Energy minister Gwede Mantashe might think South Africa’s load shedding crisis can be solved within 12 months. Pick n Pay is betting big money that he’s wrong.
The JSE-listed retail group said in a trading update on Wednesday that it is “clear” that progress to fix the energy crisis won’t be rapid. It said it “takes the view that the current crisis is a permanent new reality, requiring a rapid, determined and concerted response”.
Pick n Pay is now implementing an energy resilience plan to reduce its reliance on the grid as far as possible.
This plan includes negotiating with landlords to ensure they enable the retailer’s stores to maximise the installation of solar solutions on store roofs or provide a “fair share” of renewable energy that the landlords themselves generate.
It is also installing inverter and battery power solutions to operate supermarkets sustainably through load shedding. “The group will have trial supermarkets operational in the coming weeks. All our standalone corporate clothing stores already have power backup, with more than half of these on inverter and battery power,” it said.
Even with backup solutions in place, Pick n Pay cautioned that customer demand is also dampened during periods of load shedding, in part because consumers are reluctant to spend money on frozen food items for fear these will spoil during power outages.
“The production of food and other goods is also disrupted, creating stock challenges. Diesel generators are not designed to run for many hours on end and suffer breakdowns,” it said.
It warned, too, that the diesel needed to run store generators is a “severe cost” to the group., which spent an additional R346-million year on year on diesel for its stores in the first 10 months of the year, with the costs concentrated over the latter months.
It’s using diesel at a run rate currently of about R60-million/month. Its generator repairs bill has also soared, while it has incurred additional food waste costs.
Worryingly, Pick n Pay warned that, depending on the energy options it pursues, it may need to reprioritise capital investment in other areas of its business.
“In this event, priority will continue to be given to funding expansion of the group’s Boxer and Clothing growth engines, which are likely to deliver the best combination of sales growth and sustainable returns in the coming years,” it said.
“The group also intends to accelerate growth opportunities that are less directly disrupted by interruptions to infrastructure. We will accelerate our digital ambitions, including new initiatives in omnichannel retailing and digital media, alongside plans to step change our market-leading Smart Shopper loyalty programme.” — © 2023 NewsCentral Media