A rare study has found that Batswana are getting a raw deal in the cooking gas market in which they are only consumers.
This is a key finding according to a report titled “Liquefied Petroleum Gas Market Study” by Botswana Energy Regulatory Authority (BERA) that was released towards the end of last year. “Assuming transportation cost to be a constant in each district/area, the expectation was that the degree of variability of prices should fall in the normal range in each district/area,” says the report.
It says the prices for 9kg, 14kg and 19kg gas cylinders were considered normal for the Kweneng and Kgatleng districts. “However, prices for 48kg gas cylinders were abnormal,” it reveals. “South East District exhibited normal prices only for 14kg gas cylinders. Prices of gas cylinders for all other districts were abnormal. Abnormal pricing could result from several factors such as over-pricing and a small number of service providers resulting in limited choices for consumers.”
The report confesses that the over-pricing and inconsistent prices of gas were not fully investigated in the study but it says it is certainly an area that should be addressed through market research going forward. Even so, the study investigated how businesses were pricing gas. “Almost all the cost parameters at distribution level were similar to those at importer level,” it notes.
“It would therefore be important to investigate whether replication of these elements would bring meaningful benefits to the consumer in terms of the value add … The study was not able to fully interrogate the current pricing by businesses mainly because the information provided was either incomplete or not provided at all.”
Regarding gas quantities, the report says the Weights and Measures Act requires that where weight/mass is used for sale, the equipment (scales) must be regularly calibrated and verified by a competent authority. “That notwithstanding, retailers who were interviewed during the study stated that the most prevalent consumer complaint from the public related to the under-filling of gas cylinders. This was believed to be one of the reasons why gas finished quicker than expected,” the report says.
It says while longevity might also depend on use, it is nevertheless important that the perception of under-filling is managed. “Field visits to retail outlets revealed that most retailers did not have a measuring scale by which the cylinder could be weighed as a form of verification that indeed the gas sold to a customer was of the right quantity,” the report notes. “None of the ‘bakkie boys’ carried a scale when they delivered the gas to households … There is need for resellers of LPG to possess some form of verification equipment when they sell the gas to customers.”
A specific recommendation of BERA is that retailers should be “required to install or carry apt measuring scales and weigh a cylinder that is sold to a consumer as a way of verifying the amount of gas in that cylinder; scales should be suitable for gas cylinders and should be maintained and calibrated regularly … (a) Public awareness drive is required to help consumers understand how to make calculations to ensure that they are not ripped off.”
Regarding cylinder swapping, which refers to the exchange of cylinders between and among LPG companies such that consumers could gain a broader choice when purchasing cooking gas, the report notes that consumers could bring any brand of empty LPG cylinder to any retail outlet and use it to purchase another brand of LPG cylinder carried by the retail outlet.
“At a local level, the shortcomings of the cylinder swapping and exchange practice were recently exposed after one of the importers, Quick Gas, ceased operations owing to the matter of deceased estate. Many Batswana holding Quick Gas cylinders were left in the lurch when other companies refused to swap them because of risks and costs associated with storage and handling of empty cylinders belonging to Quick Gas,” the report says. It calls for a long-lasting solution to mitigate against instances where consumers end up suffering in the event that one or more companies cease operations.
The study found that consumers who wanted to purchase a cylinder are charged a one-off refundable cylinder deposit fee that is meant to instill a sense of fiduciary care for the cylinder. “The deposit fee does not transfer ownership of the cylinder to the customer,” it notes. “Ownership of cylinders is still retained by the supplier. The study revealed that the cylinder deposit fee differed from one business to another. Cylinder deposit fees were generally low in urban centres and areas close to major supply centres of LPG. Out of the 184 retailers sampled, 121 of them sold an empty cylinder. The lowest price was P150 and the highest selling price was P600, thus presenting an average price of P405.08,” the report says.
It says the cylinder swapping or exchange system is not adequately enforced, resulting in anti-competitive behaviours and disservice to the public. “Furthermore, the price of an empty cylinder ranged from P150 to P600 regardless of the size of the cylinder. Cylinder deposit fees differed from one business to another,” says the report.
In the report, BERA recommends establishment of an industry trust fund to enable the public to swap cylinders in instances where one company suspends operations or closes shop. “The cylinder deposit fees (would) be collected into the trust account,” it says. “The management of the trust account shall be determined in consultation with the industry and the cylinder deposit fee is standardised and is capped at P405. This means that LPG companies will be able to sell an empty gas cylinder for a price up to that amount.”
The report acknowledges that the quality of gas imported and consumed in the country is of paramount importance, more especially during an era where independent importers are entering the local market and procuring gas from other markets other than South Africa. It says the gas might contain impurities such as sulphur, which impacts human health. Therefore, the gas must conform to available standards of quality. To that end, the report notes that it is imperative that a national standard on Liquefied Petroleum Gas is developed to address issues of gas quality.
“Furthermore, the BERA’s petroleum testing laboratories do not have the capability to conduct any of the above-mentioned tests, neither does the country have any laboratory that can do such tests,” it says. “Therefore, there is need to further develop the available laboratories to enhance capacities for testing the quality of LPG.”
Furthermore, says the study, development of a national quality standard should be accompanied by development of testing facilities and capabilities to enforce regulatory requirements relating to gas quality. The report recommends that BERA should work with the Botswana Bureau of Standards to develop a National Standard (Botswana Standard) on LPG quality specifications, as well as on expanding capabilities of existing petroleum testing laboratories to include testing for the quality of gas.