Now is the time for the government to clarify and improve the payback loan scheme to support small businesses affected by blackouts. solar tax relief should also be extended to financial aid to match the cash flow of small businesses and the extent of the impact experienced due to shedding burden.
President Cyril Ramaphosa announced a raft of new measures to combat the country’s existential power crisis in his state of the nation address recently after the country experienced more than 200 days of blackouts in 2022 and not a single day without a blackout since the beginning of 2023.
Needless to say, the electricity crisis is devastating to small businesses that cannot manage unreliable electricity supplies.
Ramaphosa also announced that last year’s Covid-19 “bounce back” loan scheme to help businesses recover from the pandemic will now be used to help secure funding for solar power.
“The National Treasury is working on the adjustment of the back loan scheme to help small businesses invest in solar equipment and allow banks and development finance institutions to borrow directly from the scheme to facilitate the leasing of solar panels to customers,” he said.
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The loan scheme is withdrawn for the effects of the pandemic
Last year, the government launched a reverse loan scheme managed by banks and other financial institutions and guaranteed by the government for companies that need funds to recover from the effects of the pandemic.
Ramaphosa said the small business development department will work with the National Treasury on how the scheme can be strengthened to help small and medium enterprises and businesses in the informal sector.
Now Inospace, the owner of South Africa’s largest service logistics park, is pressing the government to clarify what the loan scheme will do. “Inospace believes that the government should urgently provide funds and facilities to help small businesses with existing loans and payments, purchase raw materials and manage operational costs and other procurement,” said Jacques Weber, COO of Inospace.
“These interventions should be tailored to suit the cash flow patterns of small businesses and the level of impact they experience as a result of reducing burdens.”
Weber said the solar tax relief is better than nothing, but it won’t help small businesses survive or bounce back. “Therefore, we call on the government to immediately provide unconditional financial assistance to SMEs whose businesses are at great risk of being overwhelmed by unnecessary burdens.”
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What help from the small business development department?
The small business development department recently said that, together with public and private stakeholders, it is working on an energy aid package for SMEs affected by load-shedding. “We would welcome any “bounce-back” measures that translate into financial assistance,” Weber said.
SMEs are often called the lifeblood of South Africa’s economy and represent more than 98% of businesses, employing up to 60% of the workforce with a gross domestic product (GDP) contribution of 39%.
Weber said that the contribution of SMEs should increase in the future, more important for the economy. “However, these businesses are also the most vulnerable to economic upheaval and externally driven pressures.”
As the load continues to fall, thousands of SMEs are following suit with the thought of cutting jobs, reducing production or possibly shutting down. The SME segment of the economy does not have the means to go out of the grid through expensive alternative power solutions, he said.
The department of trade, industry and competition launched the Intsimbi Future Production Technologies Initiative (IFPTI) in 2019 to position the country’s advanced manufacturing sector for the fourth industrial revolution.
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Load shedding will not end soon
“Despite the president’s optimism to end load shedding, Inospace believes that the problem will not disappear soon. The company launched the Living with Load Shedding project to help clients reduce disruptions in business operations and negotiate discounted prices with various service providers of alternative energy solutions , including solar energy options, inverters and generators, to help SMEs in their portfolio.
Inospace also created a hotline service to provide advice or emergency help to clients and installed solar plants in the park to reduce consumption and reduce demand on the various electricity networks. Through this project, clients can now install custom solar plants to reduce their electricity bills.
“Many real estate companies use solar as a revenue generator that increases results, but we will use solar to keep our clients’ businesses running. Our clients can move between logistics parks to use business hubs with 24/7 power, to work with different schedules and stages -strange.
“With no new generation capacity added to the system, the possibility of unplanned outages of generating units will continue. Planning to relieve the burden on our operations and business strategy will be important for at least a few years,” said Weber.