Financial Planning

SMEs severely impacted by load shedding

By: Jeremy Lang, regional general manager at Business Partners Limited

It has been reported that load shedding in South Africa at Stage 2 would cost the productive economy about R2 billion a day. As Eskom rolled out another consecutive day of Stage 2 load shedding this week, it is important to note that although the country is impacted as a whole, the implications for small and medium enterprises (SMEs) can be critical.

This is according to Jeremy Lang, regional general manager at Business Partners Limited (BUSINESS/PARTNERS), who says that in order for SME owners to limit this impact, they need to know exactly how the lack of consistent energy supply is affecting their businesses specifically. “For example, some businesses can accommodate producing goods and services around the load shedding schedules, however, other businesses may rely on passing trade at a specific time of the day. If this is the case, then load shedding can be detrimental.”

Based on our experience the industries that are most affected by load shedding are manufacturing, retail, hospitality and in particular, businesses that are using cold storage and refrigeration, he adds. “This is because over and above the potential loss of stock, the constant switching “on” and “off” can also damage the equipment which can become extremely costly to repair or replace.”

Load shedding also has a severe impact on a business’ productivity, says Lang. “As electricity is generally cut for around two to four hours, SMEs could lose up to four of an eight hour working day, which can also impact employees who are paid by the hour.”

Another way SMEs’ productivity can be impacted is in terms of their machinery, as some machines can take some time to start up, he adds. “This can also be costlier as the machines may use more electricity to start up again and in many instances, if the machines are busy with a continuous process and are interrupted midway, wastage costs will also increase.”

Further to this, these businesses will still need to cover their fixed overheads regardless of what is produced during the day, Lang points out. “As such, when businesses are less profitable as a result, they tend to increase prices to maintain margins and ultimately consumers foot the bill.”

Lang says that because of the uncertainty that the unreliable energy supply causes, SMEs may not invest in growing their business at this time, which will in turn restrict the growth of the economy.

In order to assist SMEs who are impacted by the current load shedding, Lang provides tips for them to consider. “Firstly, assess how important electricity is to the business and whether you can work or schedule your operations around the load shedding schedule.”

If this is not possible, then the best option is to consider investing in backup electricity supply such as generators or UPS systems, he says.

“Further to this, as the abrupt break in electricity also has the potential to damage the hardware of your computers, it is imperative that all SME owners make sure that the business’s information is backed up on a daily basis on a secure cloud based server, where possible.”

In closing, Lang says that in order to restore certainty to bolster the growth of South African small businesses and in turn the economy, energy security and the consistent supply of energy requires urgent intervention by government to ensure that Eskom’s operational model is effective. “We look forward to seeing how quickly the plans mentioned in President Ramaphosa’s reply to the debate on the State of the Nation Address will be implemented to turn the utility around.”

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