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South African businesses are collapsing under load shedding as the number of liquidations rises.

Reference: Published by Staff Writer, 22 May 2023

https://businesstech.co.za/news/business/690079/businesses-in-south-africa-are-buckling-under-load-shedding-as-liquidations-climb/

According to the most recent business liquidation figures released by Stats SA, 523 enterprises have closed their doors in South Africa as of this writing.

112 firms were liquidated in April 2023, 99 voluntarily and 13 involuntarily, according to the statistics body.

This brings the overall number of business liquidations for the year to 523 and joins the 168 that occurred in March.

For the fourth consecutive month this year, the financial, insurance, real estate, and business services sectors—204 in total since January 2023, including the 45 liquidations in April—were the most severely impacted industries.

Following suit, unclassified industries recorded 26 liquidations, while the trade, catering, and lodging sector added 24 more in April.

The only mentioned industries without liquidations were those in the mining and quarrying, agriculture, hunting, and forestry, and power, gas, and water sectors.

The impact of load shedding on South Africa’s small and medium-sized enterprises (SMEs) is severe, and nearly all of them have experienced production and income losses as a result of the power outages.

In a recent parliamentary question-and-answer session, the minister of small business development was asked if her office had evaluated the effects of electrical blackouts on small firms. The question raised the issue of load shedding’s effects on SMEs.

In response, Minister Stella Ndabeni-Abrahams cited data from the Small Enterprise Finance Agency (Sefa) that demonstrated load shedding has a major negative impact on SMEs.

Only 214 of the 1,500 Sefa clients who were to participate in this study answered.

The majority of those surveyed worked in manufacturing, retail trade, lodging and food services, transportation, building and construction, social services, financial services, agriculture, and mining and quarrying.

The following findings were among those noted:

  • Due to load shedding, all respondents experienced a loss in sales and production;
  • 76% of those surveyed said they still don’t have backup power systems in place to lessen the impact of load shedding;
  • The majority of respondents said they used the load shedding schedule to plan their business operations and have decreased their production to deal with the impact of load shedding;
  • The majority said they needed support with funds to buy alternative energy sources and with loan restructuring in relation to their agency loan repayment obligations;
  • Most of these companies operated for between one and five years.

Many business stakeholders have also remarked that rampant and intensified load shedding has resulted in unpredictable labor bills because many companies have had to rely on casual workers to correspond with the erratic load shedding schedules.

The study was done in August 20222, and given that 2023 has been the worst load shedding year to far, SMEs are probably facing even more difficult economic situations.

What’s happening

According to Ndabeni-Abrahams, the department has taken note of the difficulties SMEs are having as a result of increasing load shedding and is currently in consultations to find solutions.

“The DSBD and its agencies are looking at a three-pronged approach for supporting SMMEs and Co-operatives affected by load shedding,” she stated.

These comprise:

  • The Power Purchase Product (PPP), often known as alternate power sources, provides instant assistance for both formal and informal businesses. Supporting SMMEs with alternative energy-generating equipment (generators and Photovoltaic installations – PV) is a project of the Small Business Development Portfolio (DSBD, Seda, and Sefa). The following program structures will be used to carry out the program:
    • Through the DSBD’s Informal and Micro Enterprise Development Programme (IMEDP), informal businesses will receive support.
    • Support for small enterprises will be provided by Seda’s Asset Assist Program.
    • Through Sefa’s Township and Rural Entrepreneurship Programme (TREP), small to medium businesses will be promoted.
  • On behalf of the government, Khula Credit Guarantee (KCG) administers the Guarantee Program through the Bounce Back Scheme. With all relevant parties, including the National Treasury, the scheme’s custodian, extensive discussion is still needed before moving forward with this medium- to long-term intervention.
    • The National Treasury has expressed interest in and is considering expanding the bounce-back program to include all Development Finance Institutions in ongoing discussions.
  • Consultation with numerous stakeholders to develop a wider portfolio with a main emphasis on the promotion of novel concepts.
    • Ongoing discussions with numerous departments and pertinent organizations to establish sustainable, long-term solutions for the provision of energy.

Prior to implementing any of these programs, the department is still awaiting National Treasury approval, continued Ndabeni-Abrahams.

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