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Blackouts – how they affect your hood and where you shop

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The return of load shedding has impacted severely commercial property and business owners already struggling in tough economic conditions.

With harsher and more frequent power cuts expected, the outlook for businesses is bleaker.

The impact of load-shedding has been “substantial” in terms of down-time for shops, factories, warehouses and offices, and the secondary negative effects such as longer travel times, staff staying away and the negative sentiment it carries, says Fundamentum Property Group chief operating officer Frank Reardon.

Businesses, investors and individuals go into a “holding pattern”, meaning longer decision-making timeframes and deepening economic malaise.

“Energy-intensive businesses such as industrial and manufacturing, that cannot fall back on emergency power supply from generators, are the worst hit. In shopping centres the smaller retailers without generators are probably harder hit than the larger nationals.

“Offices are less reliant on electricity and many office workers can work remotely.”

Although electricity supply appears to have stabilised, Reardon says load-shedding’s return will bring “more despair, more pain, less economic growth and fewer jobs”.

Theresa Terblanche, divisional director Broll Property Group, says industrial and retail properties and businesses are the most severely affected. Industrial delays affect output and delivery, and this affects the availability of products on the shelves of retailers.

Manufacturing businesses are hardest hit by load-shedding. Picture: Denny Franzkowiak

Terblanche says: “Industrial businesses, particularly manufacturing, suffer longer outages than load-shedding times as some machinery needs to be shut down beforehand to avoid damage, plus it takes time to power up larger machinery.”

Load-shedding also sees shoppers cutting visits to malls and centres.

“Retail stores can’t trade during power cut. Food retailers are closed for longer to prep to re-open for trade. There is loss of income and extra expenses, and higher theft as electronic security devices do not work.”

With load-shedding schedules up to Stage 8 recently distributed, there are threats of power cuts becoming more regular and for longer periods. If this materialises, the already significant impacts on commercial property owners and businesses will worsen.

Tenants will not be able to trade and pay for rentals and other charges such as electricity, water and refuse removal. An inability to pay salaries will lead to job losses and affect purchasing power, she says.

“If tenants are not off the grid and unable to continue trading through higher stages of load-shedding, we will see more business failures and increased unemployment.”

To minimise risk and loss, Terblanche says businesses should invest in generators and food outlets should switch to using gas. Landlords can use generators in shopping centres for basic lighting, till points and alarm systems.

Ultimately, load-shedding results in product disruption which impacts direct economic growth, says John Loos, property sector strategist at FNB. Although the impact is “tough to quantify”, it is there.

“Slower economic growth means slower business growth and slower growth, even decline, in demand for commercial space to rent. This, when average commercial property vacancy rates are already rising, could further constrain landlord ‘pricing power’ and exert more downward pressure on already slowing rental growth.”

The negative sentiment associated with load-shedding also impacts on indirect economic growth.

“The fact that Eskom’s troubles have been around for more than a decade and with little sign of improvement, boosts pessimism regarding the economy.

“Weaker confidence in the economic future translates into fewer business investment and expansion plans, which constrain demand for new commercial space over and above the direct negative impact of load-shedding on current economic output.”

Major Eskom reforms under its new management could be a boost to sentiment.

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