/ 13 December 2007

Retailers turn to generators in dark December

Dark nights and candle-lit suppers may seem romantic, but South African retailers are losing money in what is usually the year’s most lucrative business month as they struggle to operate through repeated power failures caused by Eskom’s load-shedding programme.

The power failures have left many retailers turning to back-up generators to allow consumers to buy the necessary goods to have a decent meal. Stumbling through half-lit isles, consumers search for those food items that are least likely to perish without refrigeration.

Jonathan Ackerman, marketing director of Pick ‘n Pay, told the Mail & Guardian Online on Thursday that his group has 16 hypermarkets, 159 supermarkets and 190 franchise stores, and all of them are fitted with generators in case of power failures.

“Because we are prepared for power outages at any time, perishable goods are not compromised at all by such occurrences. It goes without saying, however, that food safety is one of our top priorities.

“Therefore, any perishable goods that may have been affected for any reason are immediately removed from the shelves, appropriately disposed of and replaced with fresh stocks.”

The same applies for Woolworths, which has 98% of its 329 stores fitted with stand-by generators.

Richard Inskip, director of operations and financial services at Woolworths, said: “We rely on the store’s emergency back-up generator to keep critical equipment like refrigeration units and tills up and running, and to provide ambient lighting. We’ve thus managed to keep most stores open during normal trading hours, helping customers to manage their shopping needs despite Eskom’s load shedding.”

Woolworths and Pick ‘n Pay both adhere to strict safety measures on all their goods. Ackerman says that it is standard procedure to have all stores fitted with a generator, and the recent load shedding was not precipitated.

Inskip confirmed that with Woolworths’ cold-chain strategy, the current load shedding is not seen as being all that detrimental to the chain store.

“A large percentage of the food products are managed by the cold chain. That means we see to the entire supply chain, from the farmer to the consumer. If any of the produce falls outside the required temperatures, we destroy the items.

“If it is past its sell-by-date, depending on the produce we either donate or destroy. This cold chain was in place before we started having the load-shedding problem and this leaves us with a competitive advantage.”


Although many bigger businesses have back-up generators and safety plans, Spar’s group marketing director, Roelf Venter, said that dealing with load shedding is “extremely frustrating”.

He said that depending on the length of the load shedding, perishable goods are replaced if there is no power for longer than two hours, when the cold chain starts being affected.

“To put a monetary value to our losses are difficult to quantify, but it is costing us R15-million in capital equipment to ensure that our distribution centres have sufficient generator power,” he said.

Mike Schussler, economist at investment holdings company T-Sec, described load shedding as “a pain for all businesses and an even bigger problem for small businesses”.

The recent power failures have seen many of the markets being affected. “It has an economic cost, although it is very difficult to calculate, but I would estimate that we have lost 0,1% of GDP cost as a result of the recent load shedding,” said Schussler.

“This changes the way that investors view South Africa. I think that load shedding is not a big crisis as yet, but overseas investors are reluctant to invest in this country because at the moment no one knows how much of a problem it might be in the future.”

Schussler added that load shedding upsets the productivity levels of the economy. “It is not a full-blown crisis, but it looks like it’s going there.”

Lengthy failures

Electricity shortages are not the only problem facing Eskom. Load shedding, according to the electricity supplier, should not affect any single area for more than three hours, yet recently some neighbourhoods such as Fourways in Johannesburg have been without power for six hours.

Andrew Etzinger, general manager of demand-side management at Eskom, said that Eskom is following its load-shedding schedule.

“We endeavour to keep it to the prescribed two-and-a-half hours and we have experience that the process is working well,” he said.

“Sometimes there are problems like what happened last week in the Fourways region. This is sometimes due to network problems and not to load shedding. There are network faults on the Eskom and municipality sides, but in most of those instances it’s on the municipalities’ side.”

Etzinger explained that municipalities decide which areas will be subjected to load shedding, and when the power is returned, the remote connections do not always work and have to be reactivated manually. This makes a power failure last longer.

Certain critical electricity users, such as hospitals, said Etzinger, need to speak to their municipality so that they are not load-shed as often as other areas.

Major chain stores and retail outlets are not favoured by Eskom or the municipalities. Etzinger pointed out that most have turned to back-up generators to run their lights and cash registers.

But Christmas lights may yet be twinkling all over South Africa, he said. “We are looking at no load shedding over Christmas and New Year. From this long weekend till schools reopen, the demand decreases and so we should have enough in reserve.”