Founder: Turnaround Talk
We have already heard some absolute horror stories when it comes to the economic impact of loadshedding. From the country losing up to R9 million/day that Eskom implements Stage 6 loadshedding to Pick n Pay and Checkers millions on generators to keep their stores operational during power cuts, the energy crisis is a significant risk for many companies.
The economic impact of loadshedding is particularly harsh on small to medium-sized businesses. Some are learning ancient techniques to keep their business open, while other business owners are contemplating raising the white flag of surrender.
Perhaps one of the most staggering statistics that has recently come out of loadshedding is that the costs of a certain company have increased by 5 000% because of loadshedding.
Under pressure
Financial services company Capital Appreciation’s load-shedding costs increased by more than 5 000% in the 2022/23 financial year.
The article points out that Capital Appreciation released its results for the year ended 31 March 2023 on Tuesday, which showed a significant increase in diesel costs in its payments division.
Capital Appreciation is a small-cap company listed on the JSE which consists of three divisions – payments, software, and international.
Payments is the company’s largest division and generates revenue through the sale of payment terminals, terminals’ rental income, maintenance and support serviced fees from terminals, and transaction-related income from terminals.
Biggest impact
The article adds that this means the payments division is more affected by the impact of load-shedding on smaller businesses than the company’s other divisions.
“Hardest hit by closures, these small businesses left acquiring banks with surplus point-of-sale terminal stock, leading to a decrease in the number of terminals sold after achieving record sales in the prior year,” said the company.
“The lower volume and a change in product mix towards lower-priced Android terminals moderated revenue growth.”
The division’s revenue decreased marginally from R533.8 million in 2022 to R524.8 million in 2023.
While the reporting period saw strong growth in the payment division’s annuity income, up 24.1%, the division’s EBITDA decreased by 5.5%.
The article points out that this was mainly a result of the slightly lower revenue and the inflationary increase in operating expenses due to diesel costs.
Image By: Steve Buissinne from Pixabay
Load-shedding caused the company to spend R419,000 on diesel for generators, a massive increase from the R8,000 it spent on diesel in 2022.
While this is far less than big retailers like Pick n Pay and Shoprite spend to keep the lights on, this 5137.5% increase comes at a significant cost to smaller businesses.
The article adds that, in addition, Capital Appreciation is anticipating this cost to exceed R1 million in 2024. This expectation comes despite politicians’ promises that load-shedding will be significantly reduced by the end of 2023 and eliminated in 2024, which indicates low business confidence going forward.
Can small and medium-sized companies get support?
Where will it end? How can small and medium-sized businesses survive when facing a 5 000% cost of doing business?
What role can business rescue practitioners and turnaround experts play in assisting these companies?
