The impact of electricity crises on the consumption behaviour of small and medium enterprises A Von Ketelhodt
Gordon Institute of Business Science, University of Pretoria
Small and medium enterprises (SMEs) will play a key role in future economic and social strategies in South Africa. However, we find that SMEs are particularly vulnerable to shocks in their external environment due to a general lack of skills and resources. This is critical as the future demand for electricity in South Africa is likely to outstrip supply and electricity will become increasingly unreliable and expensive. We surveyed 250 SMEs in Cape Town and found that the prevailing policy methods of changing electricity consumption behaviour: information campaigns, increasing prices, and providing rebates for energy savings, have had limited results and are unsustainable when applied to SMEs. Keywords: Small and medium enterprises, electricity supply, electricity crisis, Cape Town, consumption
generally lack the resources necessary to invest in alternative sources of energy and they generally do not have the in-house capabilities for sound asset management. A small enterprise in South Africa is defined as employing fewer than 50 staff, while a medium enterprise is considered to have fewer than 200 by the South African Small Business Act (South Africa, 1996). SMEs contribute between 45 and 50% of South Africa’s GDP and employ more than 50% of all formally employed in South Africa (Business Owner, 2006). The South African Government’s future growth policy and industrial policies rely heavily on the future growth of this sector; however, SMEs are far more vulnerable to volatility in the macro-economic environment. SMEs are particularly vulnerable during expansion phases and are less likely to have in-house capabilities for sound asset and risk management. This was illustrated starkly in the 2006 Cape Town electricity crisis.
Small and medium enterprises (SMEs) are regarded as particularly important to South Africa at its current stage of development according to the South African Government’s Accelerated and Shared Growth Initiative for South Africa (AsgiSA) (South Africa, 2006). SMEs are relied on as the future engines of growth for the South African economy and a method to bring the informal economy closer to the formal economy, bring women and youth into the mainstream of the economy and advance broad-based black economic empowerment (South African Government, 2006; Department of Trade and Industry, 2006). However, SMEs are one of the most vulnerable sectors to an unstable environment and policy shifts. Unlike larger businesses, SMEs
The state of electricity supply in South Africa
A reliable, abundant, low priced source of electricity is critical to the success of the business sector in South Africa, and it has enjoyed one of the lowest priced electricity supplies in the world. Constraints are, however, starting to impact on the South African business environment. Environmental constraints, a lack of availability of low priced primary energy sources, and increased construction costs for new power stations are all adding pressure to electricity prices. The efficient use of energy is therefore an important issue that consumers will need to embrace in order to constrain future price increases, which in turn, will require a change in consumption behaviour by consumers. South Africa is a developing nation, and has
Journal of Energy in Southern Africa • Vol 19 No 1 • February 2008
grown its economy through manufacturing and mining, which are traditionally energy intensive industries. Despite it having some of the cheapest electricity supplies, South African use of energy has not been particularly efficient. Figure 1 below illustrates that South Africa has progressively used more energy to produce a US$ of GDP and also more energy per capita in the time period 1971 to 2001. This has...
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