Load shedding and its impact of the metals and engineering sector
I write to you on behalf of eighteen employer associations, who are federated to SEIFSA, who collectively represent in excess of a thousand employers and who employ close to 170 000 employees, which accounts forty-percent of all employees in the metals and engineering (M&E) sector.
The metals and engineering sector is a key and integral part of the economy. Any disruptions in the sector’s industrial activity feeds through into the rest of the economy. From the end user’s perspective, the M&E sector, made up of 13 sub-sectors, is a crucial supplier of inputs into major sectors such as construction, mining, motor, automotive and other manufacturing sub-industries.
Notwithstanding the COVID-19 pandemic, the economy was already suffering from a shrinking domestic market, declining production, low capacity utilization, weak production sales, declining employment numbers, increasing levels of imports, a weak global trade balance and low investment levels.
In the first six months of 2021, green-shoots began emerging in the sector. Key positives during this period were improvements in production volumes and production sales, capacity utilization, exports improving in value terms, narrowing of the M&E trade deficit and growing exports into the African continent.
The M&E sector, already buckling under the strain of difficult market conditions, state capture, low economic growth, disinvestment and collapsing infrastructure, misguided objectives and parochial interests, is now having to contend with seemingly never-ending load shedding.
Whilst we accept that structural changes, significant investment and a culture or paradigm shift is urgently needed to secure the long-term sustainability of Eskom, in the immediate to medium term, on-going and intermitted load shedding is taking a heavy toll on our membership, the sectors contribution to the fiscus and the M&E sector’s ability to hold onto jobs and more importantly, create additional and much needed employment opportunities.
I have no doubt that you have heard more than your fair share of horror stories about the effect of load shedding on businesses. The sad and tragic reality is that it has gone on for so long that we have become accustomed to wringing our hands in despair and hoping for the best. It is also true that much has been written regarding the negative effect of load shedding on industry, sadly with little effect. Repeated assurances that everything possible is being done is also wearing thin on business.
We continue to hear and read about Eskom blaming its aging fleet on its poor performance. Whilst we may, readily accept this, we are also of the view that this, may, with respect, be an oversimplification of the problem. Moreover, much has been written about the lingering and worrying effects of the deep-rooted networks of corruption within Eskom and your commitment to eradicating this and returning this once great institution to good governance, which endeavours we support. We also support the Presidents call and your commitment to Eskom’s division into three constituent parts (generation, transmission and distribution) each run on sound businesses practices.
In closing, as we continue to struggle with the reality of load shedding, which we reluctantly have no choice but to accept for the foreseeable future, can you provide business with assurances that firstly, the scourge of corruption is being tackled and criminal and/or civil charges against current and past employees have been opened with the South African Police Services and how many of these cases have resulted in convictions; secondly, do you have the political leeway to make the cultural and headcount changes necessary to make Eskom a viable commercial enterprise and finally, are you able to provide businesses with assurances on predictability going forward? It is incredibly difficult for businesses to plan production and/ or give assurances to customers and clients when load shedding schedules themselves are not predictable.
South Africa and for that matter SA Inc., cannot afford for Eskom to fail. All we ask is that, as business continues to grapple with the present-day reality, you and your team are doing everything reasonably possible to address this crisis.
Business needs to know that the sacrifices we make today, will yield the returns that will contribute to putting SA Inc. back on a positive growth trajectory fuelled by a stable and predictable energy supply.
SEIFSA and its constituent membership remain available to assist you in your endeavours in whatever way we can, as you and your team steer Eskom, and for that matter SA Inc., through this crisis.
I look forward to receiving your views herein.
Yours Faithfully
Lucio Trentini
Chief Executive Officer