Cost of rolling blackouts exceeds R1.2 trillion, small business suffers most

The cost of rolling blackouts is estimated to exceed R1.2 trillion and small businesses are not exempt from the financial impact.

Many have closed their doors as they are unable to afford the cost of alternative power and the price increases passed on by suppliers who add the cost of running generators to what they charge.

However, the real cost of rolling blackouts goes beyond just rands and cents as the energy crisis continues to have a profoundly negative impact on the overall morale and productivity levels of the country’s employees, says Jeremy Lang, chief investment officer at small- to medium-sized enterprise (SME) financier, Business Partners Limited.

He believes that loss of revenue is merely the tip of the iceberg for small businesses who rely heavily on a consistent and reliable energy supply.

“To fully comprehend the extent of the impact that loadshedding has on the SME sector, we need to consider what it has meant for employees’ pockets as well as their daily working regimes.”

A coffee shop owner from Randburg, who did not want to be named says she has to rely on generators to keep her coffee shop open and continue offering all menu items.

“If you cut items from your menu due to rolling blackouts, you will leave customers, leaving us with little choice but buy more fuel to keep the generators running.”

She says while she is on the receiving end of all the other suppliers in the supply chain hiking their prices to pay for their increased costs for alternative power, she cannot simply increase menu prices every month.

In addition, her power bill does not decrease although power is out for almost half the day, because once the power goes back on, appliances such as fridges have to work twice as hard to get cold again. Appliances and equipment also frequently break down due to power going on and off.

The only solution that is left in the end for small business is to cut staff, she says.

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Decline in productivity hurts small business

According to a recent online survey conducted by market research firm, BrandMapp, 45% of employers reported a noticeable decrease in productivity due to rolling blackouts.

This was also reflected in the results of the Q4 2022 SME Confidence Index conducted by Business Partners Limited, where 39% of small business owners reported that their business’ productivity levels had declined as a direct result of the rolling blackouts.

Lang says these findings come as no surprise, given that power cuts lead to the abrupt disruption of workflow. Businesses are also drained of the added time needed to restart operations, retrieve lost data and constantly adjust working timetables to accommodate the loadshedding schedule.

“The cost of lower productivity results in small businesses generating reduced output which in turn affects not only profitability but also their ability to create new jobs.”

It is not surprising then that employee morale also takes a knock due to rolling blackouts. BrandMapp’s study found that worker confidence and mood has taken a dive as a result of increased levels of stress, financial pressure and job insecurity.

“The possibility of downsizing and salary reductions is a looming reality for many of the country’s small businesses that simply cannot afford to absorb the risks and costs of rolling blackouts. This consequence has been felt most acutely by township and rural-based businesses.”

According to the Insights Report conducted by Nedbank in partnership with the Township Entrepreneurs Alliance, about 65% of small township businesses are forced to cease operations during power cuts, while another 66% of these businesses have also been forced to cut jobs due to significant revenue losses.

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Disproportionate effect of rolling blackouts

“The disproportionate effect of rolling blackouts on micro-enterprises and those in the informal sector is evidence of the pressing issue of economic inequality. Many of the corner shops, tailors, shisanyamas and local fruit and vegetable sellers who have become such an important part of the South African SMME landscape are not in a position to afford expensive generators, inverters and alternative energy sources.”

Lang says this has placed many local business owners under immense stress and ‘job shedding’ has become a very real fear.

The need for access to funding for alternative energy systems is one of the key factors that prompted Lang and his team to set up the Energy Fund for SMEs to provide loans for small businesses to finance off-the-grid power supplies, such as generators and inverters.

He warns that small businesses will have to adopt an agile mindset and approach to change.

“These are unprecedented times for the South African socioeconomic climate, with emerging challenges that present a whole new set of threats to business continuity and by extension, employee wellbeing.”

Lang says small businesses can no longer afford not to invest in contingency plans that can help them stay afloat in the energy crisis.

“We are aware that loadshedding will persist into the indefinite future and therefore, small businesses must find creative ways to maintain their employee value proposition by offering flexibility and structured arrangements to recover lost working hours.”

Now is also the ideal time to invest in health and wellbeing by providing support for employees and building positive team culture, he says.

“The energy crisis is undoubtedly one of the biggest contributing factors to the course of the local working landscape’s evolution. In the very near future, the way these businesses respond to the mounting pressures will determine the long-term sustainability of the sector and its people.”