Under pressure: Black Entrepreneur’s Alliance calls for a tax break to assist SMEs
Johannesburg – The Black Entrepreneur’s Alliance has called on the government to provide financial help for SMMEs to avoid job losses.
South Africa has not experienced load shedding for almost a week now but the possibility of there being more power cuts in the future persists.
Earlier in the week, Eskom issued a power alert indicating that load shedding might be implemented at short notice due to a loss of 2 000 megawatts of power caused by electrical faults that had tripped generating units at Kriel power station.
Although it did not lead to any power cuts it is a clear indication of how volatile the power supply system in South Africa is.
The intermittent power cuts have left thousands of business owners in the difficult position of having to make a choice between keeping their doors open at a higher cost during the rolling blackouts or to reduce staff working hours to try to reduce expenses.
Further Compounding the pressure on business owners is the growing rate of inflation.
Statistics South Africa (Stats SA) announced last week that the inflation rate in South Africa quickened to 7.4 percent in June from 6.5 percent in May, and above market expectations of 7.2 percent. This is the highest rate since May 2009 when the rate was 8.0.
This along with other factors has resulted in The South African Reserve Bank’s Monetary Policy Committee (MPC) deciding to increase the repurchase rate by 75 basis points to 5.50% per year.
The South African Reserve Bank’s MPC has decided to increase the repurchase rate by 75 basis points to 5.50% per year, with effect from the 22nd of July 2022. pic.twitter.com/WPqzaO7zR8
— SA Reserve Bank (@SAReserveBank) July 21, 2022
Black Entrepreneurs Alliance (BEA) founder and chief executive Refilwe Monageng has called on the government to step in to assist small businesses. He warned that Eskom’s recent bout of Stage 4 and Stage 6 load shedding was placing the financial viability of the country’s thousands of small businesses, and jobs, in jeopardy.
He said load shedding was costing small businesses thousands of rand when refrigerated stock temperatures drop and equipment gets damaged during load shedding.
He said increased overhead costs and lost business hours were also the bottom lines of entrepreneurial enterprises.
Compounding the pressure on business owners is the growing rate of inflation.
Statistics South Africa (Stats SA) announced last week that the inflation rate in South Africa quickened to 7.4 percent in June from 6.5 percent in May, and above market expectations of 7.2 percent. This is the highest rate since May 2009 when the rate was 8.0.
This along with other factors has resulted in The South African Reserve Bank’s Monetary Policy Committee (MPC) deciding to increase the repurchase rate by 75 basis points to 5.50% per year.
Nkosinathi Mkhize, who manages a fast food outlet in Marshalltown, Joburg, described how detrimental this has been.
He said: “Load shedding by Eskom has affected us a lot because the stock in the fridges was going bad and when the stock goes bad it’s a very difficult situation because it costs us money.”
Monageng spoke of the impact load shedding had on small businesses compared to its impact on large corporates.
“Unlike large corporates and medium-sized firms, most small businesses do not have sufficient savings to explore alternative energy sources, such as solar power, nor the funds to invest in powerful diesel-run generators to keep the lights on and their doors open during long periods of load shedding,” Monageng said.
According to an Organisation for Economic Cooperation and Development 2022 report, there are 2.6 million small, medium and micro enterprises (SMMEs) in South Africa, of which 37% are considered formal.
Even businesses that are able to afford to install alternative energy solutions have been hard hit by fuel prices which keep climbing.
“Those more well-established small businesses owners who do manage to source generators to keep their businesses open are finding that the exorbitant price of diesel is ramping up their operational costs and making it difficult for them to pay their staff without increasing the prices of their goods and services for their customers who are already struggling,” he said.
Monageng lamented the effect of load shedding on small township businesses that rely on walk-in trade, such as hair salons, printing shops, locksmiths, taverns and superettes that were facing a crisis due to the rolling blackouts.
“Most modern businesses rely on electricity for technology, lighting, and machinery and owners simply cannot afford to keep paying their staff to be at work when services cannot be rendered to customers for several hours every day.”
“Some small businesses are choosing to simply close their doors during load shedding to avoid higher costs but this, too, obviously leads to a massive loss in trade,” Monageng said.
His sentiments were echoed by Sifiso Nyembe who owns a hair salon in the south of Johannesburg.
“Businesses cannot keep paying their employees to be present during a power outage as, essentially, we will be paying no customers.”
“How do I justify paying someone to sit around and wait for the power to come back on?” he said.
Monageng said it was government corruption and poor planning in the past few decades that had led to the near collapse of Eskom and resultant load shedding, and those small businesses should not have to bear the brunt of the crisis.
“We urge the government to throw a lifeline to small businesses during the 2022 tax year and to reduce our taxes or at least provide us with some sort of reprieve or a rebate for the hours of lost trade during load shedding.
It would also be helpful if the government could assist small businesses with the cost of the purchase of generators or solar panels, in the form of an energy grant, to help them to keep the lights on and their workers employed full-time,” Mongageng said.
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