Load shedding was implemented by Eskom, South Africa’s main electricity producer, in November 2007 to ease the load on the electric grid. This was due to an increased demand for electricity coupled with the failing of poorly maintained power stations and the lack of construction of new ones, which would increase much needed electricity production.
Most, if not all South Africans are familiar with the experience of rushing home after a long day at work, hoping to relax and watch a couple of hours of television before bed, only to get home and find that there is no electricity because of load shedding! We can all agree that it is an irritating inconvenience, many times costly for individual households, who have to make other plans, and not to mention the damaging effect that the ‘on and off’ electricity can have on many electrical appliances. But how are the South African businesses affected when they have to go without power for hours on end? And what will the repercussions be – short and long term – for the economy at large?
During load shedding, electricity supply to different areas is shutdown at different times of day and night to decrease the demand for electricity at any given time. This means that an area can go for up to a total of 14 hours without electricity on a given day, depending on the severity of the load shedding required. Thus load shedding is a serious burden on the South African economy – and it does not seem to be an end in sight.
One of the obvious impacts on businesses is the loss of production and the obvious loss of profits. Since many of them, particularly small businesses and manufacturing companies, cannot operate without electricity, they will have to forego the production and revenue, that would have been generated through normal business operations, due to load shedding outages. This is effectively preventing South African businesses from remaining competitive on the international markets.
Statistics from Trading Economics show that manufacturing production has been on a consistent decline over the past 25 years and, although electricity is not the only contributing factor, it still remains the Achilles heel chocking the manufacturing sector of South Africa.
Crime is also on the increase every time the power goes off. With alarm systems rendered weak and sometimes useless by the lack of electricity, businesses become much more susceptible to crime which, of course, increases the losses to businesses.
To stay afloat businesses are forced to invest in alternative sources of electricity in order to remain in operation or to maintain the security of their businesses – another added cost to the already precarious economic environment. Why are we then surprised by the many current retrenchments, lack of funds to provide increases and the constant rise of people left unemployed?
On our national economic level, economy growth is clearly stifled because if businesses are not operating consistently, investors will be more and more reluctant to invest long-term capital in our unstable economic environment.
The RMB/BER business confidence index, which measures the percentage of business people who are satisfied with prevailing conditions in South Africa, went down from 40 points to 35 in the first quarter of 2021, with load shedding cited as one of the reasons for decreasing business confidence. Even Steve Harvey, the American comedian and television personality, was quoted in May 2021 as saying, “Dear Eskom, I would love to purchase a house in South Africa, but I would like to be able to walk in and have the lights on…,” which emphasises the growing ire towards the load shedding situation in this country, even amongst international personalities – who could very well be possible investors. Thus is South Africa finding itself working at a deficit and chocking its own development, at a time when economic growth is an essential need for the South African economy.
Unfortunately, load shedding is forecasted to continue to be a staple of the South African experience for the next five years – or so we are told. So, South African business, brace for impact because you are forced to find ways to adjust – or shut – your operations to minimise the impact of load shedding.