Feb 8, 2023
South African Retailers Face a Permanent New Reality: Lack of Power
(Bloomberg) -- South African companies are facing what retailer Pick n Pay Stores Ltd. has just called “a permanent new reality” — electricity shortages. The related costs are weighing heavily.
During a year that’s seen the worst national power cuts on record, the country’s biggest food retailers have increased investment in standby generators, rooftop solar panels and refrigerated trailer trucks. For many smaller businesses, the additional costs are crippling.
“While we have maintained our operations and supply chains so far by using emergency power generators, this has been at an unsustainable financial cost,” the heads of various companies said through the Consumer Goods Council of South Africa in an open letter to President Cyril Ramaphosa on Tuesday.
Groceries giant Shoprite Holdings Ltd. last week said buying diesel to keep stores lit during the heaviest of the rolling blackouts, known locally as loadshedding, cost an extra 560 million rand ($32 million) in the six months through Jan. 1.
Rival Pick n Pay spent an additional 346 million rand on diesel to run generators at stores in the first 10 months of its financial year, it said Wednesday. The power cuts may force it to reprioritize capital investment on an energy resilience plan, delaying spending originally earmarked for other demands.
The strategy will help Pick n Pay mitigate the “inconvenience” to consumers and reduce food waste, it said. The company’s shares slumped as much as 8.1%, the most since October, and traded 6.7% lower at 3:52 p.m. local time.
“The government needs rapidly to come forward with a sustainable plan to solve the electricity crisis, including by taking every step possible to ease the way for businesses to generate and use their own sustainable energy,” Pick n Pay said. Still, it’s “clear that progress will not be rapid.”
Should the energy crisis continue, some food producers and drug and grocery stores will not be able to guarantee a stable supply of essential goods, the consumer goods body said in its letter.
--With assistance from Renee Bonorchis and John Viljoen.
(Adds consumer goods council quote in third and final paragraphs.)
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