Pick n Pay and Shoprite, two of South Africa’s largest retailers, have both revealed their monthly spending in order to keep the lights and fridges on in their stores during load shedding. In just six months, Shoprite spent an “additional” R560 million (R93 million per month) on diesel to run the company’s generators. That’s not including Shoprite’s already-high electricity bill which costs the company roughly R2 billion per year.

Shoprite isn’t suffering alone. Pick n Pay has said that its monthly spend on generators has reached as high as R60 million per month, to keep things running during trading hours. Despite the extra costs to combat stages 5 and 6, Pick n Pay still managed to see a boost in sales and turnover, with the retailer working in a “significantly more difficult trading environment.”

Undergoing a crisis

Pick n Pay continued, saying that the continuous bouts of load shedding are having a major effect on not just the retail industry, but on every part of the economy and society. The group has accepted these issues, calling it the “permanent new reality” for South Africa.

“Our priority has been to provide uninterrupted service for customers in our stores, whatever the level of load shedding. Inevitably, load shedding has disrupted customers, with some impact on turnover.”

While the company’s first concern is the ever-rising cost of diesel, it added that it was worried that load shedding is dampening customer demand due to “disruption, inconvenience and concern that that food may spoil due to interruptions to power at home.”

And then there are the hidden fees of the generators themselves. Diesel generators are not designed to run for as long as these businesses need them to, which leads to far more breakdowns and costs to keep the machines in an acceptable condition.

Shoprite is currently in the same boat. Diesel, generator repairs and the dwindling customer base caused by load shedding’s inconvenience have led to the company spending nearly R100 million per month during stage 5 and higher load shedding. Should load shedding stick around for 12 months straight – something that’s becoming more likely by the day – “it’s going to cost R1.2 billion … [and] there is nothing we can do about that”.

How can they turn it around?

The government has said multiple times that it is working on a plan to “fix” load shedding, with no word on how or when it would put its ‘plan’ (if you can call it that) into action. Pick n Pay and Shoprite cannot bet their entire businesses on a pipe dream and need to take matters into their own hands.

Pick n Pay has a few schemes that it plans to implement to negate the high costs.

Try to reduce energy usage across its stores’ air-conditioning, food prep, and store lighting without impacting customer service negatively.
Install inverter and battery products in more stores. The group said that ‘trial supermarkets’ would be operational soon, with more than half of the company’s clothing stores already running on inverters and batteries.
Negotiate better terms with landlords to allow for more solar panel installations or work out a better share of any solar solutions currently in place.
Focus on other routes of growth that are less impacted by load shedding, such as digital campaigns and change-ups to its Smart Shopper loyalty programme.

Shoprite shares a similar plan moving forward, with a larger solar rollout across mall rooftops being one way of curtailing costs. Where it can, Shoprite continues to install solar solutions on its own facilities – with 62 sites already powered by the sun (sort of).

Over the next five years, the group has plans to power 25% of all its business operations with renewable energy. The key to achieving this will be through a deal that’ll see the company purchase 434,000MWh from a specialist energy trader.

None of these solutions will happen overnight. They’re the building blocks that’ll save the companies in the long run. For now, Shoprite and Pick n Pay will continue to foot the growing diesel and generator costs.

Source: Moneyweb, BusinessTech