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Stage 6 load shedding costs South Africa’s biggest retailer R560 million

| Economic factors

South Africa’s largest retail group, Shoprite, says that it spent R560 million on diesel to keep its operations going during stage 5 and stage 6 load shedding over the last few months.

The group published an operational update on its business for the six months ending 1 January 2023, outlining strong growth across its operations for the period.

The group’s core business, Supermarkets RSA, contributed 80.1% to group sales and achieved sales growth of 17.5%. This growth is reported against the six-month period ended 2 January 2022 when sales increased by 11.3%.

According to Shoprite, the growth in sales reflects a record Black Friday and festive season, underpinning 46 months of uninterrupted market share gains.

While sales were significantly higher, Shoprite said that margins were tighter as the group moved to shield consumers from high food price inflation and also absorbed operational costs related to ongoing load shedding.

“Internal selling price inflation for the period measured 9.4%, reflecting the group’s product mix exposure to commodities, where selling price inflation has been notably higher,” it said.

“As a result of our commitment to price leadership, the group invested in selling prices to counter the impact of inflation for customers, thereby saving our Shoprite and Checkers Xtra Savings customers R7 billion over the period.”

This was exacerbated by a 56% year-on-year increase in fuel prices in Shoprite’s supply chain operations.

“The group’s additional spend on diesel to operate generators across our Supermarkets RSA store base in order to trade uninterrupted during load shedding stages five and six amounted to R560 million for the period,” it said.

Shoprite is another in a growing list of JSE-listed and other businesses in South Africa counting the costs of higher stages of load shedding that have hit the country.

R560 million over six months averages out to over R3.1 million a day.

Property developer Attacq revealed in December that it costs retailers over R500,000 a day on average to keep operations going during stage 6 load shedding.

According to the Bureau for Economic Reasearch, major production companies have warned of the toll load shedding is taking on business – affecting the country’s food supply, mining and shopping malls. Losses relating to load shedding are mounting across various sectors – specifically within the agricultural and mining sectors.

The group highlighted commentary coming from a handful of companies expressing this alarm:

Sibanye Stillwater (mining): The worsening power constraint could lead to the early closure of marginal shafts and reduces the appetite to invest in capacity expansion, said Sibanye Stillwater.

Impala Platinum (mining): The company reported that output in 2023 is likely to be down compared to 2022. “If the situation worsens, at some point, the company will stop sending people underground on certain days.”

SA Canegrowers: The group’s scenario modelling shows that continuous load shedding at stages 4-6 will cost growers more than R723 million in 2023.

Astral (poultry): South Africa’s largest poultry producer has warned it would suffer severe operational disruptions through the first quarter of 2023 due to load shedding. These disruptions result in abnormal/additional costs, as well as substantial production cutbacks – pushing chicken prices up for consumers.

Nando’s (fast-food): Has wanted of the threat to their fresh food supply.

Truworths (retail): Despite its stores still being able to trade through power cuts – it is likely fewer people will be visiting malls in South Africa.

 

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