Almost two-thirds of township businesses have been forced to shed jobs because of loadshedding, according to a new report. But business owners say the situation is even direr – they face closing if the power outages continue.

According to the Nedbank Insights Report, conducted in partnership with the Township Entrepreneurs Alliance (TEA), 64% of small township businesses cease operations during loadshedding and almost 66% of business owners have cut jobs because of loadshedding.

The jobs cuts were most visible in the food and beverage sector, as well as manufacturing.

The report also found that loadshedding has led to increased operating costs, lost revenue and declining margins.

Sandile Sangweni, Kwamashu Business Chamber spokesperson, said that loadshedding did not affect all sectors equally, and those providing food services were the ones struggling the most.

“It’s the shisanyamas, the corner shops and the butcheries that are struggling because they stock perishable items that need cold storage. Power outages mean they can’t prepare food or store it. They end up having to throw away stock, and they lose money when they can’t serve clients. In the end, businesses are having to incur the extra cost of a generator or close their doors,” he said.

According to the report, one in five businesses had turned to alternative energy sources.

Mlungisi Mazana, the chairperson of the Gugulethu Business Forum, said that small township businesses faced a number of barriers caused by loadshedding, including increased crime at their premises during the power outages.

“They end up losing customers to bigger chain stores that have generators because a small business doesn’t have that luxury,” said Mazana.

He said:

It creates unemployment and poverty. Those businesses are small, but they employ one or two people. People are losing their livelihood.

Mazana raised concern that the challenges of operating amid loadshedding are a barrier to future entrepreneurs.

“It discourages aspirant entrepreneurs when they see people they look up to closing shop,” he said.

The report also found that the challenges caused by power cuts are impacting entrepreneurs' mental health and resilience.

Chris Paladi, a former restaurant owner in Alexandra, said loadshedding had heavily impacted his business.

Paladi opened the restaurant with his wife in December 2021. Less than a year later, he had to close it.

"At first, business was great. But when loadshedding started to intensify in 2022, we started battling. We pushed until September 2022, but it didn't work out,” he said.

Paladi also had to retrench two employees who worked at the shop.

"[During loadshedding], you could miss peak trading times. It was not workable for us, and it was no longer feasible. We relied on an oven, and the oven needed power. We had stoves that operated on gas which could work during loadshedding, but we still needed the oven," he said.

After the closure of his restaurant and losing his day job, Paladi is unemployed and in debt to the landlord of the restaurant property.

"We are trying to move our business elsewhere, but he [the landlord] wants to attach our assets," he said.

Paladi said township businesses would have to look to alternative power sources in the face of ongoing loadshedding.

"Even if people need to get their own petrol or diesel to sustain the generator, it can take business far," he said.

Dr Azar Jammine, director and chief economist at Econometrix, said the research findings were not surprising, as small businesses tend to feel the impact of loadshedding the most.

He added that while the township economy spend would make up only a small portion of the country’s economy, it affects a large population who live and work in those communities.

He said:

If you look at the level of spending in those businesses, they are probably not significant contributors to the economy. But if you look at the number of people involved, it’s a lot more relevant.

Jammine added that while the government has repeatedly pushed small businesses as a focus of its economic growth agenda, the economy remains dominated by big businesses.

“It’s lip service. Small businesses are not particularly prominent in our economic environment,” he said.

Dayalan Govender, Nedbank managing executive for solution innovation, argued that township businesses had a significant impact.

“Given that spaza shops contribute around 6% of South Africa’s GDP, employ 2.6-million people and represent an economy of around R600-million, the results are troubling and require a response from both the private and public sectors,” Govender said.