Durban firms hit hard by load shedding fear lower investor confidence and global competitiveness
By Bronwyn Lovell, Managing Partner at BDO in Durban.
Durban, 10 June 2015. All of the Durban organisations responding to a survey by audit, advisory and tax firm, BDO, on the impact of load shedding on business, believed that concerns about South Africa’s future electricity supply impacted negatively on investor confidence in the country.
Furthermore, 47% of the respondents reported that the electricity disruptions had a negative effect on their operating costs, while 59% said they had an adverse impact on service delivery.
“We are aware of how load shedding is affecting our business and thought it would be interesting to find out the effect it was having on our clients’ operations,” said Bronwyn Lovell, Managing Partner at BDO in Durban.
A quarter of the organisations surveyed experienced load shedding a few times a week, with 27% being affected about once a week and the others less frequently. For 86%, the average period of load shedding lasted two to four hours; for the remaining 14%, it was less than two hours.
This translated into between 5 and 20 operating hours affected in the last three months for 41%, 21 to 40 hours for 37% and more than 100 hours for 7% of the organisations.
When quantifying the adverse experiences of service by their customers, 28% described this as high, while a quarter of respondents rated this medium.
Load shedding had a high or medium negative impact on the turnover of 42% of the businesses and on the competitiveness of 56%.
“We simply cannot afford these setbacks when, in the 2015 world competitiveness rankings, South Africa fell one place to 53rd out of 61 countries, as government and business efficiency deteriorated,” Lovell said.
“Professor Arturo Bris, director of the IMD World Competitiveness Center, has identified a lack of capacity in electricity generation and distribution as one of the major challenges facing South Africa, along with deteriorating education, high youth unemployment, corruption and an insufficient supply of skilled engineers and technicians.”
Lovell said that BDO had installed generators in all their offices but, without them, staff would not be able to function productively. “The other major problem load shedding causes for us is traffic congestion, sometimes making our staff late for appointments with clients when we pride ourselves on punctuality and service excellence.”
Heavy engineering and manufacturing companies were hardest hit.
Lovell went on to say that a number of actions were being taken by BDO clients to mitigate the impact of electricity disruptions on their business and keep their systems up and running.
A UPS battery back-up system was being used by 86%, while 47% had installed generators. Just under a third had reduced their electricity usage and 28% were using energy efficient electronic equipment (energy savers).
Eleven percent had reduced their operating hours and 42% were offering contingency plans such as flexible work hours and enabling their staff to work from home.
Some were utilising solar power, others had invested in innovative energy solutions like cooling materials in walls and 3% had outsourced business services to other countries
Other remedial actions taken by the respondents included ensuring that generators were fully functional, keeping a backup supply of diesel for generators, ensuring IT systems always remained online, maintaining off-site data backup systems and moving servers to the Cloud. Three percent said they had relocated their servers to European countries and the same number kept clients informed of load shedding followed by an action plan.
Nearly half of the respondents said that renewable energy was something that their company was looking to pursue.
“It is essential that businesses are able to operate smoothly if we are to restore investor confidence in the country and in our region,” Lovell said. “Investing in renewable energy alternatives may be the most viable way forward.”
About the research:
The research was conducted from 25 March 2015 to 6 April 2015. 400 BDO clients participated in the survey across four regions: Cape Town, Durban, Pretoria and Johannesburg. The research followed a quantitative approach and data was collected via a computer administered survey. The format was an online survey which made use of a semi-structured questionnaire which comprised of closed, pre-coded and open-ended questions.
Of the organisations surveyed in the Durban region, 69% were classified as small with up to 100 employees, 25% were medium-sized, employing between 101 and 2000 people, and 6% were large with between 2001 and 25 000 employees. They represented a wide spectrum of industries from manufacturing, retail and technology to public sector and non-profit organisations. The annual turnover of a quarter of the companies was less than R10 million, 36% had a turnover of more than R100 million, with the remaining organisations turning over between R10 million and R99 million a year. In most cases the survey was completed by senior executives such as business owners, directors, chief executives or high-level managers.
The survey was created by Answered Insight and is hosted at www.answeredinsight.co.za