Loadshedding has cost businesses dearly, forcing them to become less dependent on Eskom. Businesspeople strongly believe electricity generation and distribution must be privatised, and regard energy shortages as a top social and political priority. These are some of the findings from a recent Sakeliga survey of businesses, including its members, on the cost of rolling blackouts.
The poll was conducted in June 2022 during a period of severe loadshedding.
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The survey reveals that the direct costs of severe loadshedding amount to a very substantial 5% of turnover for the median business. Results reveal that businesses seem to spend as much on alternative power sources to alleviate Eskom shortages as they do on their Eskom bills, indicating that the actual cost of energy is substantial due to its scarcity.
The median business in the survey had a monthly revenue of around R300 000, and reported losing R8 000 per month in revenue in the three months of acute loadshedding from April to July 2022. Companies also reported around R1 250 per month (median) in damages from loadshedding over the past year – for example, related to surge damage.
The survey shows that complete dependence on Eskom has diminished substantially over the last three years, with acute dependence falling from 60% to 35% of those surveyed. However, most businesses remain dependent on Eskom to a significant degree. Less than one in five businesses surveyed consider themselves completely independent of Eskom’s power supply, and this has not unchanged in the last three years.
There are limits to how much individual businesses can “go off the grid” without the efficiency benefits of a coordinated and scaled electricity network. Most businesses need reliable, affordable, industrial-scale electricity production, which small-scale renewable solutions cannot provide.
The inability to develop private production and distribution networks due to state regulation also severely constrains options for independence from Eskom. Viable individual solutions also require costly capital outlays that most small and medium businesses struggle to afford.
There may also, to some extent, be a degree of complacency about the extent of the energy supply problem and the time that it could take to resolve at scale.
The survey confirmed that businesses tend to rely on backup power solutions that offer reliability and lower capital outlays and can handle high energy demands. Approximately 70% of businesses surveyed use petrol or diesel generators as backup power supply, compared to only 20% that use solar power. Nearly 40% use small UPS systems for short-term continuity, compared to only 10% using more expensive large battery storage solutions.
Given the substantial rises in the prices of fuel and fuel taxes, reliance on petroleum generators can be expensive, but their reliability, energy density, and lower upfront capital outlays clearly still make them appealing.
Power shortages have been increasingly costly for South African businesses since rolling blackouts began in 2007/08. Severe loadshedding in 2022 (extended periods of Stages 4 to 6) has placed additional burdens on doing business, and we can also see this in broader macroeconomic data with indicators of industrial activity deteriorating into the second quarter of 2022.
Our survey provides at least four key takeaways:
- The direct cost of severe loadshedding is substantial (around 5% of revenue for the median business in our survey).
- Chronic power shortages since 2007/08, now worsening materially into 2022, entail substantial negative effects on economic growth and business health.
- Fossil fuel-based energy backups, not renewables, remain the most popular in meeting the real needs of individual businesses; but isolated, individual energy solutions still have limited reach in producing energy independence.
- Business owners are clearly demanding the ability to buy energy from alternative producers and distribution networks that can affordably meet their industrial-scale needs. Therefore, over 90% of those surveyed fully agree that South Africa’s energy market must be completely opened to private power production and distribution.
These results strongly underscore our view that full energy market liberalisation is an urgent imperative.
Energy shortages are a grave threat to economic and social flourishing. Policies that bias energy toward one particular type of energy technology must be abandoned. Instead, market forces must be allowed to guide the discovery of what works for real businesses that need real and diverse energy solutions.
If this freeing of the energy market, in the vital interests of society, is not granted by the state, then energy independence will have to be claimed by concerted civic and private efforts.