South Africa is in the dark. Literally.
The country is going through its worst power crisis ever, with frequent and severe power cuts, also known as load shedding. And it’s taking a toll on businesses, regardless of their size.
MultiChoice Group, South Africa’s top pay-TV operator, recently released its annual financial results. And the report shows that the company’s profits declined by over 200%, going from a R2.8 billion ($150 million) profit in the last financial year to a R2.9 billion($155 million) loss.
The company blamed the weak rand and the constant power cuts as the leading causes of these unimpressive numbers. According to them, it wasn’t primarily about the consumers’ purchasing power. Inflation reached an 11-month low of 6.8% in April, but that didn’t translate to consumer spending on pay TV. Instead, MultiChoice noticed an increase in churn (the rate at which customers stop subscribing) when load shedding reached stage 4 and above, even when customers had disposable income.
“This is evidenced by the disconnect between the 290,000 growth in 90-day subscribers (that shows customers still value the group’s products) and the 140,000 decline in the active subscriber base at the end of March (customers are more selective when they sign up to avoid periods of excessive load-shedding),” the company said. As a result, MultiChoice will not be giving dividends to its shareholders this time.
But MultiChoice is not alone. Telkom, South Africa’s third-largest mobile network operator by subscriber base, is suffering the same fate. Its recent financial results for March 2023 show that profits declined by 76.6%. Telkom’s profits, measured in headline earning per share (HEPS), dipped from 575.3 cents to 134.6 cents. And the company’s statement pointed fingers at load-shedding, among other factors.
“Significant market changes and economic factors, including accelerated load-shedding, low economic growth and a high interest-rate environment, coupled with fast-evolving technologies, have had an adverse effect on the group [‘s profitability],” Telkom’s statement read.
Telkom’s financials showed that it spent over R150 million in additional costs to tackle load-shedding. Some of the load-shedding-induced costs that South African telcos have incurred include installing solar panels, batteries, and deals with independent power producers.
MultiChoice and Telkom’s fates reflect the growing volumes of losses that load-shedding is causing South African businesses. A survey by Nedbank showed that 64 per cent of small businesses stop operating during load-shedding, and most of them have trimmed their workforce.
According to a study by Trade and Industrial Policy Strategies (TIPS), a South African research organisation, load shedding cost the country’s economy between R59 billion ($3.2 billion) and R118 billion ($6.3 billion) in 2021 alone. But this year, the central bank projected that the country would lose nearly $13 billion. There’s no end in sight yet for the power crisis. So, businesses will have to keep improvising or innovating to meet their energy demands.
