Retrenchments loom as Nelson Mandela Bay businesses lose R1bn a month to load shedding
Despite contingency measures, businesses in Nelson Mandela Bay, the heart of the country’s vehicle manufacturing industry, reported losing R1-billion a month in the first six months of 2023 due to rolling blackouts.
Nelson Mandela Bay businesses have been losing R1-billion a month since the start of 2023 due to severe load shedding, a survey conducted by the Nelson Mandela Bay Business Chamber has found.
These staggering financial losses have forced some of the larger businesses in the metro to consider retrenching their workforces by as much as 20% should high-stage load shedding continue.
Apart from scheduled load shedding, 34 major power outages were caused by the tripping of substations in the metro’s industrial areas since January 2023. Some of these outages have been linked to the toll blackouts are taking on electrical infrastructure.
“This is a high-risk issue to business and is caused by vandalism and theft of substation infrastructure, lack of maintenance and damage to infrastructure which was not designed to be switched on and off intermittently,” said Denise van Huyssteen, CEO of the Nelson Mandela Bay Business Chamber.
Other risks highlighted by the industry’s Mikel Mabasa earlier this year include local government instability in the metro, a lack of municipal services and the threat of sanctions against South Africa for its stance on the Russia-Ukraine conflict.
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Load shedding has been considerably curtailed in the past few weeks, but was persisting at high levels between January and May.
Nelson Mandela Bay is the biggest metro in the Eastern Cape and the heart of the South African motor manufacturing industry. Unemployment in the municipality is already hovering at around 40%.
According to the Business Chamber’s survey, the R1-billion losses each month are attributed to the purchasing of generators and diesel fuel, the installation of inverters, damage sustained to equipment and machinery, and the loss of production and revenue as a result of not meeting domestic and export orders.
Van Huyssteen said that 243 jobs had already been lost, but that this was a conservative estimate.
“These job losses only relate to those businesses that participated in the survey.”
The survey was conducted among 100 businesses, including the largest manufacturers, which represented 54% of respondents.
Business and the manufacturing industry account for around 60% of the metro’s electricity use.
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Short-time has been implemented by 48% of the businesses surveyed and, on average, employees’ wages have been reduced by 20%.
“Going forward, 39% of businesses anticipate that they will have to downsize their operations by reducing headcount and continuing to implement short-time,” Van Huyssteen said.
“In fact, these businesses, which mostly represent the largest companies, indicated that if prolonged load shedding continues through winter, they may be forced to retrench 21% of their overall headcount.”
More than 52% of businesses indicated that their investment and expansion plans were on hold.
‘Economic survival emergency’
“Extreme load shedding has been the most harmful development to impact business in recent years and has essentially caused an economic survival emergency for both small and large businesses,” Van Huyssteen said.
Productivity SA, the National Empowerment Fund and government’s Energy Bounce-Back Scheme are helping small businesses mitigate against the damage done by rolling blackouts. In addition, financial institutions such as the Industrial Development Corporation offer loans to companies undergoing financial distress.
The Nelson Mandela Bay municipality has implemented a voluntary programme where businesses can agree to be without power for 24 hours, but will then have electricity for the other six days of the week when load shedding reaches Stage 5 or higher.
So far, 35 of the large manufacturers in the metro have qualified to join this programme, while 36 did not meet the criteria.
Van Huyssteen said it was vital the municipality was enabled to offer load curtailment for those who operate “according to more flexible production processes”.
“There are over 55,000 informal and formal businesses in Nelson Mandela Bay, with 150 of these considered to be medium to large businesses as they employ 200 or more people.
“These 150 businesses provide 61% of employment opportunities in the metro, so it is important that as many of these businesses as possible can be supported with mitigation solutions,” she said.
She said 34 manufacturers are supporting the introduction of renewable energy and solar power programmes that will come on stream at the end of 2024, with wind generation to follow in 2025.
Van Huyssteen also highlighted the risks of substation failures causing additional and unplanned power outages for businesses.
“Since the start of the year, there have been 34 power outages in key industrial areas of the metro.”
Vandalism and theft
In an attempt to prevent vandalism of substation infrastructure, the Chamber has an “Adopt-a-Substation” intervention in place, where businesses provide private security for the substation feeding their premises.
Van Huyssteen said businesses were now also offering to maintain substations to limit the number of power outages.
Several suspects have been arrested for cable theft in the metro since January. On 12 June, a man was arrested while digging a trench to get to a cable alongside the N2.
Senior officials from the electricity department were placed on precautionary suspension after a corruption scheme, described by former mayor Retief Odendaal as the biggest of its kind in the history of the metro, was uncovered during an investigation into an explosion at a substation.
Estimated damage to this crucial substation feeding the Coega Industrial Zone and part of the water pumping system for the metro came to R40-million. The matter was handed over to the Hawks and the Special Investigating Unit.
In May, Khanye Pikoli, 28, and Elgin Hart, 27, were each sentenced to 10 years’ imprisonment for digging up power cables.
The municipality noted in its Integrated Development Plan that 22% of electricity meters in the metro were being tampered with. It has introduced an amnesty programme in an attempt to normalise the situation. DM