South Africa’s energy and logistics crises are making South African businesses uncompetitive on a global scale and disproportionately affect smaller businesses.
This is feedback from Pietermaritzburg and Midlands Chamber and Business CEO Melanie Veness, who told SABC News that the effect load-shedding has on competition in the country is “completely unacceptable”.
Veness’ comments come after steel producer ArcelorMittal South Africa announced that it would shut its long steel products business and cut as many as 3,500 jobs, citing the country’s moribund economy.
The unit will be placed in care and maintenance, the company said.
The Newcastle Works, the Vereeniging Works, and rolling facilities, which use Newcastle material as feedstock, will be affected.
“The ArcelorMittal South Africa board and management have reached this point after having exhausted all possible options,” CEO Kobus Verster said in the statement.
“We have a duty to ensure that the business remains sustainable in the long term, in the interests of the company and its stakeholders.”
In October of this year, platinum miner Sibanye-Stillwater also announced that it would enter into Section 189 consultations to retrench over 4,000 workers amid the company’s restructuring.
The company is planning to restructure four of its mine shafts, which could put 4.095 South African jobs at risk.
It said that above-inflation increases in key cost components such as electricity, water, wages, and fuel, combined with the recent decline in PGM prices, significantly impacted the global PGM industry’s profitability, including Sibanye-Stillwater’s South African operations.
While devastating, Veness said these closures are not surprising.
“We can’t say we’re surprised that something like this would happen, given the operating environment in which business is forced to operate currently,” she said.
“Having electricity prices at the level they’ve escalated to, load-shedding, and a logistical crisis in the country, it’s a very difficult operating environment for business to try and function in.”
She said it is important to consider how South African businesses compare on the global stage.
“We have to carry so many additional costs that our competitors in other countries don’t have to carry,” she explained.
“The costs of a failing logistics system are enormous – the load-shedding, the high electricity tariffs, the inconsistent services that you get at a local level.”
She emphasised that the problem is not only load-shedding and high electricity costs – “it’s infrastructure failure at a local municipal level that adds additional burden to what South African companies have to face”.
“It really is impossible, in many cases, for us to compete globally. We’re not just competing with each other.”
However, South African companies are also struggling to compete on a local level.
If large, listed companies like Sibanye-Stillwater and ArcelorMittal South Africa are feeling the impact of the country’s difficult trading conditions, then smaller businesses are facing the full brunt of these conditions.
This becomes particularly prevalent with challenges like load-shedding. “Load-shedding is not affecting everybody equally,” Veness said.
“There are larger cities, some of whom can protect their large industry from the ravages of load-shedding by managing their load, and their competitors in other cities where that is not possible are facing the full brunt of load-shedding.”
“So, we’re creating this very difficult, uncompetitive environment for companies to operate in, even within the boundaries of South Africa.”
She said constant power interruptions, particularly stage 6, make it near impossible for smaller companies to compete or even stay in business.
“It is something the government has got to do something about. In fact, I’m considering at this point in time actually writing to the Competition Commission to say it is completely unacceptable that this unfair competitive space is being created by load-shedding,” she said.