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Loadshedding placing local economy under major strain

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According to a survey conducted by the Nelson Mandela Bay Business Chamber, loadshedding is having a detrimental  impact on investments and jobs in Nelson Mandela Bay, with one in five businesses reporting that they have cut jobs and over 90% halting investment and expansion plans.

With no end in sight to constant loadshedding, and more than a third of businesses  surveyed considering restructuring or relocating unless there is a significant improvement to the energy crisis, the Nelson Mandela Bay Business Chamber has called for urgent implementation of strategies to mitigate the impact of loadshedding on business.

The survey which incorporated the participation of around 70 local businesses, focused on the impact of extreme load-shedding on their operations  and revealed that 75% of local businesses had been forced to implement short-time, while 18% reported job cuts amounting to 149 jobs lost in recent months.

The representative sample of local businesses was evenly split between large corporates and small and medium enterprises (SMMEs).

Business Chamber chief executive Denise van Huyssteen said the results of the survey were concerning for the Bay’s already-strained and highly manufacturing-dependent economy.

“As per Stats SA’s unemployment numbers we already experienced a 0.8% increase in unemployment in the fourth quarter of 2022, and it is our estimation that the real impact of loadshedding on unemployment, production and investment will likely only be seen in the first quarter results for 2023.

“The fact that 91% of businesses surveyed have put plans for future investment and expansion on hold, and 36% are considering relocating out of the metro or leaving South Africa entirely, does not bode well for the sustainability of the local economy and job creation into the future,” she said.

Many of the businesses who have put their plans on ice are redirecting spending to cope with loadshedding, such as installing alternative energy solutions, or shelving future plans while in certain instances their owners or boards consider relocation.

Businesses indicated that the risk of retrenchments and closures remained high due to the twin impacts of loadshedding causing lost production and increased overhead costs incurred in mitigating the impact of loadshedding with generators, solar power or inverters.

More than 80% of businesses surveyed reported negative impacts on production due to loadshedding, and just over half said backlogs and delivery delays due to production downtime hampered their ability to meet export orders or participate in export-oriented supply chains. Impacts include cancelled shifts, increased overtime to keep up with demand and meet orders, increased breakdowns and damage to machinery due to frequent switching off and on, and increases in scrap and waste.

For some manufacturers, and depending on their processes and whether they are seven day a week operations, it is not possible to catch up on lost production. Some manufacturing processes need to be stopped an hour or more before scheduled loadshedding and/or take several hours to re-start.

Van Huyssteen said the survey had shown that a diverse set of solutions to mitigate the impact of loadshedding on business was needed, due to the differing needs and resources of different types and sizes of business.

“There is no one-size-fits-all solution, and we need to be urgently exploring all options. The municipality’s agreement to a voluntary 24-hour loadshedding schedule for those manufacturers which meet the required criteria is helping to mitigate some of  the impacts of frequent stop-start for those companies. We are refining this with the municipality and the companies involved, and working to bring more on board where possible.

“Load curtailment is another solution when loadshedding gets beyond stage 4 levels, whereby manufacturers who have demand management systems cut their demand, enabling production to continue uninterrupted, albeit at lower levels.

“We also need to find more alternatives for smaller manufacturers that don’t have the type of electricity connections that allow for demand management and monitoring,” she said.

At the same time, Van Huyssteen called on all businesses to cut non-essential load, such as air conditioning, even from stage 1 of loadshedding, to reduce overall demand on the grid and keep loadshedding at more manageable, lower levels.

“Our local economy is heavily reliant on manufacturing, which makes up 21% of local business and employs thousands of people, as well as having a substantial downstream economic impact through supply chain linkages, in turn impacting on the services and retail sectors, including small businesses.

“Retailers, hospitality and other small businesses often simply don’t have the resources to install generators and other alternative energy solutions, and are incurring substantial losses of products, perishable goods, and feet through the door.

“For the large manufacturers, constant stop-start of processes and equipment not designed for this is not only causing reduced production and lost business, but also increased scrap and waste and increased breakdowns in machinery as well as loss of exports.

“The impact of loadshedding has a massive ripple effect through all levels and types of business,” Van Huyssteen said.

The Chamber started a renewable energy cluster last year, which has attracted the participation of some of the Metro’s highest energy users, representing approximately 20% of the Metro’s electricity usage.  This cluster is working on potentially bringing 100 MW onto the grid during the course of 2025.  “However there are currently no policies that regulate that new capacity brought on through the grid will benefit the loadshedding stages of the organisations funding such capacity. It is important that more clarity is provided on how additional power generated through IPPs and other interventions feed into the national grid, can be harnessed in order to contribute towards the reduction of loadshedding at a local level.”

“With constant loadshedding having become the new norm, we must strengthen collaborative efforts between government, municipalities and Eskom, and the private sector to contain the impact of loadshedding and protect our economy and jobs,” she said.

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Alan Straton

Chief Cook, Bottle Washer and Broom Mechanic at MyPE
Passionate about Port Elizabeth and definitely NOT packing for Perth. Alan's ethos is epitomised in the words of Nelson Mandela; "I have fought against white domination and I have fought against black domination. I have cherished the idea of a democratic and free society. If need be, it is an ideal for which I am prepared to die." See more articles by Alan.