The load shedding economy is the ‘new normal’

Every business I talk to is suffering from load shedding. It is simply not possible to run a modern economy without power.

We can forget about being competitive in the 4th Industrial Revolution if we cannot fix the basics like power, water and the rule of law. After all, electricity was the main source of progress in the 2^nd Industrial Revolution and that was 150 years ago!

I haven’t lost faith that we will win in the end, but to survive and even thrive, we must confront the brutal facts of our current reality and take the right actions to adapt.

Just how brutal are the facts?

The brutal facts are that 2022 has already been South Africa’s most intensive load-shedding year, while energy availability (at 53%) is also at an all-time low.

Things will most likely get worse in 2023 as Eskom’s coal fleet continues to deteriorate while renewables and independent power producers take time to come on stream.

Eskom has indicated that in this calendar year to date, it has already burnt through R12 billion [worth] of diesel. Research consultancy Intellidex estimates that prolonged load shedding is costing us between R150 million and R250 million a day.

A year of load shedding can run up to a horrific R7.5 billion every month, and R91 billion a year.

The unquantifiable costs such as huge job losses, loss of confidence by investors and skilled emigration is wreaking long-term havoc on the economy.

Here’s what doesn’t help: ranting on social media, pointing fingers and saying “they should”.

Of course you’re completely within your rights to criticise and you’re most probably right in the macro solutions too.

Best way to solve a problem …

Still, the best way to solve a problem is to do something about it.

Fortunately, there is a huge amount that business and individuals can do to save billions to offset the above impact.

Moreover, it is far more energising (excuse the pun) to be part of the solution than to criticise from the sidelines.

Here are three impactful things you can do to adapt and save money.

If everyone in South Africa did just this, it could potentially save up to R117 billion each year.

You’ll see that most are remarkably easy, you just have to do something about it.

• Stop paying for voice calls and SMS messages. WhatsApp voice calling using mobile data can cost as little as 2c a minute; or when backed by uncapped WiFi, it’s effectively free. Industry revenue from mobile voice services amounted to around R40 billion in 2021, so the savings would be significant.
• Add your own solar power. You don’t even need to go off the grid to switch to solar, especially if yours is a daytime business that uses power while the sun shines. The capital costs of business solar are usually recouped in four to six years. Banks are now coming to the financing party to assist with the upfront cost. The average saving that I am witnessing is between 20% and 40% based on current tariffs of R1.50/kWh. Of course, these percentage savings will only become higher when Eskom increases prices by 9.6% next year to bring its “allowable revenue” to R264 billion. But even a small percentage saving (let’s say 20%) will bring massive relief to SA consumers and businesses.
• Open a free bank account. The fee structure of SA banks is much too high. An analyst report by UBS calculates that savings of up to R300 per month are attainable by individuals. Savings for businesses are much higher – easily R1 000 per month. There is no need to completely switch banks (yet) if that bothers you. Simply start to use the free electronic banking that is available from challenger banks. Stop paying bank fees on payments, fund transfers, debit orders and card swipes. Their unique-in-the-world security features further add to the positive financial impact. The potential savings for the 376 000 businesses registered in South Africa is R4.5 billion a year. And if the 40 million South Africans who have bank accounts can save a mere R50 per month, there’s another R24 billion of relief that is possible.

The current pain experienced is calling for change, as doing nothing means even more pain.

My hope is that some of you will see that there are ways to not just wait to make things better, but to make things better yourself.

Michael Jordaan is chair of Bank Zero.

Listen as Dr Michael Jordaan, former FNB CEO, shares his investing journey with Moneyweb editor Ryk van Niekerk in this Be a Better Investor podcast (or read the transcript here):