The approval of a liquefied petroleum gas (LPG) rollout strategy by the cabinet has the potential to be an important turning point in addressing SA’s energy crisis. However, while the strategy provides a useful overview of the industry, it is light on the details of how to address constraints that are impeding the industry’s growth.
If the strategy is going to be of practical value to South Africans, the government needs to work with the LPG industry’s stakeholders to craft implementable short- and long-term interventions to make LPG more accessible this winter.
Load-shedding is now so common we hardly remark on it any more, even as winter proper sets in. With recent reports of sabotage at Eskom’s Matla power station, there is little hope that load-shedding will become less prevalent as temperatures fall and electricity demand rises. The country simply does not have time to implement the rollout strategy at a leisurely pace. South Africans need access to a reliable supply of LPG in greater volumes right now.
Evidence of this growing demand is clear from the numbers being generated at the Sunrise Energy terminal in Saldanha Bay. A review of the past four years of data shows that LPG volumes at the terminal have increased by an annual average of 36%. In the full operational years between 2018 and 2021 the terminal’s throughput grew from 52,016 tonnes to 129,544 tonnes of LPG.
Even considering the exit of some players from the region’s LPG market, it is clear that the LPG imported through the Sunrise Energy terminal is not simply replacing lost volumes. By internal estimates the market grew by 10% in 2021 after a few stagnant years.
What this data tells us is that there has been real growth in consumer reliance on LPG. This is a positive development for all electricity users; the more peak functions we can take off the grid the more we can start to reduce the stages of load-shedding we all endure. What the LPG rollout strategy needs to do is to encourage and accelerate the shift to peak time LPG usage.
Unfortunately, there are important practical and policy matters in the strategy which, though addressed, are not accompanied by the kind of measurable and timebound action plan we need to provide relief to South Africans in the short- and long-term.
In the short term, the strategy fails to provide an action plan for taking advantage of the government’s greatest policy lever. The government provides free energy to indigent consumers through two policies: the free basic electricity policy and the free basic alternative energy policy. The latter is primarily used to provide alternative energy sources in areas that are not yet electrified, usually due to their remoteness.
Through these policies the government has the power to provide all recipients of free energy with a combination of electricity and LPG, with the latter to be used during peak times for cooking and heating to relieve pressure on the Eskom grid.
There are also a number of policies the government needs to consider for non-indigent energy users. For example, it could introduce a policy of giving a free cylinder to low-income households, which they can then refill at their own cost. We have seen this rolled out by the Ghanaian government to great success. This will have the added benefit of ensuring that consumers receive safe, reliable cylinders. But it must be accompanied by enforcement action against illegal bottle fillers, who can undermine the safety of an otherwise safe product.
SA should also consider removing VAT and other taxes to make LPG more affordable for consumers, especially in this difficult economic climate. Similarly, the government can remove duties from imported cylinders, making them cheaper for non-indigent but poor users who must buy their own.
The last of the possible short-term measures relates to consumer education. While the rollout strategy acknowledges the difficulties associated with public perceptions of LPG and identifies the need to implement a safety and awareness campaign, it fails to announce any action to this end. With the government and industry resources, we can immediately roll out such a campaign to increase public confidence in the safety of LPG.
In the longer term we should be looking at turning the industry into a job creator. We can do this by manufacturing cylinders locally so that import duties are not a factor. We can also adopt policies that encourage investment in the expansion of import infrastructure. The resulting growth in volumes will require further downstream investment in storage facilities, boosting capital projects to the country’s economic benefit.
These are just a few of the issues the rollout strategy must address to expand access to LPG in SA, and some of the short-term measures the government can implement immediately to accelerate the growth of the market. Yet even as these immediate steps are taken, more work needs to be done to craft a comprehensive plan of action.
The rollout strategy is a good starting point as an overview of the sector, but SA needs an actual strategy — one with action steps and timelines — if it is going to address all the constraints throughout the value chain. The best way to achieve this is for the department of mineral resources & energy to create a forum for all stakeholders to collaborate and contribute their ideas and resources.
We’ve seen this work in the agricultural sector’s master plan, and the LPG sector needs an equally collaborative framework if we are to make the best use of LPG as a valuable resource for South Africans, this winter and in future.
Tyusha is CEO of Sunrise Energy, an LPG import facility in Saldanha Bay operating under exclusive concession from the Transnet National Ports Authority.