Eskom’s recent calls for a further 20,5% electricity tariff hike is outrageous and is the last straw for SMEs hopes of sustained recovery and growth. According to Retail Capital MD Miguel Da Silva, SMEs that are in control of their own premises should consider leveraging unsecured funding solutions to install renewable energy generation systems as accessing the funds is in stark contrast to the onerous processes typically associated with traditional lenders. Businesses that can’t, should consider alternative or uninterrupted power supply systems, he says.
Investec recently made headlines with its announcement that it would help its private banking clients move to self-sustainable alternatives and away from relying on Eskom in a move plenty see as the first of many.
“While Investec recently announced that it had launched a product for its banking clients SMEs should be aware that similar options exist for them where companies such as Retail Capital provide capital to fund a number of activities, including renewable energy installations. By mere virtue of these installations’ electricity cost savings, the funding payments are reduced monthly and once the relatively short payment term is over, these cost savings go straight into the business’s bottom line. The outcome would be a business no longer at the mercy of Eskom,” he says.
Da Silva says that Eskom’s latest price request wouldn’t be so insulting if SMEs were at least guaranteed uninterrupted electricity so that they, and other enterprises up and down the value chain, could operate normally. “The truth is that Eskom has been, and by the looks of it, will continue to be one of the biggest threats to a growing economy and healthy SME sector,” says Da Silva.
Retail Capital is an SME funder, providing SME funding to businesses in most sectors in South Africa. By virtue of having a finger on the pulse of SME trade, the business is well-placed to gauge the relative health of industries. Da Silva says there has been a marked year-on-year spike in requests for funding, and the last thing anyone needs is for this glimmer of hope to be suffocated by Eskom.
Da Silva says input costs and other overheads are directly affected by electricity hikes, especially of the magnitude and frequency the country is enduring with Eskom. “An Eskom increase reverberates up and down the value chain. Everything becomes compounded, and what should be a Covid-19 recovery becomes a battle for survival. Rent will be affected, suppliers will increase their prices, and consumers, already squeezed to the limit, will have even less disposable income.
“And that’s when the lights are on. When they’re off, there’s the difficulty of actually conducting business efficiently because of the knock-on effect of load shedding,” he says.
He says rather than be seen as unpatriotic, the suggestion to going totally or partially off-grid is pragmatic as it understands the pain that SMEs and their supply chains must endure. “At the very least, being able to operate despite the grid’s unreliability is vital for businesses – especially those in services, manufacturing, or that rely on walk-in retail or hospitality. The savings remove a massive cost burden for small enterprises,” he says.
Da Silva says that while everyone wants to see a well-functioning national utility, there is a growing belief that this country’s energy security will be driven by private power producers and embedded energy installations.
