STATE TO FOCUS ON LPG PROPOSALS THAT CUT GAS COSTS
The government will give priority to the proposals contained in the Competition Commission’s report on the liquefied petroleum gas (LPG) market that would have the best impact on lowering the cost of gas and improving market access in the sector.
This according to Economic Development Minister Ebrahim Patel in an interview with City Press this week at the launch of Sunrise Energy’s LPG terminal in Saldanha.
Patel said the Competition Commission’s LPG report had been tabled in Parliament.
“We are now working through it with the department of energy. One of the core decisions the we have to reach is on the recommendations set out. We need to consolidate and integrate all the regulatory issues in one agency.”
The recommendations concerning access to the LPG market would probably get priority. Patel said the government would like to see more players included in the gas industry and for prices to come down.
“When you look at the international experience, countries that have access domestically or through importing facilities for gas have, generally speaking, lower costs than many others. Gas powers so much of the western part of Europe.
Patel said South Africa’s per capita gas consumption was extremely low compared to its peer countries.
“Those recommendations, in our view, that have the best impact on lowering the cost of gas would be the ones we would prioritise.”
“We’ll be working hard to implement some of the recommendations.”
Turning to the upcoming amendments planned for the Competition Act, Patel said that changes to the act would deal with issues of concentration in the economy and they would seek to complement the government’s other efforts to open up the economy.
“The changes would be aimed at giving more opportunities to black South Africans but more generally to provide opportunities for new entrants. The dynamism of the economy is the consequence of many things. It is the technological base, it’s the entrepreneurial energy that you bring, it’s the regulatory environment, it’s the skills base of workers, and so on. In each of these areas, we’ve got to make progress.”
“The key things survey after survey has shown, that represent an enormous opportunity for us, are those interventions that unlock the entrepreneurial energy of more South Africans. We are not an ‘unentrepreneurial’ nation. In fact, there is a high level of enterprise. The key is to give people opportunities in the formal economy in activities that are both legal and potentially financially rewarding. It is to direct all the innate creativity and enterprise towards growing the economy, towards producing goods and services that are of value. If you look at surveys of South Africa and you see the bald figures about entrepreneurship, gas represents an opportunity to open up and get in more enterprise.”
“We accept the point – it’s not only in the gas industry – it is much more broadly. Therefore, the Competition Act changes will seek to deal with it.”
“Our current act principally deals with two kinds of issues. One kind is a trigger – where one company seeks to buy another company – like a merger or acquisition. That is regulated and it requires regulatory approval. The other one is corporate behaviour that the law regards as unacceptable or illegal; such as fixing prices, activity of cartels, abuse of market dominance. What our law hasn’t provided for thus far are issues around structure. You have highly concentrated markets where you can’t draw a direct link between the levels of concentration and price fixing or cartel behaviour but where none the less it has a negative impact on the economy, on enterprise and innovation. So it is those sets of areas that the amendments will seek to speak to.”
Patel declined to say what his amendments to the Competition Act would be.
“I will obviously not talk about that until I’m ready to make those announcements.”
“When you have more opportunities investment flows to [a sector]. In this case, we have taken a measure that expands the supply of a good, in this case gas. It can only work well if it is accompanied by other efforts in a market to deconcentrate distribution networks and provide more opportunities for people.”
Turning to the R1.5 billion steel industry competitiveness fund which Patel announced in his budget speech this year, the minister said the first set of applications had been received for allocations. “We expect we would move expeditiously on those and as soon as we have the first round of approvals we will make a public announcement.”