Business owners in South Africa are looking to emigrate to escape Eskom and load shedding

 ·26 Jan 2023

South African business owners are looking to take their businesses elsewhere to escape rising operation costs caused by load shedding in the country.

Commenting on current emigration trends, the director of Breytenbachs Immigration Consultants, JP Breytenbach, said that the group has noted a concerning uptick in the number of local businesses looking into relocating to the UK in particular.

“More businesspersons are looking to relocate their businesses to the UK, as the cost of doing business in South Africa is becoming too expensive, and businesses often must close due to operating costs,” he said.

While the group hasn’t seen an uptick in South Africans looking to leave because of load shedding specifically, Breytenbach said that the rolling blackouts are one of several significant push factors mentioned by clients.

Other big factors are South Africa’s water issues and high crime rates.

Notably, the migration expert said that load shedding is a less significant push factor for people in the Western Cape, as the region has more effective load-shedding mitigation strategies than the rest of the country.

However, the blackouts have hit businesses across the entire country hard, affecting companies of all sizes, with Small, Medium and Micro Enterprises (SMMEs) particularly vulnerable.

The lack of electricity has caused businesses to lose productivity and revenue while also damaging equipment and inventory. Many businesses have been forced to invest in backup generators and other equipment to mitigate the effects of load shedding at a huge cost.

Businesses getting decimated

Businesses in South Africa have been pummeled by load shedding and the associated costs for years.

The situation reached crisis levels in the last few months as load shedding hit increasingly higher stages and sticking around for longer periods of time. Load shedding is currently sitting at stage 4 and stage 5 until further notice, having been in effect since early September 2022 almost non-stop.

Businesses not only have to suffer losses from lost sales and productivity during outages but also have to shoulder the cost of fuel, generators and other energy solutions just to keep trading and operating while in the dark.

The Franchise Association of South Africa, which represents thousands of small businesses and entrepreneurs in the country, noted this week that many businesses are facing outright collapse due to these increased costs.

SMMEs are especially vulnerable as small businesses are usually on the municipal grid, not Eskom’s grid, so they can’t even negotiate special deals like big businesses. They also do not have the capital and liquidity to invest in large-scale mitigation measures like solar or high-end battery storage.

But even larger businesses – like JSE-listed Astral Foods – are having to spend millions of rands a month to keep operations afloat while seeing earnings decimated.

Businesses are not only suffering from the direct cost of load shedding but also from rising costs surrounding it. Because Eskom’s energy sales have dropped significantly, the power utility has had to hike electricity prices to recover lost revenue.

Energy regulator Nersa has granted an almost 19% increase in the electricity price to Eskom for 2023 and nearly 13% for 2024. This means businesses and South Africans at large will not only have less electricity due to load shedding, but the power they do use will cost significantly more.

According to Stats SA’s latest liquidation data for South Africa, 1,907 businesses and companies were liquidated in 2022.

The director and head of the insolvency and Business Rescue Practice group at Werksmans Attorneys, Dr Eric Levenstein, said that the impact of relentless load shedding alone – and the cost of mitigating strategies – inevitably meant that some companies were unable to generate sustainable revenue.

“If there is no improvement in energy and the big increases come through, the cost factor in making businesses successful is extremely high, and the risk of business failure will mount in 2023,” he said.

Read: Businesses in South Africa warn of riots, looting and collapse

Show comments
Subscribe to our daily newsletter