A survey by the Nelson Mandela Bay Business Chamber has revealed the devastating effects of rolling blackouts on the local economy. Many business owners admit they are being forced to cut jobs and halt expansion plans and investments.

The survey showed:

• One in five businesses was retrenching staff because of damage done by load shedding;
• 90% of businesses canvassed said they had halted expansion plans and future investments because of load shedding;
• More than a third of businesses surveyed are considering restructuring or relocating unless there is a significant improvement in the electricity situation.

Nelson Mandela Bay is home to many businesses and spin-off businesses in the motor industry.

The survey was conducted among 70 local businesses and included large corporates and small and medium enterprises. Three-quarters of those asked said they had been forced to implement “short time” for their workers.

Around 20% reported job cuts, amounting to 149 jobs lost in recent months.

Eskom is currently implementing Stage 3 and Stage 4 load shedding due to a shortage of generation capacity.

Business Chamber chief executive Denise van Huyssteen said the survey results were worrying for Nelson Mandela Bay’s already strained manufacturing-dependent economy.

“We already experienced a 0.8% increase in unemployment in the fourth quarter of 2022, and we estimate that the real impact of load shedding 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 in the future,” she said.

Lost production, increased overheads

Businesses indicated that the risk of retrenchments and closures remained high due to lost production and increased overhead costs incurred in the purchase of generators, solar power or inverters.

Most businesses reported a negative impact on production due to load shedding, with just over 50% saying backlogs and delivery delays are occurring due to production downtime.

This also hampered their ability to meet export orders or participate in export-oriented supply chains. Other impacts included 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.

Some manufacturers already running production lines seven days a week said they couldn’t catch up on time lost due to load shedding, as some manufacturing processes need to be stopped an hour or more before scheduled blackouts. Some also take several hours to restart once the power returns.

“There is no one-size-fits-all solution, and we must urgently explore all options. The municipality’s agreement to a voluntary 24-hour load shedding 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,” said Van Huyssteen.

“Load curtailment is another solution when load shedding gets beyond Stage 4 levels, whereby manufacturers with demand management systems cut their demand, enabling production to continue uninterrupted 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.

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Van Huyssteen said they had called on businesses to cut all non-essential loads, such as air conditioning, even from Stage 1, to reduce the overall demand on the grid.

“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.”

The Chamber started a renewable energy cluster last year, which has attracted the participation of some of the metro’s highest energy users, representing about 20% of the metro’s electricity usage. This cluster is working on potentially bringing 100MW on to the grid during the course of 2025. 

“There are currently no policies regulating that new capacity brought on through the grid will benefit the load shedding stages of the organisations funding such capacity,” Van Huyssteen said.

“More clarity must be provided on how additional power generated through independent power producers and other interventions fed into the national grid can be harnessed to contribute towards the reduction of load shedding at a local level.”

In his budget speech on Tuesday, the Eastern Cape MEC for Finance, Economic Development and Environmental Affairs, Mlungisi Mvoko, said formal manufacturing in the province employed a total of 167,000 workers. This had increased by 52,000 from the fourth quarter of 2021.

“These numbers could have been more if not for weaker global demand, constraints in domestic supply chain and logistics, and load shedding…

“We cannot overemphasise the severe impact this crisis has on the economy in the province, with businesses suffering the most,” he said. DM/MC