Parliamentary Portfolio CommitteeParliamentary Portfolio Committee

Minerals and Energy Minerals and Energy

The The LP Gas Industry’s Low Income LP Gas Industry’s Low Income Household ProgrammeHousehold Programme

8 June 2005

Presentation contentPresentation content

1.1. Introductory remarksIntroductory remarks

2.2. The Case – LP Gas as a household fuelThe Case – LP Gas as a household fuel

3.3. The Initiative – Three million households The Initiative – Three million households

4.4. The Future – Challenges and action areasThe Future – Challenges and action areas

5.5. Importance of PPC – Minerals & EnergyImportance of PPC – Minerals & Energy

6.6. Questions and answersQuestions and answers

Presentation contentPresentation content

1.1. Introductory remarksIntroductory remarks

2.2. The Case – LP Gas as a household fuelThe Case – LP Gas as a household fuel

3.3. The Initiative – Three million households The Initiative – Three million households

4.4. The Future – Challenges and action areasThe Future – Challenges and action areas

5.5. Importance of PPC – Minerals & EnergyImportance of PPC – Minerals & Energy

6.6. Questions and answersQuestions and answers

1. Introductory remarks1. Introductory remarks

The purpose of the presentationThe purpose of the presentation– Update the PPC on the extensive developmentsUpdate the PPC on the extensive developments– Present legislative impacting aspectsPresent legislative impacting aspects– Ensure the LP Gas Industry has supportEnsure the LP Gas Industry has support

Reference to the Minister’s budget speechReference to the Minister’s budget speech– The history of LPG Industry – DME relationsThe history of LPG Industry – DME relations– Delivery to the poor a common objectiveDelivery to the poor a common objective– Wide range of obstacles to delivery removedWide range of obstacles to delivery removed

A private – public partnership that can work!A private – public partnership that can work!

Presentation contentPresentation content

1.1. Introductory remarksIntroductory remarks

2.2. The Case – LP Gas as a household fuelThe Case – LP Gas as a household fuel

3.3. The Initiative – Three million households The Initiative – Three million households

4.4. The Future – Challenges and action areasThe Future – Challenges and action areas

5.5. Importance of PPC – Minerals & EnergyImportance of PPC – Minerals & Energy

6.6. Questions and answersQuestions and answers

2. The Case – Thermal fuel of choice2. The Case – Thermal fuel of choice

Compared to other thermal fuels LP Gas is:Compared to other thermal fuels LP Gas is:

– SafeSafe

– Clean & HealthyClean & Healthy

– Value for moneyValue for money

– Multi purposeMulti purpose

– PortablePortable

LP Gas gives urban and rural customers access LP Gas gives urban and rural customers access

to a modern energy service!to a modern energy service!

SafeSafe

Only stored in Only stored in cylinderscylinders– Stable & cannot spillStable & cannot spill

Cannot burn back into Cannot burn back into the cylinderthe cylinder

Strict safety standards Strict safety standards for cylinders & for cylinders & appliances appliances – Cylinders are strong [30 Cylinders are strong [30

Bar]Bar]– Safe Appliance SchemeSafe Appliance Scheme

Any leak smellsAny leak smells One cannot drink itOne cannot drink it Less accidentsLess accidents

– Research shows it is Research shows it is the safest fuelthe safest fuel

Easy to useEasy to use– By anyone By anyone – Children can be Children can be

taught how to use it taught how to use it properlyproperly

Safety BrochuresSafety Brochures

Safety ComparisonSafety ComparisonMarkinor research results - June 2001Markinor research results - June 2001 > 511 000 households use paraffin safety caps> 511 000 households use paraffin safety caps > 143 000 children drank paraffin during 2000> 143 000 children drank paraffin during 2000 > 55 000 children contracted pneumonia after drinking > 55 000 children contracted pneumonia after drinking

paraffin in the last yearparaffin in the last year At least 4000 children died from paraffin induced At least 4000 children died from paraffin induced

chemical pneumonia in the last yearchemical pneumonia in the last year > 46 000 paraffin related fires and 50 000 paraffin-> 46 000 paraffin related fires and 50 000 paraffin-

related burns during 2000related burns during 2000 31 000 of these burns (63 percent) were as a result of 31 000 of these burns (63 percent) were as a result of

paraffin stoves exploding   paraffin stoves exploding   

The situation has worsened since then !!The situation has worsened since then !!

Clean and healthyClean and healthy

No smell during use No smell during use – Room, Food, Clothes, Hair Room, Food, Clothes, Hair

No smoke – sootNo smoke – soot– On surfacesOn surfaces

– Under potsUnder pots

No mess – residual ashNo mess – residual ash

Easy to storeEasy to store

‘‘Taste’ your foodTaste’ your food

No fumes to breath No fumes to breath in:in:– No burning eyesNo burning eyes

– No coughingNo coughing

– No sore throatNo sore throat

– No chest/lung No chest/lung diseasesdiseases

– Don’t always feel Don’t always feel ‘tired’‘tired’

Many uses in the homeMany uses in the home CookingCooking

– Single platesSingle plates– Double platesDouble plates– Stoves with an ovenStoves with an oven

Water heatingWater heating– BeveragesBeverages– Washing waterWashing water– Purifying (for drinking)Purifying (for drinking)

LightingLighting

Room heatingRoom heating

RefrigerationRefrigeration

Product samples – later purchaseProduct samples – later purchase

Value for money – affordabilityValue for money – affordabilityIndependent tests – Relative cooking efficienciesIndependent tests – Relative cooking efficiencies

30

35

40

45

50

55

60

65

70

75

80

0.83 0.87 1.42 1.43 1.67 1.67 1.15 1.86 1.28 1.28

Stove power, kW

Eff

icie

ncy

, %

LPG Wick Primus

Cost to Boil 2 litre water:Cost to Boil 2 litre water:* Paraffin = 18 cents* Paraffin = 18 cents* LPG = 19 cents* LPG = 19 cents

Based on LPG Vat inclusive price R7.00/kg or R3.85/litre versus R3.70 for Paraffin Based on LPG Vat inclusive price R7.00/kg or R3.85/litre versus R3.70 for Paraffin

PortablePortable IndoorIndoor

– Can use it in any roomCan use it in any room

Cook, heat, light, or even a combinationCook, heat, light, or even a combination

OutdoorOutdoor– Cooking/BraaingCooking/Braaing

– LightingLighting

Next DoorNext Door– Visit friendsVisit friends

– Take to social functionsTake to social functions

– Weddings, funerals, sportWeddings, funerals, sport

Presentation contentPresentation content

1.1. Introductory remarksIntroductory remarks

2.2. The Case – LP Gas as a household fuelThe Case – LP Gas as a household fuel

3.3. The Initiative – Three million households The Initiative – Three million households

4.4. The Future – Challenges and action areasThe Future – Challenges and action areas

5.5. Importance of PPC – Minerals & EnergyImportance of PPC – Minerals & Energy

6.6. Questions and answersQuestions and answers

3. The Initiative – Three million homes 3. The Initiative – Three million homes

South African LP Gas IndustrySouth African LP Gas Industry

Overall programme vision Overall programme vision

What the customers are offeredWhat the customers are offered

Need for a capital switching subsidyNeed for a capital switching subsidy

Free basic energy – supply of LP GasFree basic energy – supply of LP Gas

RDP householdsRDP households

National Education and Promotional campaignNational Education and Promotional campaign

South African LP Gas IndustrySouth African LP Gas Industry

This presentation is on behalf of the LPGSASA This presentation is on behalf of the LPGSASA and the participating Industry members -and the participating Industry members -currently:currently:

– Afrox Afrox

– BP GasBP Gas

– EasigasEasigas

– TolalgazTolalgaz

Overall programme visionOverall programme vision

A private sector, commercial and competitive A private sector, commercial and competitive initiative – fast, flexible and commited initiative – fast, flexible and commited

Increase the use of LP Gas in South Africa by Increase the use of LP Gas in South Africa by 3 million low income households 3 million low income households

Rural & urban customers to have easy accessRural & urban customers to have easy access Affordable and fairly priced relative to other Affordable and fairly priced relative to other

fuelsfuels Poor households helped to switch - a grant of Poor households helped to switch - a grant of

R 120 per household for the applianceR 120 per household for the appliance

Overall programme vision cont.Overall programme vision cont.

Resources provided by LP Gas industry and Resources provided by LP Gas industry and commercial funding bodies – limited commercial funding bodies – limited Government funds/subsidyGovernment funds/subsidy

BEE, SMME, livelihood creation and gender BEE, SMME, livelihood creation and gender equity will play a major role in deliveryequity will play a major role in delivery

High levels of safety ensured in the LIH marketHigh levels of safety ensured in the LIH market

Phase One – 250 000 households under wayPhase One – 250 000 households under way

Phase Two – 2 750 000 subject to a switching Phase Two – 2 750 000 subject to a switching grant and a review of the pilot projectgrant and a review of the pilot project

What is the customer offer?What is the customer offer? Low income households offered:Low income households offered:

– A 3 to 6 kg LP Gas cylinderA 3 to 6 kg LP Gas cylinder

– Funder subsidised single robust and stable cooker top Funder subsidised single robust and stable cooker top – compatable customer asset – versus cheap paraffin – compatable customer asset – versus cheap paraffin stovestove

– Deposit of R50 (down from R150) - Industry subsidisedDeposit of R50 (down from R150) - Industry subsidised

– First fill of around R35 – Customer pays = R85First fill of around R35 – Customer pays = R85

– A paraffin competitive LP Gas price, R7 per kgA paraffin competitive LP Gas price, R7 per kg

– Availability of refills through community storesAvailability of refills through community stores

– Education on the safe and efficient use of LP GasEducation on the safe and efficient use of LP Gas

Available to Low Income households only, LSM Available to Low Income households only, LSM 1- 4 (Average income < R 1750,00/month)1- 4 (Average income < R 1750,00/month)

Cylinders and cookersCylinders and cookers

Optional extraOptional extra

Need for a capital subsidyNeed for a capital subsidy

Accessibility impacted by the costs of switching Accessibility impacted by the costs of switching from other fuels to LP Gas – R120from other fuels to LP Gas – R120

A once off capital grant needed by the Low Income A once off capital grant needed by the Low Income Householder to purchase the cooker topHouseholder to purchase the cooker top

Progress:Progress:– Fund Raising by LPGSASA focused on EskomFund Raising by LPGSASA focused on Eskom– Technical proposal submitted in September 2004 for Technical proposal submitted in September 2004 for

funding under – Demand Side Management programmefunding under – Demand Side Management programme– Eskom benefits – reduced peak cooking load & thereby Eskom benefits – reduced peak cooking load & thereby

reducing investment in new power stationsreducing investment in new power stations– Awaiting final decision – due to DME/NER/Eskom policy Awaiting final decision – due to DME/NER/Eskom policy

alignment delaysalignment delays

Free Basic LP Gas - RationaleFree Basic LP Gas - Rationale Minister requested LPG industry to pioneer the Minister requested LPG industry to pioneer the

conceptconcept For application in non electrified areasFor application in non electrified areas Policy paper written and circulated Policy paper written and circulated Existing Free Basic Electricity policy allows for Existing Free Basic Electricity policy allows for

Free Basic Energy provisionFree Basic Energy provision Implementers are always local government and Implementers are always local government and

municipalities – progress withmunicipalities – progress with– TshwaneTshwane– JHBJHB– Oliver TamboOliver Tambo– Ongoing discussions with other municipalities Ongoing discussions with other municipalities

Free Basic LP Gas - How it can work?Free Basic LP Gas - How it can work?

Identify non electrified areasIdentify non electrified areas

Create database of households in areaCreate database of households in area

LPG suppliers to provide a cylinder and LPG suppliers to provide a cylinder and cooking top to each householdcooking top to each household

Issue monthly coupons equivalent to FB Issue monthly coupons equivalent to FB Electricity amount e.g. 50 kWh @ 45 centsElectricity amount e.g. 50 kWh @ 45 cents

Customers redeem coupons for a subsidised Customers redeem coupons for a subsidised refilled cylinderrefilled cylinder

Contracted LPG supplier in turn redeems Contracted LPG supplier in turn redeems coupon from Municipalitycoupon from Municipality

RDP HousesRDP Houses

All new households must be encouraged to All new households must be encouraged to switchswitch

Housing PPC has requested that paraffin be Housing PPC has requested that paraffin be removed from RDP housesremoved from RDP houses

Identification of pilot areasIdentification of pilot areas Work with local authorities to get designs Work with local authorities to get designs

modifiedmodified Can LP Gas equipment be paid for out of the Can LP Gas equipment be paid for out of the

RDP housing subsidy?RDP housing subsidy?

Education and Promotional CampaignEducation and Promotional Campaign ““Champions” needed to lead the switch to LP GasChampions” needed to lead the switch to LP Gas Alignment between LP Gas & paraffin campaignsAlignment between LP Gas & paraffin campaigns Started with the parliamentary exhibitionStarted with the parliamentary exhibition BillboardsBillboards Packs provided to MP’s for further Packs provided to MP’s for further

promotion/education in their constituencies promotion/education in their constituencies

Presentation contentPresentation content

1.1. Introductory remarksIntroductory remarks

2.2. The Case – LP Gas as a household fuelThe Case – LP Gas as a household fuel

3.3. The Initiative – Three million households The Initiative – Three million households

4.4. The Future – Challenges and action areasThe Future – Challenges and action areas

5.5. Importance of PPC – Minerals & EnergyImportance of PPC – Minerals & Energy

6.6. Questions and answersQuestions and answers

4. The Future – Focus Areas4. The Future – Focus Areas Eskom grant funding for the households to Eskom grant funding for the households to

switchswitch– Policy alignment needed (PPC oversight)Policy alignment needed (PPC oversight)– Final decision needed to facilitate the roll outFinal decision needed to facilitate the roll out

National Educational and Promotional National Educational and Promotional campaigncampaign– Money to be raisedMoney to be raised– L I H to accept the need to switchL I H to accept the need to switch– Campaign to be sustainedCampaign to be sustained

Competition commission Competition commission – Change in the agreements to complyChange in the agreements to comply

Ensuring sufficient LP Gas is availableEnsuring sufficient LP Gas is available

4. The Future – Focus areas cont.4. The Future – Focus areas cont.

Programme results reporting systemProgramme results reporting system– System accepted by all stakeholdersSystem accepted by all stakeholders– Publication of successPublication of success

Stakeholder supportStakeholder support– Policy and legislative supportPolicy and legislative support– Public sector creates enabling environmentPublic sector creates enabling environment– Common vision the keyCommon vision the key

LP Gas Industry led delivery LP Gas Industry led delivery – Private industry leads with delivery!Private industry leads with delivery!– Establish BEE & SMME enterprises in supply chainEstablish BEE & SMME enterprises in supply chain

Presentation contentPresentation content

1.1. Introductory remarksIntroductory remarks

2.2. The Case – LP Gas as a household fuelThe Case – LP Gas as a household fuel

3.3. The Initiative – Three million households The Initiative – Three million households

4.4. The Future – Challenges and action areasThe Future – Challenges and action areas

5.5. Importance of PPC – Minerals & EnergyImportance of PPC – Minerals & Energy

6.6. Questions and answersQuestions and answers

5. Importance of PPC – Energy5. Importance of PPC – Energy

Provided with cylinders & asked to become Provided with cylinders & asked to become

“champions”“champions”

Assist with alignment between all stakeholders Assist with alignment between all stakeholders

– Eskom, FB LPG, housing, health– Eskom, FB LPG, housing, health

Oversight responsibility for this upliftment Oversight responsibility for this upliftment

project project

Regular progress reports – communication of Regular progress reports – communication of

resultsresults

Presentation contentPresentation content

1.1. Introductory remarksIntroductory remarks

2.2. The Case – LP Gas as a household fuelThe Case – LP Gas as a household fuel

3.3. The Initiative – Three million households The Initiative – Three million households

4.4. The Future – Challenges and action areasThe Future – Challenges and action areas

5.5. Importance of PPC – Minerals & EnergyImportance of PPC – Minerals & Energy

6.6. Questions and answersQuestions and answers

6. Questions and answers6. Questions and answers

THANK YOU !THANK YOU !