The economic impact of load shedding : the case of South African retailers

Abstract

South Africa is currently experiencing an electricity crisis. A structural shortage of electricity supply remains one of the country s most critical challenges going forward as legacy infrastructure ages and needs to be replaced. In this context an understanding of the economic impact of load shedding is a critical consideration for all businesses in South Africa. This is particularly true for the retail sector as the impact of load shedding on consumers is dynamic and complex. The current research examines the impact of unstable electricity supply on South African retailers. A mixed-methods approach has been employed across three studies. Study 1 consists of a qualitative view of the impact of load shedding through semi-structured interviews with financial and operational retail managers. Study 2 and 3 contribute toward quantifying the cost of load shedding on the retail sector by implementing the subjective evaluation and marginal cost of backup methodologies respectively. The results of study 1 are captured in a model which highlights the major paint points experienced by the retail industry due to load shedding. The results of study 2 indicate that R13.72 billion rand was lost in revenue for the first six months of 2015. The results of study 3 indicate that a conservative estimate of R716 million has been invested by retailers in backup generation power during the same period. The impact of load shedding has been significant and far reaching. It is hoped that these results will be of value for industry stakeholders in dealing with the crisis and will provide powerful motivation to ensure the correct measures are taken to keep lights on.