The cost of South Africa’s energy shortages is weighing heavily on the country’s biggest companies.
2022 has seen the worst national power cuts on record, and grocery giant Shoprite Holdings said buying diesel to keep stores lit costs an extra R100 million a month. That’s on top of the cost of an extensive network of solar panels and generators in the Cape Town-based company’s biggest market.
South Africa has battled electricity shortages since 2008, so companies are used to making contingency plans, but the problem is only getting worse.
Breakdowns at plants operated by state-owned utility Eskom reached unprecedented levels in October 2022, raising business costs. While the biggest companies can work out ways to absorb the additional levies, small businesses are more at risk.
“At load shedding stages five and six, it comes at significant cost,” Shoprite said in a statement on Monday, referring to the categories of rolling blackouts where power in some areas is cut for as much as 10 hours a day.
Additionally, Vodacom Group invested R5.8 billion in its network in its first half through September to “enhance the customer experience at a time when the country experienced record levels of power outages,” according to a statement from South Africa’s largest wireless carrier by subscribers.
The Johannesburg-based company – majority owned by the UK’s Vodafone Group – has spent more than R2 billion over two years on batteries that keep mobile towers working during power cuts. Even so, the stop-start outages mean they can’t fully recharge, and their lifespans shorten.
One thing is clear: as blackouts continue to cause disruptions countrywide, the costs will keep mounting.
Shoprite shares gained 7.8% by the close in Johannesburg after reporting strong quarterly sales despite the blackouts. Vodacom fell 6.2% following a dividend cut and earnings that missed estimates.