The letter — from the co-chairs of the Consumer Goods Council, Gareth Ackerman (chief executive of Pick n Pay) and Johann Vorster (chief executive of Clover SA) — points out that while large businesses have so far maintained operations and supply chains by using emergency generators, this has been at an unsustainable financial cost.

“It is crippling our businesses, and will in the end mean much higher prices for consumers, who are already under severe financial strain,” reads the letter.

“The deterioration of other essential infrastructure — including water, roads, rail and policing — all make our tasks, and those of thousands of other businesses around the country, even more difficult.

“If this crisis continues, we will not be able to guarantee stable supplies of food, medicines and other essential goods.”

The letter was signed by the chief executives of big businesses including British American Tobacco (East and Southern Africa), Bidfood, Massmart, Famous Brands, Exclusive Books, Magalies Citrus, Mars, Burger King, Coca-Cola, Tiger Brands, Pick n Pay, Shoprite, PepsiCo and OBC.

Unplanned costs

A trading statement from Pick n Pay on Wednesday morning noted that, while load shedding had disrupted business, there were substantial unplanned costs incurred in running localised power generation for stores.

“The ongoing crisis in national electricity generation is having a profound impact on every part of society and the economy. All Pick n Pay and Boxer stores have backup power and are operational throughout load shedding. However, severe load shedding creates significant challenges.

“Customer demand is dampened as a result of disruption, inconvenience and a concern that food may spoil due to interruptions to power at home. The production of food and other goods is disrupted, creating stock challenges.

“Diesel generators are not designed to run for many hours on end, and suffer breakdowns,” the trading statement says.

Pick n Pay has spent an additional R346-million year-on-year on diesel to run generators at stores in the first 10 months of the current financial year, with costs concentrated over recent months, and is currently on a run-rate of about R60-million per month, depending on the stage of load shedding experienced.

For the six months to January, Shoprite reports spending R560-million on diesel to operate generators across supermarkets in South Africa to ensure uninterrupted trade during load shedding stages 5 and 6.

In November last year, chief executive Pieter Engelbrecht pointed out that there were two facets to diesel use; one being spend on diesel to run distribution trucks (Shoprite trucks do more than 100 million kilometres a year), and then the bigger cost of running generators.

“Load shedding also has an impact on our suppliers and their operations (not just electricity, but also impacts water reservoirs filling up). This in turn impacts their ability to service our inventory requirements. Also, due to global supply chain issues, we brought in stock earlier than any year I can remember.

“These factors are all related. Diesel, supply chain, load shedding,” said Engelbrecht.

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Pick n Pay is also reporting increased generator repairs and maintenance costs, and some additional food waste costs.

The trading statement says 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.

“It is clear that progress will not be rapid.”

Pick n Pay has taken the view that the current crisis is a permanent new reality, requiring a rapid, determined and concerted response, and is implementing the following energy resilience plan:

• Over the past decade, it has reduced energy consumption per trading floor area by 35.1% in its Pick n Pay corporate stores, against a 2009 baseline. These efforts are to be redoubled, looking across air-conditioning and refrigeration, food preparation, lighting and other uses of electricity to reduce usage further, without unduly impacting customer service.
• Negotiations with landlords to ensure that the retailer can maximise installation of solar electricity on the roofs of its stores or be allocated a fair share of renewable electricity that landlords generate.
• Installing inverter and battery power solutions to operate supermarkets sustainably through load shedding. Pick n Pay will have trial supermarkets operational in the coming weeks. All of the standalone corporate clothing stores already have power backup, with more than half of these on inverter and battery power.
• Depending on the energy options pursued, Pick n Pay has noted that it may need to reprioritise other demands for capital investment. In this event, priority will continue to be given to funding expansion of the Boxer and clothing growth engines, which are likely to deliver the best combination of sales growth and sustainable returns in the coming years.
• Management plans to accelerate growth opportunities that are less directly disrupted by interruptions to infrastructure. These opportunities will include new initiatives in omnichannel retailing and digital media, alongside plans to step-change the Smart Shopper loyalty programme. BM/DM