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Power outages, pandemic continue to cripple economy

“Businesses depend on electricity to be efficient, yet the latest power cuts in Ekurhuleni resulted in many businesses closing down.”

The impact of Covid-19 and load-shedding continue to cripple the local economy.

ALSO READ: Covid-19: Informal economy vulnerable during lockdown

GCN spoke to City of Ekurhuleni (CoE) spokesperson Zweli Dlamini and director at Lij Media Thabang Mabale.

The structure of the city’s economy is dominated by these sectors: manufacturing, finance, business services, community services and general government and, to a lesser extent, the trade and hospitality sector.

“Lockdown regulations and a decrease in demand were the main reasons businesses stopped operating.

Manufacturing, the music industry, trade and accommodation were even worse off.

“The music industry has been hit hard, with live-performance revenue the biggest casualty. The decline in movement affected many businesses, especially those in town or transportation hubs,” said Dlamini.

Many new businesses in the informal sectors and those who lost their jobs in this sector increased the competition, leading to lower-than-average revenues and renewed pressure on profit margins.

“Owners of micro and informal businesses rely on their income and continued economic activities to care for their families. During hard lockdowns, informal recyclers were arrested and beauty salons were forced to provide services at their clients’ homes. Some entrepreneurs even sold alcohol and cigarettes illegally.

“The unexpected impact of lockdown regulations hit the informal sector hard. Bottle stores and taverns closed their doors. After a short break, micro-businesses selling essentials like food, fruit and vegetables or transportation of essential workers could operate during lockdown,” said Dlamini.

“During level four lockdown, CoE received 6 688 applications to conduct business in the informal sector, of which 4 268 were approved,” added Dlamini.

“Ekurhuleni was a coronavirus hot spot. By the third quarter of 2020, our economy dropped by 6% compared to the same period in 2019. Almost two million South Africans lost their jobs. Our unemployment rate now stands at 30.8%.

“The pandemic had tremendous and swift effects on small and medium businesses, especially those at the start-up stage. The impact of lockdown on these businesses was direct. They had no capital left to purchase items, failed to pay instalments on cars and many could not replace confiscated equipment.

“Some entrepreneurs successfully adapted their businesses to the ‘pandemic economy’ by communicating with customers via social media such as WhatsApp, delivering products to clients’ homes, manufacturing essential items such as masks and assisting learners with homeschooling,” said Dlamini.

Thabang Mabale, director at Lij Media, discusses how the pandemic changed the dynamics of daily business operations, focusing on small and medium businesses.

Load-shedding and power failures
GCN has since the start of 2022, reported on CBD businesses expressing concern about power outages that result in shop doors closing, job losses and increased costs for fuel and generators.

Many business owners reported they could not pay employees during times of power outages.

Most small businesses are choosing to close during power outages, as thefts and burglaries increase during these periods.

“The South African Chamber of Commerce and Industry (SACCI) stated the load-shedding crisis will impact SA’s economic recovery from Covid-19. Economists agreed that persistent load-shedding will cripple economic recovery if a solution for planned power outages is not found soon.

“SACCI further reported load-shedding costs the country R17-million loss per hour. The chamber, which represents over 20 000 small- and medium-sized businesses, warned that companies are struggling with power cuts and additional job losses,” said Dlamini.

GCN questioned what help is available to small businesses affected by the pandemic and power interruptions.

Dlamini said CoE’s economic response plan provides support to informal and formal businesses.

Informal business support includes:
• Registration and regularisation of informal businesses in line with the Business Act.
• Providing information to enable affected businesses to access government support.
• Market access programmes for SMEs.
• Skills development and training.
• Provide grants as an incentive for registration and compliance.
• Funding through Ekurhuleni Community Enterprise Development Fund (ECEDF) as a relief intervention.
Formal business support includes:
• Investment and development facilitation.
• Assisting affected businesses with development approvals and certificates of compliance.
• Strategic investment in economic infrastructures, such as special economic zones and the city’s industrial park.
• Providing access to the city’s business and industrial sites temporarily.

Daily operations
Mabale highlighted how the pandemic changed the dynamics of daily business operations focusing on small and medium businesses, especially at the start-up stages in the township economy space.

“A business from its inception is not only meant to survive but also strive. This means a business needs to have proper systems, processes and sustainable business support that ensure the sustainability of such a business,” said Mabale.

“Through our events, we offer township businesses creative solutions and entrepreneurial support. We have covered a base of 75%, which is 2 460 businesses from 2017 to 2020 in the manufacturing and food industry.

“These businesses already struggled to keep up with the technological trends for competitive advantage. Funding can be a challenge for many start-ups and lack of digital skills is at the top of the list,” said Mabale.

He said 17.6% of local businesses failed in the first year of Covid-19 because of a lack of technological or digital skills as these pertain to entrepreneurial adaptation.

“I realised that non-profits in the social development sector suffered, as businesses couldn’t generate revenue because of power outages and the pandemic.

“The social sector is the anchor of all other sectors, whether private or public. No industry in or out of the social sector can fully function without an influence by this sector,” Mabale said.

“A business needs an educational touch for strategic layout. Staff need proper health support. As the social sector is in the frontline, it is apparent why Covid-19 exposed the vulnerability of local businesses. Behind the social sector lies the biggest issue that affected local businesses in direct proportion to Covid-19 – power cuts,” said Mabale.

He highlighted that in this era, 85% of services rendered in the local economy space depend on electricity.

“Businesses depend on electricity to be efficient, yet the latest power cuts in Ekurhuleni resulted in many businesses closing down. Businesses suffered severe losses with no hope of recovery.

“The role of NPOs and NGOs is to create a bridge between the private and public sectors to promote the social and economic interests of the public or community,” he said.

“Stats show almost 30% of NPOs are not registered, while others are partly registered. Any organisation needs capital to serve its mandate. Lack of funding can cause financial losses or closure.

“This needs to be done with proper assessment systems in place. Government must also offer mandatory management and leadership training for businesses or organisations before registration. On completion, they will operate.”

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