Load Shedding is Killing Small Business

Hilton Tarrant – article from Moneyweb.co.za

Walking down Main Road in Sea Point, Cape Town during the last just over two-hour block of load shedding on Sunday left me worried. Main Road is unique, as it offers a highly concentrated assortment of retail outlets. All kind of shops, fast food outlets, coffee shops and superettes. Hundreds of them in the 2,5km stretch.

On my amble along the commercial artery, I could count on two hands the number of independent stores trading during the peak lunch hour brown out.

Yes, the big supermarkets were all open, thanks to generators mostly installed a year or two ago – or at the very least, a good few months back. Woolworths (all three Food stores), Pick n Pay, Shoprite, Checkers and Spar. Mostly, trading as normal. One or two of them slightly less-lit than you’d expect.

I find the Spars across South Africa particularly interesting, given that these are run by independent owners. When load shedding reared its inconvenient head late last year, you couldn’t find a Spar that didn’t already have a back-up generator. Of course, it’s logical. For every minute these stores aren’t trading, it’s the owner that’s suffering. With the bigger retail groups, that’s head office’s problem.

Aside from the supermarkets, practically everything else on Main Road was closed.

Those establishments that weren’t, had a rattling generator purring outside. A bookie, the vet, one coffee shop (the Bootlegger, look it up when you’re in Cape Town – it’s that good) and a handful of food outlets (all independent, save for the Primi Piatti). Subway, thanks to the product it sells, was selling subs in the dark! One petrol station out of five was pumping fuel.

I was nervous about what I could see load shedding doing to our economy in front of our very eyes. But as a Famous Brands shareholder, I was especially worried. Not one of the Famous Brands franchises on this strip were trading. Not Steers. Not Debonairs. Not Milky Lane.

Other food chains were also closed for the Sunday lunch trade. KFC, Nando’s, Taste’s Domino’s Pizza andThai Café. Ocean Basket was technically open, serving sushi.

Two centres were trading completely normally. A new HCI-owned centre (The Point), anchored by Checkers, and a Spar/Woolworths-anchored one (Piazza da Luz). Here, chugging generators in the basements kept everything running, including the restaurants (Simply Asia, Vida e Caffe and Knead, among others).

So, two distinctly different situations.

Be in a major shopping centre/mall, and you’ll probably be trading through load shedding (and be paying a decent rent premium, no doubt). Find yourself on the ‘high street’ or at a smaller, neighbourhood centre, and you’ll probably be forced to shut your doors (or make your own plan).

This is not only a Cape Town phenomenon. In Johannesburg, the problem is arguably a lot worse, given that load shedding operates in four-hour blocks. That’s an entire evening’s trade, potentially. (Unless you’re a wood-fired pizza takeaway, where boom-times are here!) Visit Sandton City (or newer centres like Nicolway, in the north) and the fact that there’s load shedding underway will only be evident from the traffic lights that are out en route to the mall. But, visit your neighbourhood centre, and only Checkers or Spar or Pick n Pay (and the Woolies) will be open. The line shops will likely be closed (including those Famous Brands stores!).

What I really don’t comprehend is those businesses that could trade but don’t because they don’t have a generator (or another workaround). Are franchisees so pinched that they can’t afford a generator? Are they that disinterested? Are they ok with closing their doors for two or three or four hours, practically every day this month? Are the franchise groups going to be forced to come to the party with some sort of asset finance?

Do the maths, and it starts becoming alarming.

For a food outlet, an evening’s trade could be half the day’s takings. A couple of those a week (depending on the cruelty of the load schedding schedule) add up very quickly. Throw in a few afternoons or lunchtimes and you might as well not be trading. How many more months can you get by with paying staff to sit around, locked inside a dark store waiting for the lights to come back on? Will the local burger place be able to afford six employees per shift if this is the case? They might trim that down. And what if every other joint does the same? See what I mean.

Retail is the one sector where the effects of load shedding on small businesses will be visible first. You’ll see the underinvestment, forced by the fact that they might very well be borderline and pushed just that little bit further. You’ll probably pay more where that business makes a plan to trade through (generators aren’t cheap). If this continues, which it will, slowly you may very well see them hitting the wall, simply unable to make a profit.

Don’t get me wrong, there are hundreds of thousands (millions?) of other small business where you won’t be able to see the effects. I’ve lost count of how many services businesses I’ve been told about where offices full of employees sit around for two/three/four hours at a time, completely unproductive. But we don’t walk past those businesses every day.

A large part of the growth in employment over the past decade has been thanks to the retail sector. When that number begins to stutter – or worse, drop – hopefully we’ll be through the worst of Minister Lynne Brown’s “three years more” of load shedding.

* Hilton Tarrant works at immedia. During load shedding, there’s back-up power at the office.

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