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How load shedding hits SMEs - and what they can do about it

Feb 18 2019 22:05

Although the whole country is impacted by Eskom load shedding, the implications for small and medium enterprises can be critical, says Jeremy Lang, regional general manager at Business Partners.

For SME owners to limit this impact, they must know exactly how the lack of consistent energy supply affects their particular business, he says.

"For example, some businesses can accommodate producing goods and services around the load shedding schedules.

"However, other businesses may rely on passing trade at a specific time of the day. If this is the case, then load shedding can be detrimental," said Lang.

Manufacturing, retail, hospitality

Lang says certain industries are also more vulnerable.

"Based on our experience the industries that are most affected by load shedding are manufacturing, retail, hospitality and in particular, businesses that are using cold storage and refrigeration."

This is because over and above the potential loss of stock, the constant switching on and off can also damage the equipment which can become extremely costly to repair or replace.

As electricity is generally cut for around two to four hours, SMEs could lose up to four hours of an eight-hour working day, which could also impact employees who are paid by the hour, he says.

Another way SMEs’ productivity can be impacted is in terms of their machinery, as some machines can take some time to start up.

This can also be costlier as the machines may use more electricity to start up again and, in many instances, if the machines are busy with a continuous process and are interrupted midway, wastage costs will also increase.

Price increases

Furthermore, these businesses would still need to cover their fixed overheads regardless of what is produced during the day.

"As such, when businesses are less profitable as a result, they tend to increase prices to maintain margins and ultimately consumers foot the bill," said Lang.

Because of the uncertainty that the unreliable energy supply causes, SMEs may not invest in growing their business at this time, which – in his view – can in turn impact the growth of the economy.

Advice

His advice for SMEs is to firstly assess how important electricity is to the business and whether you can work or schedule your operations around the load shedding schedule.

If this is not possible, then the best option is to consider investing in backup electricity supply such as generators or UPS systems.

It is also important that SME owners make sure that the business' information is backed up daily on a secure cloud-based server, where possible.

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