Cooking stoves manufacturing
Cooking stoves manufacturing
Business Model Description
Manufacture and distribute liquified petroleum gas (LPG) or improved cooking stoves for government programs and private customers.
Expected Impact
Reduce the use of unsustainable energy sources and address practices harmful to health during food preparations.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Ghana: Countrywide
- Ghana: Northern
Sector Classification
Consumer Goods
Development need
In Ghana, SDG 7 - Affordable and Clean Energy and SDG 8 - Responsible Consumption and Production signal a major and significant challenge.(I) Although manufacturing growth was hit heavily during the 2013-14 energy crisis, the sector recovered and grew steadily by over 6% in 2019. It accounted for over 10% of gross domestic product (GDP) in 2019.(II)
Policy priority
The government recognises manufacturing as the backbone to economic growth and contributed to strengthening the sector.(III)
The most prominent government program is One Factory, One District, which aims to scale manufacturing across the country.(IV) The government aims to use clean fuels for cooking, especially in rural areas.(III)
Key bottlenecks
The main sector challenges include: unreliable and costly access to electricity, the high cost of doing business, the high cost of credit, the lack of skilled labor, and low competitiveness in international markets.
Appliance Manufacturing
Pipeline Opportunity
Cooking stoves manufacturing
Manufacture and distribute liquified petroleum gas (LPG) or improved cooking stoves for government programs and private customers.
Business Case
Market Size and Environment
USD 100 million - USD 1 billion
Achieving the government goal of 50% liquified petroleum gas (LPG) penetration requires more than USD 405 million over next 10 years.(8)
Only 21% of Ghanaians used LPG for cooking in 2017 - 35% in cities and only 6% in the rural areas.(3)
From 2017 to 2019, cooking stoves usage increased, reaching 24.5% of the total population.(8)
Indicative Return
20% - 25%
The estimated rate of return for investors is 20.5% - 24.5%. This rate is a benchmark calculated as a cost of equity that includes a country risk premium, reflecting an average return required by investors active in Appliance manufacturing.(14)
Investment Timeframe
Short Term (0–5 years)
According to investor interviews, investing in large-scale energy efficient cooking stoves takes 1 to 6 months. Cashflow should be generated in less than 2 years.(15)
Market Risks & Scale Obstacles
Capital - CapEx Intensive
Market - High Level of Competition
Capital - Requires Subsidy
Impact Case
Sustainable Development Need
78% of Ghanaians use solid fuel such as wood or charcoal for cooking. This is estimated to cause around 10,000 deaths per year due to air pollution.(3)
Improved cooking stoves require 50% - 60% less of fuel, which can reduce the scale of deforestation.(3)
Gender & Marginalisation
Remote and traditionally excluded communities are most likely to conduct cooking practices that are harmful to their health and negatively impact the environment.
Expected Development Outcome
Reduced use of fuel wood, reduced indoor pollution
Saved time and resources, increased health and wellbeing of households
Increased manufacturing of sustainable appliances
Gender & Marginalisation
Healthier environments in households and especially for children, which supports, for example, a conducive learning environment
Primary SDGs addressed
7.1.2 Proportion of population with primary reliance on clean fuels and technology
7.b.1 Installed renewable energy-generating capacity in developing countries (in watts per capita)
8.2.1 Annual growth rate of real GDP per employed person
9.2.1 Manufacturing value added as a proportion of GDP and per capita
9.2.2 Manufacturing employment as a proportion of total employment
Secondary SDGs addressed
Directly impacted stakeholders
People
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Corporates
Public sector
Outcome Risks
Liquified petroleum gas (LPG) explosions can cause serious health hazards(4)
While healthier than traditional cooking stoves, improved cooking stoves still emit more pollution than electric ones and can slow down the future transformation(2)
If cooking stoves are not adapted to local customs, they may change cooking and eating patterns(2)
Impact Classification
What
Production of liquified petroleum gas (LPG) and improved cooking stoves is likely to have a positive impact because it reduces the use of non-renewable resources for cooking and required time.
Who
Mainly rural communities who are aggrieved by air pollution resulting from outdated cooking stoves.
Risk
Although the business is market proven, there is a risk that other technologies like electric or solar cooking stoves may become more desirable than LPG and improved cooking stoves.
Impact Thesis
Reduce the use of unsustainable energy sources and address practices harmful to health during food preparations.
Enabling Environment
Policy Environment
Sustainable Energy for All Action Plan: This plan sets the government's targets for liquified petroleum gas (LPG) penetration at 50% by 2030. The goal was moved from 2015 and 2020, due to constraints that slowed down progress.(3)
Due to frequent accidents, Ghana shifted its LPG model from Consumer-Controlled Cylinder Model (CCCM) to Branded Cylinder Recirculation Mode (BCRM). For this reason, LPG will become more accessible for investors due to lowered risks and adapted policy framework.(5)
The government offered free LPG cooking stoves and other equipment for rural communities through the Rural LPG Program. In 2017, 150,000 out of 170,000 planned cylinders were distributed.(4)
Financial Environment
Fiscal incentives: Ghana offers a reduced corporate income tax rate for manufacturers based on location.(10) For example, manufacturing businesses located in regional capitals (except Accra and Tema) pay 75% of the standard corporate tax rate or 18.75%. Ghana offers custom duties exemption for importing plants, machinery, equipment and parts.(2)
Regulatory Environment
A significant change in regulation occurred in 2017 when the LPG circulation model changed to Branded Cylinder Recirculation Mode (BCRM). With is model, customers purchase pre-filled cylinders instead of filling the cylinders close to home through vendors.(4)
The Ministry of Energy is responsible for implementing clean cooking support programs and energy policy.(7)
The Energy Commission is responsible for energy resources management. There is a plan to introduce a national standards and labelling program for improved cookstoves.(13)
The Ghana Cylinder Manufacturing Company Ltd established set standards for LPG cylinders and other LPG equipment in 1998.(4)
Marketplace Participants
Private Sector
Ghana Cylinder Manufacturing Company Ltd, Enterprise Works/VITA
Government
Ministry of Health, Ministry of Energy, National Petroleum Authority
Multilaterals
African Development Bank (AfDB), UN Development Programme (UNDP), World Health Organization (WHO)
Non-Profit
Netherlands Development Organisation (SNV), German Corporation for International Cooperation (GIZ), United States Agency for International Development (USAID), ASA Initiative, Shell Foundation (VIVO Energy), Clean Cooking for Africa Program, Global Alliance for Clean Cookstove, Ghana Alliance for Clean Cookstoves (GHACCO)
Public-Private Partnership
Ghana Energy Commission
Target Locations
Ghana: Countrywide
Ghana: Northern
References
- (I) Sachs, J., Schmidt-Traub, G., Kroll, C., Lafortune, G., Fuller, G., Woelm, F. (2020). The Sustainable Development Goals and COVID-19. Sustainable Development Report 2020. Cambridge: Cambridge University Press. (II) World Bank database. https://data.worldbank.org/ (III) Medium-Term National Development Policy Framework: An Agenda For Jobs: Creating Prosperity and Equal Opportunity for All (First Step) 2018-2021 (IV) One District, One Factory. http://www.moti.gov.gh/1d1f/
- (1) Ghana Investment Promotion Centre (2017). Doing business in Ghana – to know and invest in Ghana.
- (2) Energy for Sustainable Development (2016). Assessment of cookstove stacking in Northern Ghana using surveys and stove use monitors. https://www.researchgate.net/publication/308307688_Assessment_of_cookstove_stacking_in_Northern_Ghana_using_surveys_and_stove_use_monitors
- (3) Copenhagen Consensus Center (2020). Cost-benefit analysis of interventions to increase the use of clean cooking fuels in Ghana. https://www.copenhagenconsensus.com/sites/default/files/gp_a4_lpg.pdf
- (4) Assante, K. et al. (2018). ‘Ghana's rural liquefied petroleum gas program scale up: A case study’, Energy for Sustainable Development, 46, pp 94-102.
- (5) Global LPG Partnership (2018). Clean Cooking for Africa Programme – National Feasibility Study: LPG for Clean Cooking in Ghana. https://static1.squarespace.com/static/5633c4c2e4b05a5c7831fbb5/t/5cca5e51c8302537495638e6/1556766364994/GLPGP+Clean+Cooking+for+Africa+Ghana+National+LPG+AssesSMEsnt+-+First+Edition+-+December+2018.pdf
- (6) Ministry of Energy (2020). Medium Term Expenditure Framework (MTEF) for 2020-2023. https://www.mofep.gov.gh/sites/default/files/pbb-estimates/2020/2020-PBB-MoEn.pdf
- (7) World Health Organization (2018). Opportunities for transition to clean household energy – Application of the WHO Household Energy Assessment Rapid Tool (HEART). https://apps.who.int/iris/bitstream/handle/10665/274281/9789241514026-eng.pdf?sequence=1&isAllowed=y
- (8) Global LPG Partnership (2019). Clean Cooking for Africa Programme – LPG for Clean Cooking in Ghana: Investment and Implementation. https://static1.squarespace.com/static/5633c4c2e4b05a5c7831fbb5/t/5dc0c9001b8b2d52d599657b/1572915472242/GLPGP+Clean+Cooking+for+Africa+-+Ghana+LPG+Investment+and+Implementation+%282019%29.pdf
- (9) Centre for Energy, Environment and Sustainable Development (2014). Nationwide mapping of stakeholders in the clean cook stove value chain in Ghana, https://www.cleancookingalliance.org/binary-data/RESOURCE/file/000/000/311-1.pdf
- (10) Ghana Investment Promotion Centre. Ghana incentives inventory. https://www.gipcghana.com/press-and-media/downloads/promotional-materials/33-ghana-incentives-inventory/file.html
- (11) Wassie, Y.T. and Adaramola, M.S. (2020). ‘Analysis of potential fuel savings, economic and environmental effects of improved biomass cookstoves in rural Ethiopia’, Journal of Cleaner Production. https://www.sciencedirect.com/science/article/pii/S0959652620347442
- (12) World Bank (2017). Project appraisal document on a proposed carbon finance transaction in the amount of US$7.65 Million to the Republic of Rwanda for an improved cookstoves project (P158411). http://pubdocs.worldbank.org/en/680521534357131570/PAD-FINAL.pdf
- (13) Clasp (2017). Ghana Developing Cookstoves Performance Label. https://clasp.ngo/updates/2017/ghana-cookstoves-label
- (14) PwC analysis based on Prof. A. Damodaran data, 2020.
- (15) UNDP/PwC Interviews, 2020.
- (16) UNDP/PwC sectoral meetings with stakeholders and other UN Agencies for the development of the SDG Investor Maps, 2020.
- (17) Energy Commission (2014). Cookstove Sector of Ghana – a baseline study and survey of stakeholders. https://www.gh.undp.org/content/dam/ghana/docs/Doc/Susdev/UNDP_GH_SUSDEV_SE4ALL_Cookstove%20Sector%20of%20Ghana.pdf