JSE-listed companies this week laid bare the severe economic impact of Eskom’s power cuts including significant extra costs and billions of rands in lost income – a dark economic cloud that has seen a whopping 685 000 hours lost to economic activity due to loadshedding.
Retailer, The Foschini Group, said the energy crisis profoundly impacted South Africa’s economy and society, making it difficult for businesses to trade, operate and plan.
“This adds abnormal costs to the business, including the inability to pass on the impact of inflation and the costs of dealing with loadshedding to consumers in full,” said the company.
“Further, due to loadshedding, retail footfall has declined. This, together with a change in consumer spending patterns, has impacted South African retail.”
Foschini said the unprecedented loadshedding has hurt its business.
“The impact of these consistently high levels of loadshedding would have been significantly worse were it not for the back-up power solutions installed over the past three months and now provide partial mitigation to about 70% by turnover of our South African stores.”
Due to local power cuts, Foschini lost about 120 000 trading hours during January and February, representing 9.4 times of lost trading hours over the same two months in 2022.
“This equates to about 345 000 lost trading hours for the 11 months ended 28 February 2023. The true impact, however, has been estimated at close to double that figure [about 685 000 lost trading hours], as the disruption and inconvenience dampen customer demand,” the company said.
Foschini estimates the financial impact of loadshedding to have reduced its retail turnover by R1-billion in its 2023 financial year. In addition, power cuts require higher inventory levels, which would reduce its gross margin, the retailer added.
“Additional unbudgeted direct costs of about R65-million have also been incurred regarding diesel, security, and maintenance. In addition, about R220-million has been spent on back-up power.
“As a result, an additional R30-million will be spent in the 2023 financial year to ensure that about 80% of turnover of The Foschini Group Africa’s stores have back-up power.”
MTN estimated loadshedding resulted in an R695-million reduction in its South African operating profit during the half-year ended December 2022.
“MTN South Africa commenced the rollout of its comprehensive network resilience plan in the second half of 2022 and targets a completion of this process by the end of May 2023,” the telecommunications group said.
As a result of the power cuts, MTN faced vandalism and had to put extra security at its sites, which increased its operating costs.
Sun International, which owns Sun City, said it spent R53-million on diesel costs in 2022 due to power cuts, while food group Libstar said power cuts added R39-million to its operating expenses in 2022.
Financial services group Old Mutual said it was bracing for a rise in policy lapses, as consumers take the strain from the battered economy and blackouts.
“Failure to address loadshedding will impact crop failure, higher food prices and shortages of certain food products, further dampening economic growth,” Old Mutual said.
Patrice Motsepe’s African Rainbow Capital Investments, which has a stake in TymeBank, said this week that loadshedding hurt the companies it invested in.
The group said its portfolio companies felt the power cuts through major operational disruptions, the financial implications and lower consumer confidence.
Transaction Capital, which owns second-hand car dealer WeBuyCars, said increased power cuts were one of the critical factors that knocked its SA Taxi unit, which provides finance and other services to owners of minibus taxis.
In addition, MultiChoice said loadshedding significantly impacted its customer activity.
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