Commission conducts inquiry into S.Africa's LPG sector - CNBC Africa

Commission conducts inquiry into S.Africa's LPG sector

Technology

by Trust Matsilele 0

Tutuka Power Station, Mpumalanga, South Africa. PHOTO: Getty Images

This inquiry into the LPG sector is being conducted because the Commission believes that there are features of the sector that prevent, distort or restrict competition.

Thembinkosi Bonakele, commissioner at the Competition Commission said market inquiries are conducted in sectors encountering problems with wider impact in the society.

(READ MORE: Competition Commission concludes retail investigation)

“We look at what we consider to be a problem market, so where we pick problems and have a much wider impact in the society. If the impact will affect few people then we might not prioritise the investigation in such a sector,” Bonakele told CNBC Africa.

“We are conducting an inquiry into the LPG because it’s a consumer product that should be widely used if one looks at other countries. In South Africa it is only used in about three per cent of the households.”

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The inquiry takes place against the background of increasingly importance of LPG partly due to power problems in the country and rising electricity costs.

(READ MORE: S.African power grid "not looking good": Eskom)

LPG is primarily used as a thermal fuel and is consumed by industrial, commercial and household consumers.

The LPG is also used for heating purposes where a readily controlled temperature is needed and for commercial purposes like a shopping centre with a number of restaurants which may have one bulk tank with LPG reticulated to individual restaurants.

Approximately 300,000 tons of LPG is manufactured and sold in South Africa annually generating a turnover of about 1.5 billion rand.

Most of the LPG produced in South Africa is consumed by industrial users such as manufacturing plants and commercial users such as shopping centres with only marginal quantities consumed by households.

A market inquiry is a general investigation into the state, nature and form of competition in a market, rather than a narrow investigation of specific conduct by any particular firm.

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