Growing Inclusive MarketsHalifax, Canada20-21 June 2008

VidaGás: Powering Health Clinics and Households in Mozambique with

Liquefied Petroleum Gas

Courtenay Sprague, Lecturer, Graduate School of Business Administration, University of the Witwatersrand (Wits), South Africa Doctoral Candidate, Development Studies

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Structure of the Presentation/Discussion (four parts):

I. The ProblemsContext Setting – Northern Mozambique

II. ResponsesInnovations employed

III. Establishment of A Pro-Poor Venture based on an Alternative Business Model

-Results and Outcomes

IV. Challenges & Opportunities for Scaling Up

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I. Problem in Context – Northern Mozambique

Shortage of health personnel estimated 500 doctors for a population of roughly 20 million

Accidents and births take place at all hours - clinics can only treat patients during daylight hours.

Lack of reliable fuel to provide lighting for surgery and routine procedures

Lack of fuel impairs immunization efforts on behalf of children:

Storage of vaccines requires refrigeration within a fixed temperature range

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I. Problem In Context

Kerosene-powered refrigerators frequently breakdown.

And compromised vaccines must be discarded.

Without proper immuni-

zation, many children will die

of preventable diseases such

as measles, polio and hepatitis

The mortality rate for children under five is 89 per 1,000 in Maputo.

It stands at 241 in Cabo Delgado, Pemba, Northern Mozambique (Dabis and Ekpini 2002; World Health Organisation 2005a; Republic of Mozambique, 2005)

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I. Problem In Context

Lack of reliable fuel (cont’d): Less than 2% of households in Mozambique have electricity

Families rely on wood or charcoal for cooking

Burning such “biomass” fuels increases risk of ill health, increasing susceptibility to respiratory infections, asthma, complications related to pregnancy, including still births.

And, in the absence of electricity, the forests that supply firewood are declining, leading to rising deforestation

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Key Messages:

Health and development for Mozambicans are impeded by shortages in human resources, fuel and infrastructural constraints

Reliable fuel is at the core of these challenges.

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II. The Responses

Partnership initiative forged between 2 NGOs and 1 Government Ministry:

Led by Blaise Judja-Sato of VillageReach (Seattle), and Graça Machel of Fundação para o Desenvolvimento da Comunidade (FDC), and the Ministry of Health in Mozambique (MISAU).

Partners sought a sustainable solution to the problem of fuel shortages in health care clinics.

The goal? To improve health care and immunization efforts for Mozambican residents.

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Innovations Employed1. LPG. Liquefied Petroleum Gas could be supplied to health

clinics – with the proper human and physical infrastructure were in place. LPG-powered refrigerators and lamps could be used to operate the clinic, provide lighting, and sterilization for surgery.

Benefits: LPG is lead-free, odorless, safe, clean burning, producing less environmental and other pollution (20% less CO2). Highly portable, easy to use, not ‘messy’, can be easily stored and packaged, and is cost-efficient.

2. LPG Cold Chain. A network of freezers, refrigerators and coolers to transport vaccines within a fixed temp range (35.6F – 46.4F) could be put in place to ensure the potency of the vaccines.

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The Innovations (Cont’d)Decrepit kerosene refrigerators in 88 remote health facilities in Cabo Delgado were replaced with Liquefied petroleum gas-powered refrigerators - outfitted with automatic change-over valves to ensure a fixed temperature.

3. The Supply Chain & Logistics Platform. This refers to the cycle of planning, sourcing and procurement of essential medicines and supplies, management of logistics and related activities, including: -Training of Field Teams in delivering LPG and

medicine; in repairing LPG refrigerators and equipments.

Communities and clinics are outfitted with bicycles or motorcycles in case deliveries are needed between visits of field staff

Goal: to deliver needed medicines and supplies on time without waste, ineffectiveness, or inefficiency.

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A fleet of dedicated vehicles was procured to deliver the goods and supplies; extensive databases created to manage data and information.

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Data Collection The data informs all of the partners – VillageReach, FDC and MISAU –regarding the efficacy of the system;

Nine key metrics are gathered monthly - for the 251 clinics served by the partners.

These metrics inform the partners of the field context, helping to pinpoint problems and to improve the functioning of the overall system and its constituent parts.

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Ministry of Health uses the data to order supplies for the clinics, transports them to warehouse, where FDC/VillageReach field staff collect them.

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III. Results

Before the partners became involved in the project, many vaccines were disposed of due to problems with the cold chain: 85% of the kerosene refrigerators suffered some type of breakdown or malfunction, leading to spoilage of large amounts of vaccine.

Refrigerator Reliability Of the 88 refrigerators in 88 clinics served in Cabo Delgado province in 2005 and 2006, there was an infrequent number of repairs, following the introduction of LPG, down to 5% in 2005, and reduced to 2% throughout 2006.

Vaccine Wastage Rates Quantitatively, closed-vial vaccine wastage rates are tracked to monitor effectiveness.

Again, portions of vaccines must be discarded for reasons such as breakage, spoilage, or expiration. The resulting rates for Cabo Delgado’s clinics are consistently low, averaging below 3% for each type of vaccine.

Improved Data Collection As a result of the partnership’s intervention, there is now improved data collection in the clinics. The importance of accurate data in a post-civil war context in which data systems and record-keeping fell into total disrepair cannot be over-emphasized.

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III. Outcomes

Improved quality of health services provided to patients as a result of reliable refrigeration, lighting for medical care and surgery, and safe sterilization of medical instruments and syringes

The improved cold chain has enabled better vaccine delivery, manifested by a 36% increase in vaccination coverage in the 88 clinics that constitute the pilot region of Cabo Delgado (population 1.5 million)

Reliable fuel allows for night-time operations, safe sterilization, and safe deliveries of babies, hence assisting in meeting Millennium Development Goal 5 Target 6 (to reduce the maternal mortality ratio by three-quarters by 2015).

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III. Outcomes

Over time, improved vaccination for children should assist in meeting MDG 4 Target 5 (to reduce under-five child mortality rate by two-thirds by 2015)

LPG provides a more sustainable environmental solutionto the problem of using biomass fuels scarce wood as a fuel source in homes (for cooking) and businesses.

It breaks a cycle of environmental destruction while freeing residents from their dependence on wood for fuel. In so doing, it also assists in meeting MDG 7 Target 9 (to integrate the principles of sustainable development into country policies and programs, and reverse the loss of environmental resources)

It results in time saved for those women and children who use LPG and no longer need to fetch scarce firewood for cooking

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Key Messages & ImplicationsWith the right enabling environment, LPG provides a superior, green fuel that would social and environmental benefits, while improving access to healthcare and enhancing the quality of care in clinics.

To ensure a sustainable supply of LPG in northern Mozambique, this initiative would have to become self-sustainable.

That requires the establishment of a private company, and the introduction of a viable LPG market, and the uptake of LPG by households and businesses, in order to keep serving health clinics.

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The Goal

Establishing a private company as a pro-poor venture underpinned by a viable business model

This company, called VidaGás, was created by the partners.

Began to sell LPG to businesses, commercial operations in N. MZ and households

Set itself the goal of becoming a revenue-generating entity within three years.

By 2007, VidaGás sales were estimated at 14 tons of LPG per month in 2007. The company required sales of 25 to 35 tons per month to breakeven.

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IV. Challenges at the Outset

Poor industrial and commercial infrastructure in northern Mozambique

Inadequate consumer knowledge of the benefits of LPG

Inadequate training of retailers in LPG use

Achieving economies of scale

Competition with traditional sources of fuels

High transport costs

Insufficient LPG supply and storage facilities in MZ

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Additional Innovations/Responses to Meet Challenges

Feasibility Study – On Understanding the Market and the Consumer.

Tapping into Local Knowledge – focusing on women who are the users of LPG; women use their social networks to endorse particular products and services.

Diversifying range of LPG-appliances – generators, refrigerators, freezers, smaller household canisters (that women can carry on their heads), three and four burner stoves for restaurants

Social Marketing for Expanded Education and Awareness of LPG Benefits

Expansion into Additional Provinces – Nampula and Zambezia - to boost sales

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Opportunities for Scaling Up

Local Production of LPG. In terms of a structural intervention to reduce transport costs, the USAID study puts forward the option of producing LPG locally at an estimated investment at roughly $1.5 million.

Microfinance. Initiatives in Brazil have shown that the initial upfront costs of purchasing a stove and cylinder can serve as a prohibitive barrier, and thus the financing of those setup costs becomes a great incentive. Brazilian companies financed both the stove and cylinder with an agreement that the money would be paid back within a one to two year period. The growth of LPG confirmed this approach in spite of some defaults on loans.

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Opportunities for Scaling UpGovernment Subsidy and Regulation. The Indian Government

subsidizes LPG as a fuel for households. As of 2001, an estimated 18% of households in India (roughly 34 million households) used LPG for cooking.

The Brazilian Government offers a subsidy to low income families at a rate of an estimated $3 per month enabling 4.5 million families to access the benefits of cleaner, healthier fuel. At the moment, there is no government legislation in place in Mozambique to regulate bottling, use and safety is essential to ensure consumer protection and quality control if LPG is to become fully established as an alternative fuel.

The health and environment benefits of LPG may warrant a government intervention in the market to facilitate the entry of LPG in Mozambique, which would in turn boost sales.

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Lessons Learnt

In reviewing the case, the following four elements can be seen as part of a winning ‘formula’ in this – or any other pro-poor venture that seeks to be successful over time.

1. Overcoming Regulatory Hurdles and Start up Costs

2. Employing Problem-Based Innovation

3. Achieving a Social Development Impact (with Multiple Spinoffs)

- Employment; health benefits; contributions to environmental sustainability

4. Realizing Long-Term Profitability

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Further Research

If interested in research on Bottom of the Pyramid (BOP) Style Case Studies, particularly in Africa, please see the following publication, published in September.

THE BUSINESS OF SUSTAINABLE DEVELOPMENT IN AFRICA

HUMAN RIGHTS, PARTNERSHIPS & ALTERNATIVE BUSINESS MODELS

To be published by UNISA Press (in Africa), September 2008;

And Greenleaf Press (in Europe/North America)

Editors

Ralph Hamann, Stu Woolman and Courtenay Sprague(courtenay.sprague@wits.ac.za)

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