Parliamentary Portfolio Committee Minerals and Energy The LP Gas Industry’s Low Income Household Programme 8 June 2005

Presentation content 1.Introductory remarks 2.The Case – LP Gas as a household fuel 3.The Initiative – Three million households 4.The Future – Challenges and action areas 5.Importance of PPC – Minerals & Energy 6.Questions and answers

Presentation content 1.Introductory remarks 2.The Case – LP Gas as a household fuel 3.The Initiative – Three million households 4.The Future – Challenges and action areas 5.Importance of PPC – Minerals & Energy 6.Questions and answers

1. Introductory remarks  The purpose of the presentation –Update the PPC on the extensive developments –Present legislative impacting aspects –Ensure the LP Gas Industry has support  Reference to the Minister’s budget speech –The history of LPG Industry – DME relations –Delivery to the poor a common objective –Wide range of obstacles to delivery removed  A private – public partnership that can work!

Presentation content 1.Introductory remarks 2.The Case – LP Gas as a household fuel 3.The Initiative – Three million households 4.The Future – Challenges and action areas 5.Importance of PPC – Minerals & Energy 6.Questions and answers

2. The Case – Thermal fuel of choice  Compared to other thermal fuels LP Gas is: –Safe –Clean & Healthy –Value for money –Multi purpose –Portable LP Gas gives urban and rural customers access to a modern energy service!

Safe  Only stored in cylinders –Stable & cannot spill  Cannot burn back into the cylinder  Strict safety standards for cylinders & appliances –Cylinders are strong [30 Bar] –Safe Appliance Scheme  Any leak smells  One cannot drink it  Less accidents –Research shows it is the safest fuel  Easy to use –By anyone –Children can be taught how to use it properly

Safety Brochures

Safety Comparison Markinor research results - June 2001  > households use paraffin safety caps  > children drank paraffin during 2000  > children contracted pneumonia after drinking paraffin in the last year  At least 4000 children died from paraffin induced chemical pneumonia in the last year  > paraffin related fires and paraffin- related burns during 2000  of these burns (63 percent) were as a result of paraffin stoves exploding  of these burns (63 percent) were as a result of paraffin stoves exploding The situation has worsened since then !!

Clean and healthy  No smell during use –Room, Food, Clothes, Hair  No smoke – soot –On surfaces –Under pots  No mess – residual ash  Easy to store  ‘Taste’ your food  No fumes to breath in: –No burning eyes –No coughing –No sore throat –No chest/lung diseases –Don’t always feel ‘tired’

Many uses in the home  Cooking –Single plates –Double plates –Stoves with an oven  Water heating –Beverages –Washing water –Purifying (for drinking)  Lighting  Room heating  Refrigeration

Product samples – later purchase

Value for money – affordability Independent tests – Relative cooking efficiencies Cost to Boil 2 litre water: * Paraffin = 18 cents * LPG = 19 cents Based on LPG Vat inclusive price R7.00/kg or R3.85/litre versus R3.70 for Paraffin

Portable  Indoor –Can use it in any room  Cook, heat, light, or even a combination  Outdoor –Cooking/Braaing –Lighting  Next Door –Visit friends –Take to social functions –Weddings, funerals, sport

Presentation content 1.Introductory remarks 2.The Case – LP Gas as a household fuel 3.The Initiative – Three million households 4.The Future – Challenges and action areas 5.Importance of PPC – Minerals & Energy 6.Questions and answers

3. The Initiative – Three million homes  South African LP Gas Industry  Overall programme vision  What the customers are offered  Need for a capital switching subsidy  Free basic energy – supply of LP Gas  RDP households  National Education and Promotional campaign

South African LP Gas Industry  This presentation is on behalf of the LPGSASA and the participating Industry members - currently: –Afrox –BP Gas –Easigas –Tolalgaz

Overall programme vision  A private sector, commercial and competitive initiative – fast, flexible and commited  Increase the use of LP Gas in South Africa by 3 million low income households  Rural & urban customers to have easy access  Affordable and fairly priced relative to other fuels  Poor households helped to switch - a grant of R 120 per household for the appliance

Overall programme vision cont.  Resources provided by LP Gas industry and commercial funding bodies – limited Government funds/subsidy  BEE, SMME, livelihood creation and gender equity will play a major role in delivery  High levels of safety ensured in the LIH market  Phase One – households under way  Phase Two – subject to a switching grant and a review of the pilot project

What is the customer offer?  Low income households offered: –A 3 to 6 kg LP Gas cylinder –Funder subsidised single robust and stable cooker top – compatable customer asset – versus cheap paraffin stove –Deposit of R50 (down from R150) - Industry subsidised –First fill of around R35 – Customer pays = R85 –A paraffin competitive LP Gas price, R7 per kg –Availability of refills through community stores –Education on the safe and efficient use of LP Gas  Available to Low Income households only, LSM 1- 4 (Average income < R 1750,00/month)

Cylinders and cookers

Optional extra

Need for a capital subsidy  Accessibility impacted by the costs of switching from other fuels to LP Gas – R120  A once off capital grant needed by the Low Income Householder to purchase the cooker top  Progress: –Fund Raising by LPGSASA focused on Eskom –Technical proposal submitted in September 2004 for funding under – Demand Side Management programme –Eskom benefits – reduced peak cooking load & thereby reducing investment in new power stations –Awaiting final decision – due to DME/NER/Eskom policy alignment delays

Free Basic LP Gas - Rationale  Minister requested LPG industry to pioneer the concept  For application in non electrified areas  Policy paper written and circulated  Existing Free Basic Electricity policy allows for Free Basic Energy provision  Implementers are always local government and municipalities – progress with –Tshwane –JHB –Oliver Tambo –Ongoing discussions with other municipalities

Free Basic LP Gas - How it can work?  Identify non electrified areas  Create database of households in area  LPG suppliers to provide a cylinder and cooking top to each household  Issue monthly coupons equivalent to FB Electricity amount e.g cents  Customers redeem coupons for a subsidised refilled cylinder  Contracted LPG supplier in turn redeems coupon from Municipality

RDP Houses  All new households must be encouraged to switch  Housing PPC has requested that paraffin be removed from RDP houses  Identification of pilot areas  Work with local authorities to get designs modified  Can LP Gas equipment be paid for out of the RDP housing subsidy?

Education and Promotional Campaign  “Champions” needed to lead the switch to LP Gas  Alignment between LP Gas & paraffin campaigns  Started with the parliamentary exhibition  Billboards  Packs provided to MP’s for further promotion/education in their constituencies

Presentation content 1.Introductory remarks 2.The Case – LP Gas as a household fuel 3.The Initiative – Three million households 4.The Future – Challenges and action areas 5.Importance of PPC – Minerals & Energy 6.Questions and answers

4. The Future – Focus Areas  Eskom grant funding for the households to switch –Policy alignment needed (PPC oversight) –Final decision needed to facilitate the roll out  National Educational and Promotional campaign –Money to be raised –L I H to accept the need to switch –Campaign to be sustained  Competition commission –Change in the agreements to comply  Ensuring sufficient LP Gas is available

4. The Future – Focus areas cont.  Programme results reporting system –System accepted by all stakeholders –Publication of success  Stakeholder support –Policy and legislative support –Public sector creates enabling environment –Common vision the key  LP Gas Industry led delivery –Private industry leads with delivery! –Establish BEE & SMME enterprises in supply chain

Presentation content 1.Introductory remarks 2.The Case – LP Gas as a household fuel 3.The Initiative – Three million households 4.The Future – Challenges and action areas 5.Importance of PPC – Minerals & Energy 6.Questions and answers

5. Importance of PPC – Energy  Provided with cylinders & asked to become “champions”  Assist with alignment between all stakeholders – Eskom, FB LPG, housing, health  Oversight responsibility for this upliftment project  Regular progress reports – communication of results

Presentation content 1.Introductory remarks 2.The Case – LP Gas as a household fuel 3.The Initiative – Three million households 4.The Future – Challenges and action areas 5.Importance of PPC – Minerals & Energy 6.Questions and answers

THANK YOU !