Dear Minister,
As entrepreneurs, we understand the business and challenges of leadership, and the need to be decisive – when to shift from discussion to action. Leaders understand that key decisions can make a difference, today, and we hope, as the new minister, you will make a commitment to act swiftly, and just do it. Time is not on your side.
Whilst entrepreneurs are agile and resilient, constantly looking for solutions, our tenacity has already been tested to the limit during Covid-19, the floods and the riots. So, the expectation that we can continue to get on with it and implement strategies to cope with load shedding is untenable. The expectation that small businesses will save the country is not reasonable because they are suffering the most. They need a lifeline.
Every outage is sucking the life out of our fellow South Africans. Individual entrepreneurs, their businesses, their families and communities cannot wait for something to change at some stage in the future. The country has placed a heavy weight of responsibility on small businesses to be the main drivers of the economy and plug the job deficit - how can they when they are not given the basics to run their business, in this case, electricity?
These are people trying to put food on the table and battling to keep their businesses afloat. This is what it is like on the ground if you are unaware. In a recent survey of our entrepreneurs across all corners of the country, the message was clear, when there is load shedding, the impact is devastating; production capacity is cut, resulting in large orders not being taken on, especially in the manufacturing industry (encompassing bakeries to print houses).
Delays lead to client dissatisfaction, staff relations are impacted, and with all the ramifications from spoiled goods to the additional long-term outlay of diesel costs - profit margins shrink. For retailers – when the lights are out, and doors are closed, overheads such as wages for staff, rental or operating costs remain constant.
The stop-start also results in damage to machinery. In one case study, a startup youth-owned furniture manufacturer has suffered irreparable load-shedding damage to machinery and is without insurance to cover this. Another supplier of traditional African herbal products, who learnt her trade from her grandfather, explained that the stores she supplies don’t have backup generators, so when there is load shedding her products don’t sell. The same goes for her suppliers, when there is load shedding they can’t give her the ingredients she needs, which means her production grinds to a halt.
Believe it or not, load shedding has forced entrepreneurs to implement outdated and inefficient manual systems, like the youth farmer in Kuruman, Northern Cape, who has resorted to watering her tunnel-grown vegetables by bucket, just to maintain the crop, resulting in higher labour costs and lower yields.
Examples like these are a backward slide to the tremendous strides South Africa has taken in its digital transformation, so critical to building our position on the global platform. Progressive entrepreneurs who embraced data-driven decisions, automation, virtual meetings and cloud technology find even their basic working day hampered by load shedding.
Businesses that are fully digitally enabled, including those who retail online, now face system downtime, yet customers still “expect instant responses to their queries, world-class online shopping, and 24/7 engagement; and staff demand seamless hybrid and remote working conditions.”
The power outages are also causing computers, printers and support equipment to break, as evidenced in a surge in sales for businesses that refurbish computer equipment.
There is no shortage of case studies, Minister. Of lost deals, of compliance letters delayed and red-tape hindering workarounds to install solar. There is no shortage of personal lives impacted as a result of business shut downs. Based on our experience with entrepreneurs, here are solutions you may not have thought of.
What SMEs can do for themselves
Forced to think on their feet, entrepreneurs are building proactive solutions, like the ambitious bakery that faced staff friction when they reduced working hours and had to resort to manual processing of the dough. To mitigate this, they have approached the nearby gold mine to be on-boarded to their procurement database. The win-win partnership will mean a steady income and access to a consistent power source provided by the mine.
Wider small and medium-sized enterprise (SME) collaborations can potentially be encouraged to unlock load-shedding pressures, for example, pooling purchasing power for backup systems, and co-locating to improve the cost-effectiveness of continual internet solutions, or security. Other solutions SMEs have applied include pre-producing orders and shifting away from customised products to streamline production.
Corporate Participation
A thriving small business sector is important to both corporate and government.
Multi-stakeholder collaboration models can help to ease the impact of our energy crisis, with small business park clusters that guarantee electricity supply, water and internet access as a viable solution. This approach is showcased by the V&A Waterfront in Cape Town, which has improved its appeal and built a more sustainable micro-economy by hosting an array of smaller businesses – to the benefit of the corporate, small business and consumer.
Market access via SME-friendly corporate and government procurement channels is vital for healthy growth towards resilience, yet how many corporates are caring for the survival of their small business supply chain as this crisis bites deeper?
Government participation
The call from entrepreneurs is for solutions now. In the form of fast-tracked tax breaks, subsidies and grants: for rent, for energy-efficient equipment, for conversion to green energy, for uninterrupted power supply and power banks, for wages during downtime.
While the motivation for funding is clear, the budget for this will negatively impact other parts of the economy, but this will be offset by shoring up growth and as articles in media have highlighted, if reducing poverty and inequality truly is central to our future, then providing grants for alternative energy solutions to the load-shedding crisis is non-negotiable.
Given the scale of the problem, then this support needs to be on a scale with that provided to small businesses during Covid-19, so it is with intense interest we await the details, and the level of ambition, of the Minister of the Department of Small Business Development’s announcement on January 18 that they are urgently working on an energy relief package for the small, medium, informal and micro sectors.
Of the roll-out of rooftop solar panels, household assistance and tax incentives alluded to during President Cyril Ramaphosa’s State of the Nation Address.
We all want to build a better South Africa. As stated by your colleague, Finance Minister Enoch Godongwana, load shedding is “one of the biggest barriers to economic growth”
It’s indeed time to take rapid impactful action to solve this national disaster today.
Catherine Wijnberg
CEO, Fetola
BUSINESS REPORT