8 June 2005

1. Parliamentary Portfolio Committee Minerals and EnergyThe LP Gas Industry’s Low Income Household Programme 8 June 2005

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

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

4. 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!

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

6. 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!

7. 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 Safe

8. Safety Brochures

9. Safety Comparison Markinor research results - June 2001 • > 511 000 households use paraffin safety caps • > 143 000 children drank paraffin during 2000 • > 55 000 children contracted pneumonia after drinking paraffin in the last year • At least 4000 children died from paraffin induced chemical pneumonia in the last year • > 46 000 paraffin related fires and 50 000 paraffin-related burns during 2000 • 31 000 of these burns (63 percent) were as a result of paraffin stoves exploding    The situation has worsened since then !!

10. 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’ Clean and healthy

11. 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

12. Product samples – later purchase

13. 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

14. 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

15. Presentation content • Introductory remarks • The Case – LP Gas as a household fuel • The Initiative – Three million households • The Future – Challenges and action areas • Importance of PPC – Minerals & Energy • Questions and answers

16. 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

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

18. 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

19. 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 – 250 000 households under way • Phase Two – 2 750 000 subject to a switching grant and a review of the pilot project

20. 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)

21. Cylinders and cookers

22. Optional extra

23. 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

24. 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

25. 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. 50 kWh @ 45 cents • Customers redeem coupons for a subsidised refilled cylinder • Contracted LPG supplier in turn redeems coupon from Municipality

26. 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?

27. 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

28. Presentation content • Introductory remarks • The Case – LP Gas as a household fuel • The Initiative – Three million households • The Future – Challenges and action areas • Importance of PPC – Minerals & Energy • Questions and answers

29. 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

30. 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

31. Presentation content • Introductory remarks • The Case – LP Gas as a household fuel • The Initiative – Three million households • The Future – Challenges and action areas • Importance of PPC – Minerals & Energy • Questions and answers

32. 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

33. Presentation content • Introductory remarks • The Case – LP Gas as a household fuel • The Initiative – Three million households • The Future – Challenges and action areas • Importance of PPC – Minerals & Energy • Questions and answers

34. 6. Questions and answers

35. THANK YOU !