Load shedding causing crushing effect on South Africa’s commercial property industry. According to recent data from the South African Property Owners Association (SAPOA), the ongoing load shedding is causing a significant impact on the country’s commercial property industry.
The SAPOA survey polled various property industries such as commercial office, industrial, shopping centres, hotels, and residential. The survey aimed to determine how load shedding affected their businesses and what changes they had to make. The organisations ranged from smaller groups, between 1 to 100 employees, to larger companies that employed upwards of 500.
The SAPOA survey found that over 70% of respondents reported a serious or very serious impact on their business due to load shedding. Only 1.69% of all respondents said that load shedding had no impact on their business. Load shedding has taken place every day this year, with no sign of reprieve in the near term. Rolling blackouts have crippled the economy, pushed the country into a likely recession, halted business operations, and shattered foreign investor interest.
Load shedding causing crushing effect on South Africa’s commercial property industry
One of the most tangible effects of load shedding to everyday business owners is the extra amount they are paying each month to maintain standard operational levels. Whether it is installing solar, UPSes, or fueling large-scale diesel generators, small and large companies are forking out millions of rands every month to keep the lights on.
SAPOA provided a graph that details direct costs associated with business operations during load shedding. The majority of respondents to the survey said that direct costs associated with running a business during load shedding – whether it be fuel for generators, among other things – spend over R100,000 a month. 8.93% of all respondents spend above R10 million a month.
Apart from direct costs, businesses often face overlooked factors such as lost labour productivity, resultant damage to machinery and more – these can be considered some indirect costs to load shedding. In this case, more than half of all respondents spend between R100,000 and R500,000 a month to mitigate these adverse effects.
SAPOA found that 83% of businesses polled rely on diesel generators to mitigate load shedding. To keep these diesel generators going, businesses are largely paying the going market prices for fuel, escalating costs significantly. Very few get special pricing or pay wholesale prices, according to the report.
Less than half (49%) of businesses have some sort of solar backup. However, the response shows that more businesses are turning to solar, with 75% and 85% indicating they have applied to Eskom and their local municipality, respectively, for solar approval. The process is being hampered by long wait times as approvals take months to be granted. Some companies indicated waiting over 12 months for their applications to be processed.
The investment into generators and solar ranges from the low-end of R400,000 to over R500 million. Most companies said their backup solutions have cost them tens of millions of rands. For the companies that are generating their power, it still only covers a small part of their business, with most companies indicating that self-generation covers around 30% of their operations.
For businesses dealing specifically with manufacturing processes, owner confidence in the sector has been hit hard by power outages. According to the Bureau for Economic Research (BER), the pervasive power outages coupled with deteriorating household income knocked manufacturing hard in the final quarter of 2022.
SOPOA respondents reported that there was also a significant decrease in the number of operational assets during load shedding. 50% of all respondents said that only 80% of their assets functioned during power outages, followed by 35% that said half of their equipment was still reliable.
Furthermore, the indirect costs of load shedding, such as lost productivity and damage to machinery, are often overlooked and add to the overall burden placed on businesses.
While many companies are turning to diesel generators and solar backup solutions to mitigate the effects of load shedding, the high costs and lengthy approval processes are hindering progress in this area. The investment into generators and solar can range from hundreds of thousands to millions of rands, which can be a significant financial burden for companies.
The wider economic impact of load shedding is also concerning, with manufacturing being hit particularly hard. The government has introduced tax measures to promote investment in renewable energy, but many respondents to the SAPOA survey believe that the load shedding situation will only worsen in the future.
It is clear that urgent action is needed to address the energy crisis in South Africa, particularly with regards to load shedding. Without a reliable and affordable source of electricity, the commercial property industry and the wider economy will continue to suffer.
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