Bidcorp, the South African food services company that operates in more than two dozen countries, is finding its home market tough under the strain of endless power cuts.
In a trading update for the 10 months to end-April, Bidcorp reported growth in Australasia, the UK and Europe. But its emerging-markets region presented a different picture.
“Trading conditions in South Africa remain difficult” and low economic growth exacerbated by blackouts hampered performance, Johannesburg-based Bidcorp said in a statement on Tuesday.
The company’s shares slumped as much as 6.1%, the most in 15 months.
State-owned power utility Eskom has imposed rolling blackouts, known locally as load-shedding, every day this year, bar one.
That’s caused havoc for businesses, with retailers spending billions of rand to keep their shops open and cold chains intact.
Manufacturers have lost production, and many companies are opting to install expensive renewable energy systems to reduce their reliance on the national grid.
Problems in Bidcorp’s domestic market extend beyond Eskom. Unemployment is almost 33%, the rand has weakened to record lows, and benchmark interest rates have more than doubled since November 2021.
Plus, bad debts among consumers are creeping higher, and the country was added to the Financial Action Task Force’s so-called grey list in February for failures in combating illicit money flows.
Bidcorp said it’s closely monitoring credit risk in a few jurisdictions, although currency volatility had a positive effect on its results when translated to the rand.
And thanks to diversification away from South Africa, Bidcorp still expects to post record trading results for its full year.
The company cited the devastating earthquakes in Turkey and short-term stock valuation issues in the Middle East and Chile as further challenges for its emerging-market operations.