As McDonald’s tackles SA blackouts, Archie’s doing fine

Cashing in on load shedding.

There are few things better for business at Archie Milicevic’s shop than a power blackout.

His store named Yugo, in Linden suburb in South Africa’s biggest city, stocks candles, candlestick holders and kerosene lamps and is attracting as many as three times more customers since state-owned utility Eskom started regular, scheduled power cuts, known as load-shedding, more than six months ago. The first prolonged outages since 2008 are prompting companies including McDonald’s Corp. and Vodacom Group Ltd. to invest in generators for electricity.

“I’m an old guy with an old store so I’m not really affected by the power cuts,” he said, sitting behind a counter in his general store in Johannesburg as the smell of kerosene hung in the air. “There’s always natural light because I’m only at work till 6 o’clock, so I can use my calculator during load- shedding hours.”

Milicevic, 70, is a rare winner of the rolling blackouts that have hit Africa’s most-industrialized economy almost daily since the start of April and are likely to persist for at least another two years. Eskom, which supplies about 95% of the country’s electricity, can’t meet demand from its aging plants and began rationing power in November, forcing businesses to shut doors and causing traffic congestion.

“Generator sales have more than doubled over the past year,” Annaleigh Vallie, a spokeswoman for Massmart Holdings, the South African retailer owned by Wal-Mart Stores, said in an e-mailed response to questions. “We have been working around the clock to keep up with demand and bringing in stock regularly.”

 

Battery Pack

A gasoline generator to give power to an average-sized home costs about R9,000 ($740).

McDonald’s and Vodacom, Vodafone Group’s Africa unit, are among the businesses tackling the outages. Vodacom is seeking to increase emergency fuel stockpiles and wants to work with its biggest rival, MTN, to keep its network online during power cuts, Chief Executive Officer Shameel Joosub said in a May 18 interview.

“Surely there’s opportunity for us to work together, create a better battery pack,” Joosub said at the company’s Johannesburg headquarters. “You could put a generator at the site and share the cost three or four ways.”

McDonald’s, which has more than 200 restaurants in South Africa, plans to have about 75% of its outlets connected to a generator before August, the company’s South Africa CEO, Greg Solomon, said in an e-mailed response to questions. That compares with 40% now.

 

Mall Generators

Eskom is struggling to build new plants in time to curb power cuts, while trying to plug a 225 billion-rand cashflow shortfall. The 4,764-megawatt Medupi plant, the first new major facility being built after decades of underinvestment, is four years behind schedule.

At Sandton City, a shopping mall in Johannesburg’s financial hub, generators are the only way to sustain daily operations during load shedding. The mall is majority-owned by Liberty Holdings Ltd.

“The generators have to pick the whole center up,” said Derrick Ntuli, whose Italian restaurant in center had 30 seconds of darkness on May 22. “It shouldn’t be more than a minute, or more than two minutes.”

The mall will seek to recoup costs of providing emergency power during blackouts, and is considering charging stores for running generators, Liberty’s assistant technical manager, Harry Husselmann, said by phone. It used 10,000 liters (2,640 gallons) of diesel last week on the machines, he said.

The power crisis is stifling a recovery in South African economic growth from the weakest expansion last year since a recession in 2009. Gross domestic product grew an annualized 1.3% in the first quarter as factory production contracted 2.4%.

But for Archie Milicevic, there are few downsides. While paraffin lamps are his biggest draw, old-fashioned fire-heated irons are selling fast.

“I stock things that they need during load-shedding, so I benefit,” he said. “The till I use runs on electricity. If that doesn’t run, I’ve always got this calculator.”

©2015 Bloomberg News

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