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South Africa's SMEs must reduce dependence on Eskom

Pylons carry electricity from South African power utility Eskom's Koeberg nuclear plant near Cape Town. Picture: REUTERS/Mike Hutchings

Pylons carry electricity from South African power utility Eskom's Koeberg nuclear plant near Cape Town. Picture: REUTERS/Mike Hutchings

Published Aug 2, 2022

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Johannesburg – President Cyril Ramaphosa addressed the nation on Monday, July 25. During his address, Ramaphosa announced a set of interventions that the government would adopt to end load shedding and achieve energy security.

Ramaphosa subsequently established the National Energy Crisis Committee (Necom) to spearhead the proposed interventions aimed at achieving energy security.

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Necom is comprised of all relevant government departments and Eskom, led by the Director-General in the Presidency, Phindile Baleni.

This structure reports to an inter-ministerial committee, which will be chaired by Ramaphosa and comprises the minister in the presidency and the ministers of mineral resources and energy; public enterprises; finance, forestry, fisheries and the environment; and trade, industry and competition.

Necom has stated that its immediate objective is to reduce the severity and frequency of load shedding and the long-term goal is to end load shedding altogether. The committee hopes to do this through immediate measures to stabilise the energy system.

In a briefing held yesterday by Necom, Minister in the Presidency Mondli Gungubele highlighted the negative effect load shedding has had on the economy and business.

He said: “Load shedding is the single biggest constraint on South Africa’s economic growth. Government is taking bold steps both to address the immediate crisis and to make load shedding a thing of the past.

He said the government would do everything in its power to eradicate load shedding.

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“Further, we are mobilising all of the resources at our disposal and will do whatever it takes to achieve energy security. I must emphasise that achieving energy security is our single most important objective as a country, to enable economic growth and job creation,” he said.

The plan announced by the Ramaphosa includes five interventions with specific actions and time frames to address the electricity shortfall. These are:

– To fix Eskom and improve the availability of existing supply.

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– To enable and accelerate private investment in generation capacity.

– To accelerate procurement of new capacity from renewables, gas, and battery storage.

– To unleash businesses and households to invest in rooftop solar.

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– To fundamentally transform the electricity sector to achieve long-term energy security.

While all these interventions have been welcomed by many entrepreneurs there are some who believe that SMEs must reduce dependence on Eskom.

Retail Capital managing director Miguel Da Silva said if Eskom’s woes were not resolved soon, or if businesses were not able to develop independence from the grid, any remaining hope that small and medium enterprises (SMEs) could help rekindle the economy and create jobs would become pipe dream.

The economic and jobs crisis in South Africa is so dire that SMEs cannot adopt a wait-and-see approach and they need to take positive steps towards ensuring that they are able to continue trading when Eskom is unable to provide them with electricity.

He lamented the effects of loss of trade on the smaller enterprises that could not afford to install alternative power solutions to keep them going during load shedding.

“Spare a thought for the smaller guys who cannot afford renewable installations or higher spec uninterrupted power supply (UPS) systems. In some cases, they are losing more than half a day’s trade,” he said.

Da Silva highlighted the past resilience of entrepreneurs and called on SMEs to leverage relationships with each other and the private sector.

He said: “Small business owners have come to realise that government talk seldom translates into anything meaningful for them. The best advice now, just like before, would be to tighten the belt, lean on peers for advice and networks, try new and innovative ways to reach new customers, approach alternative lenders to fund growth, close cash crunches, and develop independence from the grid.”

Da Silva said there were several options available, such as rentals, asset finance, and commercial bank loans.

Whether or not entrepreneurs took the advice to develop independence from – or at least resilience against problems with – the national grid, said Da Silva, they would do well to seek funding sooner than later.

“This should never be interpreted as chasing debt. Cash flow, and the ability to survive dry patches or take advantage of opportunities when they arise. It is like blood for a small business. Securing credit lines when the going is still good ensures businesses get the best deal, as opposed to being a price taker when it is too late,” he says.

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