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Load shedding solutions for small businesses are available, but with most small businesses cash-strapped during difficult financial times, it is not an easy solution.
Many small businesses working in sectors – such as manufacturing, tailoring, baking, printing and food processing – depend on the availability of electricity and every cut in supply for them means a cut in production.
It is estimated that in 2020, load shedding cost our economy R500 million per stage, per day and this is the same for small businesses around the country.
The problems are worse in rural and peri-urban areas where electricity cuts appear to be most severe, with some entrepreneurs reporting up to 12 hours of cuts at a time.
This June, South Africa experienced one of its worst weeks of load shedding, with four consecutive days of Stage 6 rolling blackouts.
The negative impact of the ongoing electricity disruption threatens the country’s economy, says Catherine Wijnberg, CEO of Fetola, a provider of scalable, world-class entrepreneurial support programmes for African entrepreneurs.
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Small businesses are drivers of the economy, but they have to survive the immense pressure of inflation hikes.
According to the latest consumer price index published by Statistics South Africa, annual consumer price inflation has broken through the upper limit of the Reserve Bank’s target range.
As always, Wijnberg says, entrepreneurs are agile, wily and resilient and constantly looking for solutions and workarounds, including flexitime for staff, rescheduling tasks to accommodate the electricity outages and buying generators to compensate.
“However, these are short-term measures at a considerable cost to the profitability and well-being of the company.
“Even with these workarounds, the impact is huge, with some businesses reporting June 2022 as their worse month ever, while others had to put staff on short time and some had to face the potential for business closure.”
At the same time, consumers at all levels are also becoming more cost-conscious, cutting back on expenses and building a ‘price-first’ mindset.
Wijnberg says this makes an already harsh small and medium enterprise environment even more tricky as consumers flock to the malls for cheap bulk deals and large players play the price-war game and win.
“The question is, if we are relying on small businesses to create jobs and grow the economy – we hear statistics such as “SMEs will create 80% of new jobs” and “SMEs currently employ 64% of
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She says government can rescue businesses from this horrendous impact by creating small business park clusters where electricity supply is guaranteed, with no switch-off zones.
Through collaborations, small businesses can also cooperate and apply for grant finance to install a private power production plant, or use alternative renewable energy, such as wind, solar, water turbines and biofuel.
Small businesses should adopt healthy working conditions with all staff participating to fight the effects of load shedding, such as building morale by communicating the problem and making it a shared war to fight.
Wijnberg says this can also be achieved by scheduling tasks around load shedding.
Miguel da Silva, MD of Retail Capital, says small businesses must reduce their dependence on Eskom.
“If Eskom’s woes are not sorted out soon, or if businesses are not able to develop independence from the grid, any remaining hope that small and medium enterprises could help rekindle the economy and create most of the country’s jobs by 2030 will be relegated to a pipedream.”
The South African government’s National Development Plan (NDP) wants the small business sector to create 90% of new jobs by the end of the decade, but Eskom is the single biggest threat to the country.
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“Spare a thought for the smaller guys who cannot afford renewable installations or higher spec uninterrupted power supply (UPS) systems. In some cases, they are losing more than half a day’s trade.
“Even those who gave up worrying about the environment, which we strongly advise against, can barely afford to keep their generators running.”
He says the key is for small business owners to realise that while the going is tough and likely to get tougher, the sector is resilient and has grown accustomed to looking out for itself and relying on the private sector.
“Small business owners have come to realise that government talk seldom translates into anything meaningful for them.
“The best advice now, just like before, would be to tighten the belt, lean on peers for advice and networks, try new and innovative ways to reach new customers and approach alternative lenders to fund growth, close cash crunches and develop independence from the grid.”
He acknowledges that alternative power solutions are not cheap.
Solar installations can be very expensive upfront and that does not even consider the batteries required to provide sufficient backup.
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“A decent uninterrupted power supply (UPS) system that can power enough of the business for extended periods, a few times a day every day, is also far more expensive than many off-the-shelf options in retail stores, especially those that use newer technology like lithium iron phosphate batteries.”
Da Silva says various options are available, such as rentals, asset finance and commercial bank loans.
However, while asset finance and bank loans sound good on paper, not many institutions are interested in financing newer, smaller enterprises.
He says whether or not entrepreneurs take the advice to develop independence from the national grid, they would do well to seek out funding sooner rather than later.
“This should never be interpreted as chasing debt. Cash flow and the ability to survive dry patches or take advantage of opportunities when they arise, is like blood for a small business.
“Securing credit lines when the going is still good ensures businesses get the best deal, as opposed to being a price taker when it is too late.”
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