Rolling blackouts are enabling the collapse of small and medium-sized enterprises (SMEs), according to Shawn Theunissen, who believes the sector is key to transform the economy.
Theunissen is the founder of a leading SME development programme and B-BBEE advisory service Property Point and president of Johannesburg Chamber of Commerce and Industry.
He said in addition to challenges arising from a stagnant economy and the strenuous impact of Covid-19, SMEs are faced with the issue of “excessive electricity cuts, which puts further pressure on their operations” and ability to contribute towards economic transformation.
This as Eskom has been faced with massive energy crises for the past 15 years and is getting worse by the year. The crisis, alias loadshedding, does not only impact the daily lives of people and their business operations, but may also be seen as a threat capable of driving the country’s economy into a recession.
The role of SMEs in economic transformation
According to Theunissen, SMEs contribute to creation of jobs, sustainable growth, poverty alleviation, and innovation “in a significant manner”. He said they are also “central to efforts to achieve environmental sustainability”.
“SMEs are productive drivers of inclusive economic transformation for the global economies. According to the World Bank, SMEs represent 90% of all business worldwide and around 50% of employment, while formal SMEs contribute up to 40% of GDP [gross domestic product] in developing markets and provide 70% of employment.
“The International Finance Corporation and Statistics South Africa report, using data from 2012-2019 estimates, suggest that SMEs provide employment to between 50%-60% of the workforce, and 34% to South Africa’s GDP.
“In the beginning of 2018, the employment level was at 28.7% and now [it is] sitting at 33.9% in 2022 [Q2], these numbers are significantly higher when including informal SMEs.”
Theunissen said the potential of SMEs’ growth would be put to better use if they had access to finance, awareness of opportunities, good infrastructure, and “less burdensome regulation requirements”.
Impact of loadshedding on SMEs
The Department of Small Business Development agrees with Theunissen that SMEs play a huge role in economic transformation. It has said, however, that the impact of loadshedding on the businesses’ potential to drive economic growth is difficult to determine.
“Small businesses play a major role in the transformation and growth of the economy. The National Development Plan [NDP] is very clear that SMMEs should be the driver in the creation of employment,” the department said.
“By 2030, the NDP requires the small business sector to have created millions of jobs. But this has been made very difficult by both Covid-19 and continued loadshedding.
“It is difficult to quantify the exact impact of loadshedding on small businesses. Energy and economic experts have estimated that the country loses around R2-billion a day as a result of loadshedding.
“Keeping in mind that small businesses don’t always have the means to sustain themselves through loadshedding by incorporating tools such as generators, it is pretty obvious that the impact is huge.”
Theunissen said because of the insecurity triggered by the erratic energy supply, SMEs are hesitant in investing to grow their business at this time, which in his view can in turn impact the growth of the economy.
He added that when SMEs are faced with blackouts, many of them end up closing their doors because they cannot function and not all of them have the privilege of an alternative power supply.
This leads to a loss in production, a jobs bloodbath, and financial implications for the businesses.
Theunissen explained: “Non-stable voltage flows in the electricity system damage electronic appliances, which may increase business expenses and they have to replace them.
“Not only does loadshedding have financial implications, but SMEs also do not have access to WiFi which relies on electricity. Traffic lights are affected, which can result in missed meetings, delayed deliveries, and employees arriving late for work.
“Furthermore, 3-4 hours without electricity compromises the security systems making, businesses vulnerable to criminal activities. The SMEs may need to increase the price of their goods/services to maintain overheads which they still have to cover regardless of whether they produce or not, and this has knock-on effects on consumers.”
How can SMEs survive rampant blackouts
For SMEs to survive and continue to operate, Theunissen said they need to plan their business operations around the proposed loadshedding schedules to minimise production delays.
“[They must adopt] flexible working hours, opening for longer hours to make up for lost time and switch off electronic components [machinery, computers, etc.] when electricity goes off to prevent damages.”
SMEs are also advised to seek assistance from the Small Business Development Department.
“The department, through its agencies, has a range of offerings and opportunities that can be exploited by small businesses to cushion and sustain themselves.
“We encourage small businesses to get in touch with either the department or the entities to familiarise themselves and possibly take advantage of such opportunities,” the department said.
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