1 June 2022: Following two years of lockdown restrictions, South Africa’s economic recovery in is being thwarted by a number of adversities on both local and global fronts. Locally, several antagonistic forces are at play, namely significant fuel price hikes and the ongoing bouts of load shedding, which continue to undermine the stability of the energy system and put additional pressure on small and medium-sized enterprises (SMEs) in the country.
This is the opinion of Rene Botha, Area Manager at South African SME financier, Business Partners Limited, who explains that the effects of these realities are felt most acutely by small businesses. Within this context, SME owners need to focus single-mindedly on finding creative ways to circumvent these challenges in order to maintain a semblance of ‘business as usual.’
“Globally, the domino effect of record-high inflation will continue to trickle down to developing countries like South Africa. For the SME sector – the engine that drives a large proportion of South Africa’s economy – this has created a particularly demanding business environment. While the industry may have once envisioned problems like load shedding to be temporary, SME owners now need to start preparing for these challenges as long-term realities.”
A spotlight on load shedding
Load shedding has led to significant revenue losses, with the most recent figures presented by technology company, Yoco, suggesting that about 30% of small businesses have lost up to 10% of their annual revenue due to the onset of load shedding. There are several theories on how much longer load shedding will continue, with one source suggesting that it could persist well into 2025. The general consensus, however, is that it is a South African reality for which small businesses need to prepare.
Botha offers the following tips for SMEs on how to reduce the effects of load shedding:
- Surge protect your property
With small businesses playing such a crucial role in the subsistence of South Africa’s economy, finding innovative ways to mitigate load shedding needs to be a priority. At a minimum, SMEs should have preventative measures in place to reduce damage to their property, which includes installing surge protection plugs.
- Install a backup power source
Another way to avoid incurring severe revenue losses as a result of load shedding is to invest in battery-powered backup technologies like point-of-sale devices, so that sales can still be processed when the electricity is cut off.
With the wide variety now available, SMEs should be able to find battery-powered solutions that meet their needs. Portable nano solutions are relatively cost-effective when compared to the potential revenue loss of being completely unable to operate. Solar powered backup generators are also viable options for larger businesses, especially where factors like food storage need to be taken into account. A good, practical exercise for SME owners would be to add up the line item costs of undergoing a complete shutdown during load shedding versus the initial outlay of a backup power source or the cost of going completely green for your building. In the vast majority of cases, the cost saving potential of backup energy or going green justifies the initial investment especially with finance that comes with rebates as with the Business Partners Ltd’s Green Buildings Finance programme.
The effects of the fuel price hike
Hikes in fuel prices affect South African small businesses across several sectors. SMEs who deliver or collect goods, or transport people as part of their business model are directly impacted. Small businesses are also affected indirectly when supplier prices escalate in order to accommodate rising fuel prices. From a macroeconomic perspective, fuel hikes can drastically reduce consumers’ disposable and spending power, which can also have a knock-on effect on an SME’s bottom-line.
Botha offers the following tips on how small businesses can mitigate the effects of the fuel price increase:
- Prioritise vehicle maintenance
Depending on the vehicle being used, there are ways to maintain a car to ensure that its fuel consumption remains relatively low. For example, tyres that are underinflated have a higher rolling resistance on the road, which generates excess friction and increases fuel consumption in the long run. Tyre pressure should be checked at least once a month, engines need to be serviced frequently and air filters should be kept cleaned.
- Optimise your travel arrangements
Technology is a powerful enabler when it comes to finding ways to be more fuel-efficient. Navigation apps like Google Maps and Waze collate millions of data points to provide users with accurate information on traffic capacities and alternative, faster routes. By using these apps to avoid peak traffic times, SMEs can reduce their fuel input cost. Incremental savings in the short-term can accumulate into longer term savings.
SMEs who deliver goods can introduce set delivery slots and use digital tools to position these slots within hours that roads are relatively free of traffic. This can be marketed to customers effectively by emphasising how set delivery times will help goods recipients to plan their schedules more efficiently.
About the Author: René Botha
