eco-Smart Box t/a The Recycling Box· The SOUL Foundation· The Waste Trade Company· Trashback· Tswelangpele Co-op· Tuffy Brands· Unilever SA· Waste Plan· Wildlife & Environmental Society of South Africa

(As at 1 December 2015)

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PETCO PARTNERS AND MEMBERS

PETCO acknowledges our partners who sharean ambitious vision to shape waste managementpractices in South Africa:

· Department of Environmental Affairs (DEA)· Packaging SA· Paper Recycling Association (PRASA)· Packaging Council of SA (PACSA)· National Recycling Forum (NRF)· Institute of Waste Management SA (IWMSA)· PlasticslSA· SA National Bottled Water Association

(SANBWA)· The International Labour Organisation

(ILO) - United Nations· The PEACE Foundation

PARTNERS SHAREHOLDER MEMBERS

At end-December 2015, there were23 Shareholder Members of PETCO:

· ABI (SAB Miller)· Bizee Corporation t/a ATA Agencies· Bowler PET (Pty) Ltd· Boxmore Plastics International Pty) Ltd· Coca-Cola Canners· Coca-Cola SA· Coca-Cola SABCO (Coca-Cola Fortune)· Coca-Cola Shanduka Beverages· Hosaf a Division of KAP Manufacturing (Pty) Ltd· Mpact Plastics· Nampak Liquid Packaging· Nioro· New Age Plastics cc· Pick n Pay· Nampak Petpak· Peninsula Beverage Co (Pty) Ltd· PETech/Plastech (Astrapak)· Polyoak Packaging· Purpleline Plastics· Split Line Manufacturers· Tsitsikamma Crystal Water· Twizza (Azores Manufacturers)· Woolworths

Shareholder Membership is reserved forcompanies who pay levies and grants, and forwhom shareholding and voting is reserved.

PETCO PARTNERSHIPSGOVERNMENT LOCAL

INDUSTRYINTERNATIONALINDUSTRY ANDAGENCIES

SHAREHOLDERSAND ASSOCIATEDMEMBERS

To build policy andpractice frameworksthat support and growthe green economy.

To harnessknowledge, buildcommon interestsand increase wasteinnovation.

To glean knowledgeon best practice onhow to generate andsustain a creativecontribution toinnovation anddevelopment locally.

To support PETrecycling, sustaincollection interestand reduce thevolume of post-consumer PETin the waste plan.

Our BoardMembers(from top left to bottom right)

ANDRE NELCASPER DURANDT - CHAIRMANCLYNT LEVINDANIEL SCHOEMANDAVID DREWGREG MORSE - VICE CHAIRMANTOM MCLAUGHLINTSHIDI RAMOGASEVUKANI MAGUBANE

Greg Morse - Bottler Perspective:“Going forward, we are veryexcited to have the possibility ofusing rPET in B2B applications. Weappreciate the investment that hasgone into the infrastructure inmaking this possible.”

Andre Nel - Retail Perspective:“We would like to see increasedcollaboration within the retailsector on non-competitive issues.We would also enjoy an increasein consumer activism and moretransparency in supply-chains.”

Tom McLaughlin - Retail Perspective:“With the need to create moreand better jobs in the field ofrecycling, it is in the best interestsof the packaging supply chain tocollaborate and create a circulareconomy. We need packagingwhich is fit for purpose and whichis also designed for disposal.”

What do our Stakeholdersthink about the future?

David Drew - Converter Perspective:“I believe we will start to see moreand more use of rPET in beveragesin particular and potentially inbrands that will claim their use ofrPET publicly. This is also animportant change in the market.Some of those using rPET at thispoint have done so purely from acost point of view. I think theimpact of the new MPact plant onthe upstream supply of PC PETwill take a while to settle and froma converter point of view it shouldalso have an impact on the marketfor clean factory scrap.”

Unless commitment is made, there areonly promises and hopes... but no plans.Peter Drucker