Small businesses, hailed as the engine of job creation and crucial players in SA’s efforts to get onto a robust economic growth path, want the government to consider implementing subsidies on diesel, diesel-powered generators or other alternative energy solutions to help them cope with load-shedding.
According to the National Small Business Chamber (NSBC), the largest representative organisation in SA for small and medium enterprises (SMEs), many small businesses will not be able to survive another two years of constant power cuts.
“The only businesses that can survive another two years of load-shedding are the companies that have huge cash reserves. A small business doesn’t have that,” said Mike Anderson, CEO of the NSBC.
On Sunday, Eskom chair Mpho Makwana mentioned the possibility of implementing permanent stage 2 and 3 load-shedding to allow space for generation units to be taken offline for maintenance and to provide businesses and individuals with some predictability. CEO André de Ruyter later said this would not be feasible because Eskom would need higher (or lower) stages of load-shedding, depending on the number of units out on unplanned outages.
What is clear, however, is that the recovery of the generation system, which is central to the country’s plans to end load-shedding, will take at least two years to restore plant performance to such an extent that the power cuts can be significantly scaled down.
“If we are talking about one, two years down the line, with frequent level 4 and level 6 load-shedding, most small businesses will not be able to sustain that — they cannot last that long,” Anderson told Business Day.
More than two-thirds of SA’s working population work in a small business (which employs less than 100 people) and this is expected to increase to more than 90% of the working population by 2030.
The NSPC estimates that there are 750,000 formal SMEs in SA but when the informal sector is included, this rises to about 3.5-million small businesses. “This shows how vital it is to all sectors, consumers and government that we allow the SME sector to prosper,” Anderson told Business Day.
Catastrophic
The Covid-19 pandemic, he said, has been catastrophic for all businesses but specifically small businesses. Before the segment could really recover from the pandemic, SA began experiencing its worst load-shedding since Eskom started power cuts in 2008.
“It is a frustrating and demoralising time for the SME sector. Many small businesses ... are cash-based ... and with SA now frequently experiencing between six and 10 hours of load-shedding per day, the cost of alternative energy supply is incredibly expensive and out of reach for many of these businesses.”
Anderson said they had already seen productivity losses and a lot of profit losses, leading ultimately to business closure.
“We hope that the business closures will be temporary, but without a solution at hand, we’re afraid that it’s not going to be temporary.”
The organisation does not have specific figures available to show the number of business closures, but it has commissioned a research team to determine this.
“What we can already say is that over the past two to three months, there has been a massive increase in business closure, specifically because of load-shedding.”
Cas Coovadia, CEO of Business Unity SA (Busa), said the organisation is collecting data on the extent of business closures due to load-shedding, but it can see that it particularly affects SMEs. “Major corporates and some bigger businesses are able to, at this point, manage their way through, but smaller businesses are struggling,” he said.
To reverse the trend the government should consider a substantial subsidy on diesel, generators and solar power installations for small businesses so they can have access to alternative energy supply at a “very reduced cost”, said Anderson.
Cash flow
“We have seen some small businesses paying R80,000 per month for diesel to run generators. They don’t have sufficient cash flow over and above normal expenses to do this for months on end.
“There should be a massive drive now to alleviate the pressures of running generators, to supply small businesses with heavily subsidised or even free diesel for the next 18 months or until electricity supply improves.”
Happy Khambule, energy manager at Busa, said it would support the implementation of a subsidy and/or incentive for SMEs that are affected by load-shedding to generate their own power and achieve some energy security.
“It is crucial that SMEs are provided with incentives and subsidies to secure energy security affordably,” he said.
According to Khambule, the specific technology is not a major factor, but to future-proof investment in alternative energy sources the costs and co-benefits of the technology would be key and it is in this light that technologies that enable the storage of energy and production of energy from renewable resources should be prioritised.
Ultimately, the only solution to load-shedding is a constant reliable power supply by Eskom, Anderson said. But in the meantime, business owners need some predictability, and clear and consistent communication from the government on the electricity outlook, the extent of load-shedding that businesses should prepare for, and by when they can realistically expect to see a real improvement in electricity supply.
“We don’t have any indication of when this going to come to an end. And to me, that’s extremely frightening and disheartening because livelihoods are at stake.
“When a small business closes, it is often a whole family that goes out of business. Then there is no money to send children to school. There’s no food on the table. The devastating effects that come down the line, that most people don’t see, is tragic,” Anderson said.
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