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Grocery stores cry foul as load shedding raises costs

| Economic factors

Grocery retailers and food producers say lost trading hours, wasted food and costly generators are among the biggest concerns emanating from the rolling power blackouts afflicting SA.

Most large retailers and producers have, or are installing, generators to deal with power utility Eskom’s inability to provide a stable electricity supply. But many indirect costs are unavoidable.

Shoprite, whose electricity costs rose 17% in the six months ended December partly because of the need to run expensive generators, last week said load shedding was a major concern. This was partly because of changed shopping habits — where trading hours were effectively lost as shoppers avoided shops and malls during power cuts — but also due to lost production and wastage.

Shoprite CEO Whitey Basson said his company had managed load shedding "to the best of our ability — although it does cost us a lot of money not just on generating costs but on costs of lost production" and fewer trading hours.

When the electricity went out at Shoprite’s fast-food chain, Hungry Lion, the entire batch of chicken that was being cooked had to be thrown away. "It’s the same in Shoprite, we just throw away millions and millions of rand every month," Mr Basson said.

The small reduction in fuel costs had been more than offset by generators’ high costs in the case of Shoprite stores. The group had "bought R160m worth of generators … to deal with load shedding".

David North, head of group strategy at Pick n Pay, said "load shedding is disruptive both to customers and to companies".

Tiger Brands investor-relations executive Nikki Catrakilis-Wagner said on Friday: "Load shedding is disruptive from a production perspective as well as in terms of distribution. The critical paths of most of our production facilities have been installed with back-up generators, which has helped manage the situation and curb waste so far. In addition and where possible, we are increasing the safety stock cover by introducing additional shifts."

Tiger Brands was reviewing various alternative sources of energy, including bio-gas, solar panels and additional generators. "So far, there has not been any material loss due to load shedding," Ms Catrakilis-Wagner said.

Massmart CEO Guy Hayward said when power cuts occurred the company’s generators kicked in and allowed fridges and freezers to remain cold and keep food fresh. "But if there’s too much tripping in and out, you can end up blowing your fridges and freezers and then you get into waste.

"We’ve not seen much of that but I have every sense that we will particularly if the load shedding becomes quite prevalent."

Mr Hayward said Massmart could possibly benefit from many of its large stores being situated on standalone premises, as shoppers seemed to avoid large malls when the lights went out.

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