WLPGA/UNDP LP Gas Rural Energy Challenge in South Africa
1. Situation
The LP Gas Rural Energy Challenge is a public-private partnership initiative between the UN Development Programme (UNDP) and the World LP Gas Association (WLPGA), launched at the World Summit on Sustainable Development held in Johannesburg in 2002.
It is designed to create viable and sustainable markets for LP Gas delivery and consumption as a means to deliver a wide range of productive services, contributing to sustainable energy solutions to improve peoples lives in selected developing countries.
Access to modern energy provides the productive capacity for stimulating economic development and reducing conditions of poverty while improving health, air quality, productivity, comfort, education, and hardships imposed on women and children.
By delivering cleaner, modern fuel in the form of LP Gas, and creating sustainable markets for its consumption and use, the LP Gas Rural Energy Challenge provides rural communities with the means to generate a wide range of consumptive and productive services in order to deliver vastly improved living conditions.
2. Targets
The Main Objective of the Case
Specifically, the partnership aims to address adverse impacts on health, the environment and economic productivity related to dependence on traditional biomass fuels in rural areas. This is a situation that impacts more than two billion people worldwide and disproportionately affects women and children.
3. Activities
Actions Taken
In-country workshops have been held in five countries (Honduras, Morocco, South Africa, Ghana and Vietnam) to establish a working dialogue between the different stakeholder groups at the national and local levels. China and a seventh country are scheduled for 2005.
In South Africa, the WLPGA/UNDP workshop brought the government and the LP Gas industry together to review their respective positions, identify barriers to the provision of affordable, accessible and acceptable LP Gas for previously disadvantaged communities and to seek a collaborative way forward.
Following the workshop the major LP Gas suppliers in South Africa under the auspices of the LPG Safety Association of South Africa with the extensive involvement of independent consultants, then developed a commercial approach to meeting this challenge.
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| Launch of Safety Gas |
This approach is the LP Gas Low Income Household Programme that aims to supply on a commercially sustainable basis 3 million LIH over 3 years. As a prelude to this the LP Gas supply industry committed to switch 250,000 poor households to LP Gas at their own risk and with their own resources to show commitment and to demonstrate their capability.
A detailed market enabling framework was developed in the later part of 2004 and a written commitment has been presented to the SA Minister of Energy. Key features of this framework are a competitive and commercial approach, the need for commercial funding to provide grant subsidy for the initial cost of switching with the acquisition of cylinders and cooking appliances by poor households and a range of other generic enabling activities such as user education, the creation of local supply agents, providing work for previously disadvantaged, setting a maximum resale price and the supply of small easily portable cylinders and cooking tops.
This also involves the establishment of a number of pilot projects by each of the leading LP Gas suppliers in poor urban and rural communities.
Low-cost LP Gas packages have been developed with smaller sized cylinders of 5-6kg and a basic burner attached to it. Some suppliers use ambassadors to sell the products in the townships and make demonstrations on how to use LP Gas.
Partnerships with Local Black Economic Empowerment groups are further facilitating the distribution. Other suppliers have developed small vehicles suitable for local conditions to transport and distribute cylinders. Within the generic market enabling framework each LP Gas supplier operates independently with their own competitive offerings and advantages.
The pilot projects involving the LPGSASA as well as participating industry members (Afrox, BP, Easigas and Totalgaz) were endorsed by Minister of Energy Phumzile Mlambo-Ngcuka on November 8, 2004.
.jpg "Three wheelers") |
| The three-wheeler that is given to the dealerships to ensure the delivery of Shesha, the advanced 5 kg cylinder of Totalgaz. |
Problems and Difficulties
The industry is currently in discussion with the Competition Commission to ensure compliance with local competition legislation, which has slowed the implementation process significantly.
The issue requiring finalisation is whether the low income household programme in any way contravenes such legislation in which case it may proceed without any further delay, or, if it does, then a special exemption will be sought.
The whole matter is still in process although it is hoped it will be resolved in the near future.
A second aspect requiring a breakthrough is the raising of a switching fund to cover the cost of household conversion (the cost of the household appliance) around $18/household. For the full project this would equate to $55 million.
4. Results
Market Expansion
Despite the delays mentioned earlier each of the four participating LP Gas suppliers has already developed their own particular supply strategies and market expansion plans. Three of the suppliers, Shell Easigas, Afrox Handigas and Totalgaz also have pilot supply projects running in both urban and rural areas across South Africa. To date it is estimated that some 30 000 low income households have already been switched to LP Gas from the other inferior thermal fuels.
In addition to these concrete results among poor households that will hopefully shortly ramp up to 250,000 and then 3 million homes, a huge amount of planning, knowledge sharing, risk assessment and necessary commercial preparation has been completed in a matter of months. The suppliers commitment is further demonstrated by the level of financial expenditure which already exceeds $3 million. Once the last few constraints are cleared, the local LP Gas supply industry has empowered itself to move swiftly to significantly expand the SA market.
Lessons Learned
The partnership with UNDP was helpful to attract high-level government officials and key gatekeepers from the local LP Gas supply industry to meet and discuss the way forward. It was also valuable in the case of South Africa since it led to the public and private sectors also defining their own particular ethos and needs. These then provided some basis on which to work after the workshop in building common ground, solving each of the problems and creating a common vision and ownership.
It is important to identify at the outset which of the stakeholders actually have the resources and necessary skills to deliver i.e. the power to act. Back the wrong stakeholder and it results in tears. It also important for the role of the public sector to be understood as one of enabling rather than doing.
WLPGA and UNDP can only facilitate the establishment a working dialogue between industry and government and must always be guided by local circumstances and dynamics. Post workshop, it is essential to swiftly build on specific outputs from the workshop and if a commercial model is being used that the local LP Gas industry take the lead. This is more complex in practice than in theory since in most countries the local supply industry consists of suppliers who compete with one another and are without an appropriate body or mechanism to collaborate and undertake strategic market expansion activities together.
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| The Minister of Minerals and Energy Phumzile Mlambo-Ngcuka discusses the safe use of LP Gas with a trainer at the Afrox ‘Safety Gas’ launch. |
In South Africa this challenge was met by the industry, through the LPGSASA, appointing an independent energy and strategy consulting practice to the project that were identified in the workshop. It is also important that the local UNDP office remains involved to keep the interest of government.
Further information
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