SA’s largest packaged foods producer, Tiger Brands, has announced it is making contingency plans for stage 6 to 8 load- shedding, which entail having capacity to store sufficient water and diesel as municipal services also endure high levels of power cuts.
It is the first company to publicly state it is making plans for stage 8 load-shedding. Some energy experts have said the country should brace for stage 8 load-shedding this winter.
Stage 8 could result in up to 13 hours without power a day, or 8,000MW of cuts, and some energy experts have warned that winter could see the introduction of intense blackouts.
The maker of brands such as Koo, All Gold, Black Cat, Tastic and Jungle Oats, on Tuesday put out a voluntary update on its sales in the first four months of its financial year starting in October. It revealed the high costs of lack of power that food producers are facing.
While it already has plans for four solar plants at four facilities it said its “contingency plans for stages 6-8 indicate that we will require a further capital investment of about R120m for additional generating capacity”
Most of this investment will be spent on increasing capacity to store water and diesel.
The company also announced in August that it was embarking on a multimillion-rand investment in solar and renewable power at its manufacturing sites.
Its goal is to have 65% of the business’s manufacturing electricity requirements across SA sourced from sustainable energy by 2030. It is also exploring the use of biogas, wind, battery and hydrogen power.
The first four sites where solar power installation is expected to be completed in the first quarter of 2023 are its Hennenman Mill in Free State, King Foods in North West, and its beverages and home and personal care manufacturing plants in Gauteng.
Tiger Brands said the costs of operating in the current unpredictable and suboptimal environment were significant. It spends R1.5m a day to run generators when there is stage 6 load-shedding. Running of generators for backup power costs R250,000 per stage of load-shedding per day.
It is clear that costs are beginning to be passed onto consumers.
The incremental cost of electricity generation using backup generators in the four months from October to January was R27m and “has not yet been recovered in price,” it said, suggesting prices would rise.
In the four months, its product period prices were up 18% and volumes or the amount bought only dropped 1%. This also reflect rising input costs of raw materials.
In the four months to end-January, it saw growth in the sales of bread products which includes Albany brands, snacks and treats including Beacon brands, Fattis and Moni’s pasta, rice and sorghum breakfast, and beverages which includes Oros.
But purchases of staple products often bought by poorer consumers such as flour, maize and sorghum beverages dropped.
In January, food prices reached their highest inflation at 13.4% since April 2009, according to data released by Stats SA.
The group says it expects food inflation to drop to low double digits in the second half of its financial year, which starts in April meaning it would still be above 10%. Its prediction on product inflation is based on what it expects commodity prices of goods such as maize and wheat to be.
It also said generators use will add R15m to its full-year maintenance budget.
The company has been working with the Ashton Municipality in the Western Cape by providing generating equipment and expertise to ensure water supply to the deciduous fruit factory, as fruit must be canned on time to maintain quality. It wanted to close its loss-making canning factory but public pressure kept it open. Farmers in the area require canning for their fruit and would have to close farms and retrench workers without it.
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