Business owners who borrow money from Business Partners Limited’s new Energy Fund for SMEs to buy their own electricity generation and storage systems are granted six months before they have to pay the first instalment, should this be in line with their plans.
Applications have been streaming into Business Partners Ltd’s R400-million Energy Fund for loans of between R250 000 and R2 million to buy and install solar and inverter systems, batteries, generators, or other alternative energy supply. The loans are offered at a competitive, risk-adjusted interest rate with a repayment term of up to five years.
The brisk take-up of the loans since the launch of the fund in April this year is not surprising, given the massive disruption to business operations caused by Eskom’s dysfunction.
“While the ongoing energy crisis presents many uncertainties, one thing we do know is that load shedding will continue to be a reality for the foreseeable future,” says Jeremy Lang, Executive Director and Chief Investment Officer at Business Partners Limited.
South African businesses are desperate to decrease their reliance on the national grid and to start investing in systems that will provide a consistent and reliable source of power.
According to data published by the South African Reserve Bank, Stage 6 load shedding costs between R204 million to R900 million per day. The total accumulated cost of load shedding has exceeded R1.2 trillion so far.
“Small businesses have been impacted by power cuts through loss of output, increased overheads, additional capital expenditure, operational challenges and supply chain disruptions. Ultimately these result in turnover reduction, margin shrinkage and long-term financial distress,” says Jeremy.
“What we also need to realise is that when the power comes back after a bout of load shedding, a business operation takes a while to get up to speed. This is especially true for manufacturing where some machines take an hour or two to warm up and become fully operational,” he says.
This is compounded by the need to clean machines when the energy supply is cut off and raw materials are wasted. During Stage 6 load shedding, a second black-out a mere two hours after the first one is devastating for business operations.
Another key area of impact to consider is the effect loadshedding has on employee morale. A recent survey by the market research firm BrandMapp found that load shedding has had a significant negative effect on worker confidence and mood. Finding ways to access a reliable energy supply is therefore first and foremost a matter of business survival.
Installing a power generation or backup-system is not cheap, and becomes ever further out of reach for businesses the more they are impacted by load shedding.
In the Q4 2022 edition of the SME Index, a quarterly survey by Business Partners Ltd, participants were asked if they had the necessary funds to install their own power generation or storage. No fewer than one in three businesses reported that they could not afford to invest in a system to combat load shedding.
“These findings are a strong indicator of a dire and urgent need that exists within the SME sector,” says Jeremy. The Business Partners Ltd Energy Fund loans are therefore structured for accessibility and affordability by allowing for a six-month repayment moratorium, among other things.
In preparing their application to the Energy Fund, Jeremy urges business owners to ensure that their financial statements are up to date, and that they have an equipment quote from a reputable, accredited installer of their choice.
Loans from the Energy Fund for SMEs can be used to buy solar systems, back-up batteries and inverter systems, diesel-powered generators as well as other energy generation related products.
Indications are that by far the most popular choice for applicants to the Energy Fund are solar solutions, probably because the running cost of diesel generators is high. While business survival through energy independence is by far the most important consideration for business owners, a welcome secondary consequence of the Energy Fund is increased environmental sustainability of many of its beneficiaries.
SMEs whose loans are approved may also be able to take advantage of the latest tax incentive, announced in this year’s Budget Speech. The incentive allows businesses to reduce their taxable income by up to 125 percent of the cost of their investment in renewables.
Jeremy says: “The long-term benefits of running a more energy secure business will far outweigh the cost of the investment. With alternative energy sources, businesses can futureproof their operations, position themselves as potential contributors to the impending embedded generation programme while also reducing the cost of energy.”
Loan applications for the Energy Fund for SMEs are open; apply online at: www.businesspartners.co.za