Does load shedding mean that retailers should be avoided entirely? Chris Gilmour weighs in.
The scourge affecting retailers and consumers alike is rotational power cuts aka load shedding. This has now become so frequent that it is having a serious impact on the ability of retailers to transact normal business in South Africa.
When load shedding was less frequent and less intense, it didn’t really matter, other than it caused a bit of inconvenience when certain shops had to close as they lost power. But now, the sheer physical cost of keeping refrigerators going with additional diesel at fast-moving consumer goods (FMCG) retailers, or keeping battery backup capability in clothing stores, is becoming horrendous.
The large clothing retailers such as Truworths and The Foschini Group have all installed battery backup systems in around 70% of their stores, which allows them to carry on normal trading in those stores. Shoprite recently announced that it has spent almost R600 million on diesel to keep the lights and its refrigerators going in its stores. Pick n Pay is incurring similar expenses, with total diesel costs now estimated to be costing R60 million a month. The Pick n Pay trading update seems especially concerning, as the group appears to be saying that earnings in the current year to end February 2023 are unlikely to match those of the previous year, thanks to the impact of load shedding.
The coldest of all
Woolworths Foods hasn’t quantified the cost to its supply chain as yet, but it must be enormous, considering that their cold chain is by far the most sensitive of any of the large FMCG retailers. The tolerance in terms of temperature that is permitted between van and store is tiny and deliveries have to be made quickly to ensure freshness of product. This is the primary reason that Woolworths Foods is not available in the rest of Africa outside of South Africa; they just don’t have confidence that those tolerances could be achieved in Africa.
Load shedding of this order of magnitude has reduced South Africa to an environment that in some respects is on par with the rest of Africa. This statement sounds harsh but it’s true.
And the story doesn’t stop there. Having bought one’s chilled or frozen food, what does one then do with it to ensure that it stays fresh when the power goes off? Options are very limited.
The first thing to do is to reduce average shop to daily from weekly or monthly. While that may be irritating, it at least solves the problem of wastage in a domestic refrigerator. But if that type of pattern is repeated throughout the country, then shopping volumes at supermarkets and elsewhere will suffer.
Of course, one can invest in a cooler box with battery backup, but that is expensive. Back in the day, when load shedding wasn’t so frequent and intense, it was possible to keep food reasonably cold for longish periods of time by keeping the fridge door closed and just waiting for the two to three hours of load shedding to pass. But with 10 to 12 hours of power cuts in a single day, the domestic fridge just can’t cope.
Will it change?
Load shedding has been a feature of South African life since 2007 and it’s getting noticeably worse. As South Africans, we are now subject to the obscene spectacle of a government that has completely lost control of the Eskom situation and where its leaders are pointing fingers at each other, desperately looking for a solution to this mess of their own making. There may be SOME relief by 2024 as an extra 9,000 Megawatts of new power is brought onstream. This doesn’t include any power from the Turkish Karpowerships that mining minister Gwede Mantashe so desperately wants to bring onstream.
If all this happens, then there is more than a reasonable possibility that load shedding could end. But for that to happen will require a huge amount to political will and a lot of good luck.
In the meantime, the retail sector should probably be avoided, even though the prices of retail shares are more than discounting all the bad news.
