Eskom’s latest price hike request is a huge threat to SA’S SME sector

Da Silva says SME’s should consider using unsecured funding solutions to install renewable energy generation systems as the easy application/ accessing the funds are in stark contrast to the onerous processes typically associated with banks and other traditional lenders. Picture: Mike Hutchings

Da Silva says SME’s should consider using unsecured funding solutions to install renewable energy generation systems as the easy application/ accessing the funds are in stark contrast to the onerous processes typically associated with banks and other traditional lenders. Picture: Mike Hutchings

Published Jan 31, 2022

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Eskom’s recent calls for a 20,5 percent electricity price hike have dashed the hopes of SME’s for a sustained recovery from the economic misery of the past two years, says Retail Capital MD’s Miguel Da Silva. He cautioned that without uninterrupted electricity, vital operations for small businesses could suffer.

Da Silva says that this request by Eskom would not be so insulting if SMEs were at least guaranteed uninterrupted electricity so that they, and other enterprises up and down the value chain, could operate normally.

“The truth is that Eskom has been, and by the looks of it, will continue to be one of the biggest threats to a growing economy and healthy SME sector,” said Da Silva.

According to Da Silva, there is light at the end of the tunnel, though, for those who are in control of their own premises – renewable energy generation systems. He cites Investec’s recent headline-making announcement that it would help its private banking clients move to self-sustainable alternatives and away from relying on Eskom in a move plenty see as the first of many.

“While Investec recently announced that it had launched a product for its banking clients SMEs should be aware that similar options exist for them where companies such as Retail Capital provide capital to fund several activities, including renewable energy installations.

“By mere virtue of these installations’ electricity cost savings, the funding payments are reduced monthly, and once the relatively short payment term is over, these cost savings go straight into the business’s bottom line. The outcome would be a business no longer at the mercy of Eskom,” said Da Silva.

Da Silva says SME’s should consider using unsecured funding solutions to install renewable energy generation systems as the easy application/ accessing the funds are in stark contrast to the onerous processes typically associated with banks and other traditional lenders.

Businesses that cannot do this should consider alternative or uninterrupted power supply systems; otherwise they are at the mercy of Eskom.

According to Da Silva input costs and other overheads are directly affected by electricity hikes, especially of the magnitude and frequency the country is enduring with Eskom, and that the power provider’s increase reverberates up and down the value chain.

“Everything becomes compounded, and what should have been a Covid-19 recovery becomes a battle for survival. Rent will be affected, suppliers will increase their prices, and consumers, already squeezed to the limit, will have even less disposable income.

“And that’s when the lights are on. When they’re off, there’s the difficulty of conducting business efficiently because of the knock-on effect of load shedding.”

He said rather than be seen as unpatriotic, the suggestion of going totally or partially off-grid is pragmatic as it understands the pain that SMEs and their supply chains must endure.

“At the very least, being able to operate despite the grid's unreliability is vital for businesses - especially those in services, manufacturing, or that rely on walk-in retail or hospitality. The savings remove a massive cost burden for small enterprises,” said Da Silva.

BUSINESS REPORT ONLINE

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