Founder: Turnaround Talk
If you are reading this while you are on the move, you better take a seat. It is no secret that we are in the middle of the worst year of loadshedding since the practice was introduced in 2008. This year alone we have – to date – experienced over 1 900 hours of loadshedding with more promised over the Festive Season and the beginning of 2023.
Eskom is trouble and is tabling a significant tariff increase with the National Energy Regulator of South Africa to try and find capital to bankroll its maintenance programme.
This is where this article gets scary. In July, Turnaround Talk published an article which pointed out that loadshedding cost South Africa Each of the up to eight stages of load shedding costs the country’s economy an additional R500-million a day in lost activity. We have had about 79 days of loadshedding (to date), meaning that we have lost R39,5-billion worth in lost days.
But that’s not the scary part of this article. We have quantified what loadshedding has cost the country in terms of lost activity. What has loadshedding cost some of the country’s biggest companies in terms of investing in infrastructure to negate loadshedding? And what are the costs to running this infrastructure? Strap yourselves in….
R400 million lost in two weeks
The City Press article pointed out that Anthony Thurnström, CEO of The Foschini Group (TFG), said last week that their loss of income during just the two weeks of Stages 5 and 6 load shedding in September was estimated to be R400-million.
Thurnström said, “there was stock that we had to mark down that we couldn’t get sold in time.”
Shoprite estimates that in a Stages 5 and 6 load shedding scenario, the group will have to spend an additional R100-million monthly on diesel for generators.
The article adds that, in its interim results for the six months to the end of September, Tsogo Sun Gaming says that, during the severe rolling blackouts in August and September, its casinos paid R23-million for diesel.
CEO Chris du Toit told Moneyweb in a radio interview that, in the previous results period, that amount had been R2-million per year.
Photo By: Africa News Agency
The CSIR weighs in
According to the Council for Scientific and Industrial Research (CSIR), load shedding in the month of September was worse than in the whole of 2020. So far this year, South Africans have experienced one stage or another of load shedding for almost half of the year.
The article points out that, according to the CSIR, this year is the first time Stage 4 load shedding has dominated, compared with Stage 2 previously.
PwC, in an economic review last week, said that load shedding had tripled in the first nine months of the year compared with what it was per month last year.
A survey in August by Sakeliga, an independent business community lobby group, on how much more expensive it is for small and medium-sized enterprises to do business amid load shedding, showed that 35% of respondents were still totally dependent on Eskom power, compared with 60% three years ago.
The article adds that about 62% are mostly dependent on Eskom (75% previously) and about 20% are completely independent of Eskom (similar to previously).
The survey, carried out among 478 small and medium-sized enterprises with a median income of R300 000 per month, also showed:
- R8 000 average monthly loss of income per enterprise;
- R5 000 per month additional spending on alternative power sources; and
- R1 250 per month in damage related to load shedding and power surges.
The damage or direct losses for the median enterprises amounted to about R15 000 per enterprise in the past year, according to Sakeliga.
The article points out that most respondents said they used generators and small uninterrupted power supply systems as a backup. About 22% use solar power systems and only 12% use large battery systems.
The margins are also stretching large companies’ wallets for alternative power generation systems.
Shoprite on the ropes
The article points out that Shoprite said in an operational update for the quarter to the end of September that the increase of about 56% in the fuel price compared with a year ago is affecting operations in general.
However, the supermarket division can continue its operations thanks to investments in solar panels and power.
Shoprite said that, in the past 12 months, its installed photovoltaic solar panel capacity has increased by 82%.
The article added that there are now 143 674m² of solar panels at 62 sites – as large as 20 football fields. This provides the equivalent of power for 3 735 households for a year and thus relieves the pressure on the national grid.
Photo By: Shoprite
Apart from loans worth R3.5 billion for investment in renewable energy, among other things, the Shoprite group also significantly reduced electricity consumption in the previous financial year by using LED light bulbs.
The article points out that Tsogo Sun Gaming was now installing solar panels at sites including as the Silverstar Casino in Krugersdorp on the West Rand.
More pain ahead
The article points out that the listed poultry group Astral Foods said that, apart from the direct additional costs of R138-million due to load shedding in the year to the end of September, it had spent R200-million on alternative energy sources and water storage.
TFG expected up to 70% of its stores across the country to have some form of backup electricity by Christmas.
Thurnström said the turnover that TFG stores would achieve because the lights were on in a shopping centre where most other stores were in darkness meant the group would be able to recover the costs of batteries and inverters within a year.
The article adds that, according to Pick n Pay, its corporate stores have generators and the clothing stores were getting batteries and power inverters to keep their doors open amid the rolling blackouts.
Meanwhile, several metros are making plans to partially wean themselves off Eskom’s power.
Jack Radmore, programme manager of energy and climate finance at GreenCape, said municipalities could create a favourable environment where the private sector could help with alternative electricity generation such as photovoltaic solar panels on roofs.
“Cape Town and the Western Cape government have worked hard to support local businesses with greater energy security, as well as feed new electricity generated into the national grid,” said Radmore.
The article points out that a spokesperson for the City of Joburg said that, after the city’s energy indaba earlier this year, the multiparty government got its strategy for independent power supply in place. The city was now in the first phase of this strategy. City Power was awaiting information from interested parties who could supply power directly to the grid, said the spokesperson.
“The blackouts will only get worse, and we as a city can watch Eskom collapse and fail, or we can follow a proactive strategy to secure energy from somewhere else.”
The Ekurhuleni metro had contracts with 47 independent power producers (IPPs) to supply renewable and clean energy for 20 years. These IPPs are expected to start building power supply stations early next year.
“Another six agreements will hopefully be concluded soon and the metro wants to acquire 700MW of renewable energy with the same budget allocated for Eskom purchases,” said the spokesperson.
“The current budget of about R14-billion per financial year will be divided between purchases from Eskom and from independent power suppliers. The current procurement of IPPs will take up about 25% of the current budget.
“It is particularly aimed at greater energy security, because clean energy is needed and because potentially cheaper power can be purchased from independent power suppliers.
“If Ekurhuleni has less load shedding, companies will lose less production time, spend less on diesel for generators and also need less capital outlay for alternative power supply systems.”
