Antoine e Slabbert
1 minute read
21 Aug 2015
6:00 am

Manufacturers make new powerplay

Antoine e Slabbert

Eskom should be worried about manufacturers finding alternatives for electricity supply from the utility and municipalities as it may affect its investment in new power generation, including Medupi and Kusile, says Iraj Abedian.

Photo: iStock

Abedian conducted research for the Manufacturing Circle, finding 63% of the 73 respondents had their own on-site generation as a way of mitigating uncertain power supply. Respondents were spread over medium-sized and big companies. This may also impact municipal finances as they supply the majority – 69% – of respondents.

Eskom supplies 13% and, between them, they supply 18%. Some companies implement more than one mitigation strategy, with 53% rescheduling production, 19% reducing production and 15% closing production lines, or substituting production with imports.

In the second quarter (Q2), companies supplied by Eskom had on average three days’ electricity disruption (four in Q1). Municipality-supplied companies’ disruption remained unchanged, averaging two days.

Forty-eight percent of respondents upgraded their plants in the last year and a third said greater water and energy efficiency drove this. Abedian said pressure on electricity supply was one of the main contributors to the downbeat mood among manufacturers in Q2.

He emphasised manufacturing was the heartbeat of the economy and said the lack of a credible national energy policy results in manufacturers being in the dark about how to navigate the electricity challenges.

Abedian said unless “we wake up and elevate the problem to national level, we will gravitate from bad to worse”. He said 22% of respondents said their profitability at operating level deteriorated by more than 15% in Q2.

Pessimism among respondents increased materially, with 82% (up from 71% in Q1) saying conditions in the industry would be “poor” or “fragile/weak” over the next six months, 75% (up from 59% in Q1) said the same over 12 months and 69% (up from 41%) over the next two years.

Twenty-seven percent of respondents retrenched 1-5% of staff in Q2; 21% retrenched more than 5% and 45% planned retrenchments in coming years.