The reality of load shedding for businesses and household salariessuzette
South Africa’s economy has been crippled with the implementation of daily power cuts for the past few months, in that it has cost billions of rands in lost activity. All indications are that load shedding will remain an issue for businesses and households in South Africa in 2023, with Eskom itself warning the public to prepare themselves for a bumpy year ahead. Economists and analysts have warned that load shedding is likely to get worse, before it gets any better. They continue to state that South Africans should expect higher stages of load shedding by the middle of 2023, with energy experts pointing towards the possibility of stage 8 load shedding being implemented on short notice. The impact that load shedding has on households and businesses both small and large has been and will continue to be devastating.
Below is a graph from the EskomSePush App that compares the amount of load shedding between 2015 and 2022:
Above and beyond the outages being much more outrageous in 2022 than in the previous years, the severity of load shedding has already worsened substantially.
Impact on businesses:
Load shedding continues to disrupt and disturb the productivity of the South African workforce. Firstly, the current rapid changes in the load shedding schedule shows continued instability of the grid, making planning around load shedding extremely difficult for any organisation. Jan Oberholzer, COO of Eskom, said that although the grid is highly unpredictable, there is no risk of a blackout at this stage.
Tiger Brands, a large South African packaged goods company, confirms that stage 6 to 8 will take R120 million out of their pockets for additional generating capacity to ensure ongoing operations.
The majority of all businesses heavily rely on electricity, especially considering the difference WIFI makes to the effectivity and productivity of an administrative office. This has a significant impact on those individuals working from home or in a hybrid workplace. It might even be time to call quits on the trend of working from home or hybrid offices for those not having reliable alternative power supplies readily available. Both corporate and small businesses have been seeing failing internet connections, missed deadlines, employees taking longer to complete tasks and lost data due to outages. Furthermore, small businesses are most likely making use of the municipal grid and not Eskom’s. They would therefore not even have the opportunity to negotiate deals with Eskom like big businesses can. Christo van der Rheede from AgriSA stated in September 2022 that there are already serious concerns about the availability of fresh food in our country because of load shedding.
Farms, among other production operations, have been forced to adapt their ways in order to compensate for the load shedding. They have to reschedule time slots of operations, try to maintain cold storage and make up for larger input costs. Making use of alternative power options like generators is a large financial expense, that some cannot afford.
John Jack, CEO of Galetti Corporate Real Estate, said that for business to obtain backup power supply is now a necessity and no longer a luxury. He explained that this has been fuelled by the need to ensure continued operations despite the instability of the national grid.
According to JP Breytenbach, Director of Breytenbachs Immigration Consultants, an increase has been noted in the number of local businesses looking into relocating to the UK. They explain that the lack of electricity has resulted in businesses losing productivity and revenue, while experiencing damage to equipment and inventory. All of the above may have an impact on a company’s profitability and sustainability, which ultimately influences remuneration and job security.
Impact on households:
Households are feeling the effect of municipal electricity tariff increases, said the Bureau for Economic Research (BER). At the start of January 2023, NERSA approved an 18,65% electricity tariff increase for 2023, effective from 1 April 2023. Eskom applied for a 32% increase, which is almost double what the regulator approved. This tariff hike is for direct Eskom customers. There are even higher hikes expected from municipalities as from the 1st of July 2023.
The current issue is that most wage negotiations / salary increases already took place last year, before the announcement of Eskom’s electricity price hike. Most employers had not taken this into account when approving remuneration adjustments for 2023. In addition, the National Minimum Wage have been increased to R25.42 (9,62% increase) as from 1 March 2023. However, for the national minimum wage to compensate for the coming electricity price hike, not even considering the food and transport inflation, the Pietermaritzburg Economic Justice and Dignity group said the hike would had to have been 11,8%.
Products to combat the daily struggles and inconveniences of load shedding are getting more and more expensive for households. These may include an inverter, a UPS, generator, solar panels, battery powered fans or lights and most probably fast-food take-aways.
Companies will continually have to monitor load shedding and evaluate how best they can be equipped under these circumstances, while facing the reality.
Article written by Lené Eygelaar