Higher diesel costs and rolling blackouts hit retailers hard

Shoprite chief executive, Pieter Engelbrecht, says the approximate 56% year-on-year increase in fuel price continues to affect the cost of supply chain and general operations, but more so as a result of unprecedented periods and stages of rolling blackouts during the first quarter. 

Diesel expenses have increased considerably as well. 

“While — as a result of our solar and generator investment programme — our supermarket business has been fortunate to trade seamlessly and continue to meet the needs of our customers during load shedding, at load shedding stages 5 and 6, it comes at significant cost,” he says, estimating the additional monthly spend on diesel at R100-million a month.

Energy data analysed by South Africa’s Council for Scientific and Industrial Research shows that Eskom cut 2,276GWh of electricity in the first six months of 2022 — more than 90% of the 2,521GWh it shed for the entire 2021. 

For the six months to the end of August this year, Pick n Pay reported that it took a particularly hard hit from the combined impact of increased rolling blackouts and sharp fuel price increases. 

The group spent R110-million more on energy costs for the first half of the 2023 financial year, compared with the same period last year, reflecting extra spend on diesel net of electricity cost savings. 

According to the Pick n Pay interim results report, this figure includes both increased trucking costs and increased store-level generator costs. 

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The retailer’s operations cost lifted 12.8% to R2.5-billion for the six-month period, largely driven by higher electricity costs and a doubling of utilities costs such as increased fuel consumption to drive store generators on the back of a higher fuel price. 

Chief executive Pieter Boone notes that given rolling blackouts accelerated in the latter part of this year, the impact in the second half of the 2023 financial year is likely to be more severe.

This is fairly accurate given that Eskom itself has confirmed that, aside from 2021, there were more power cuts in September than in any other entire year since load shedding started in 2007. Just over 570 of the total 720 hours in the month of September were affected.

Last week, TFG reported that it lost 132,000 trading hours during the first half of the year due to power cuts. 

However, management is dealing with this by investing in backup power solutions installed across 57% of stores throughout the country, and covering about 68% of turnover by year-end.

TFG has also deployed mobile point-of-sale devices across key stores to enable trade during rolling blackouts and is actively engaging with landlords to discuss alternative and emergency power options. BM/DM