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After 200 days of load shedding last year, and not a single day without power cuts since the beginning of 2023, South Africa’s Small, Medium and Micro Enterprises (SMMEs) are barely surviving. The President recently announced plans for an energy relief package to alleviate the devastating impact of load shedding on small businesses.
The dire situation was clearly on President Cyril Ramaphosa’s agenda when he announced a raft of new measures to combat the country’s existential power crisis in his State of the Nation Address in early February.
We look at what these measures may include and whether it will be of any help to property developers.
What we know so far.
We know, from the President’s address, that last year’s Covid-19 bounce-back loan scheme to help businesses recover from the pandemic will now be used to assist them in getting funding for solar power.
The plan is for the Department of Small Business Development and the National Treasury to work together to adjust the existing loan scheme. The proposed plans will give banks and development financial institutions the ability to directly borrow from the scheme to facilitate the leasing of solar panels and solar equipment to small and medium enterprises (SMEs).
‘Our aim is to find immediate solutions that can be urgently affected to avoid disastrous consequences, such as the closure of small businesses and job losses in the SME sector. This sector is still recovering from the ruinous effects of COVID-19, and we cannot afford to lose more businesses and jobs,’ said Minister of Small Business Development Stella Ndabeni-Abrahams.
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The plans come on the of back of research from The Small Enterprise Finance Agency (SEFA) that looked at the impact of load shedding on its funded clients. Most of their respondents indicated that they are highly reliant on electricity for their operations, with more than 70% admitted to being negatively impacted by load shedding; and the majority requiring an alternative power source to continue with their business operations.
What are the limitations?
Although a step in the right direction and no doubt welcome, according to Jacques Weber, Chief Operating Officer at Inospace, the proposed relief package is somewhat lacking.
‘Solar tax relief is better than nothing, but this won’t help small businesses survive or bounce back. We thus call on the government to immediately provide unconditional financial assistance to SMEs whose businesses are at an enormous risk of being annihilated by unending load-shedding,’ he says.
He suggests that funds and facilities must be provided urgently by the government to help small businesses with their existing debts and payments, to buy raw materials and manage other operational and procurement costs. ‘These interventions must be structured to match the patterns of small business cash flow and the extent of the impact experienced due to load-shedding,’ adds Weber.
Who will be the biggest beneficiaries?
The president was clear that his main target will be SMEs and businesses in the informal sector. Without being able to afford alternative power sources such as generators, this business sector has been identified as being one of the hardest hit, with owners often being forced to pause trading, and sometimes even selling perishable goods such as meat and vegetables at low prices to avoid them rotting away.
For now, the relief package doesn’t seem to extend to property developers and businesses in other sectors. For them, the message seems to be “wait and see” – something not good enough for Weber, who, through his company, has already taken matters into their own hands.
Inospace has recently launched a Living with Load-shedding project to help its clients minimise disruptions to their business operations. It has negotiated discounted prices with various service providers of alternative energy solutions, including solar energy, inverter, and generator options, to assist SMEs within its portfolio, and a hotline service, providing clients with advice or emergency relief, has also been established.
‘Many property companies use solar as a yield-enhancing profit generator, but we are using solar to keep our clients in business,” says Weber. ‘SMEs are the lifeblood of South Africa’s economy and represent over 98% of businesses. They employ up to 60% of the workforce with a GDP contribution of 39%. Planning for load-shedding in their business operations and strategies will be essential for at least a few years,’ he concludes.
