Practice question (2021)

Read the article below and answer

ALL the questions that follow.

Small Business Takes Big Hit With Load Shedding Small business may be the backbone of the South African economy, but its bearing the brunt of the energy crisis. Paying for generators, fuel, and inverters, employing extra staff to work in less time, and having to turn away work are some of the difficult steps this sector has had to take to survive. The situation has gone from bad to worse, says labour lawyer Michael Bagraim. Normally at this time of year, my firm receives instructions to draft letters of appointment and contracts of employment. All weve been doing is retrenchments. Both in small and big business, retrenchment has been at an all-time high. This is purely because of load shedding. Retrenchment is now greater than it was at the height of the pandemic.

Lessa Gordon Mauerbergers laundrette, Wash World, and Supa Clean, the factory she runs with her daughter-in-law, Lauren Gordon, would have thrived in the holiday season if she hadnt had to turn down customers due to load shedding. Located in the heart of Sea Point, the businesses service hotels, guest houses, day spas, airlines, and individual customers, including tourists. Its been an absolute nightmare, she told the SA Jewish Report. We have lost a fortune of work. We usually operate throughout the night, but power is often out for four hours every night. In addition, night staff get paid extra, but they spend most of it waiting for power. All this has a huge knock-on effect. She says she cannot invest in a generator, and a business like hers requires a huge amount of power.

Ive had to employ extra staff to do more work in less time. Weve had a fantastic season, but have had to turn down so many customers, such as kids returning from camp.

She says small business owners often bear the brunt of angry and impatient customers and asks people to be understanding and accommodating when it comes to load shedding, for example, by packing extra clothes for the holidays. You can either be bitter or get on with it. Weve chosen to get on with it. We would be flying if we had the water and power to do it. She notes that when Cape Town faced its infamous drought a few years ago, it also affected the business, yet she survived. We lived through it all, and were still standing.

Her daughter-in-law had to join the business when her late husband, Ronen Gordon, passed away suddenly eight months ago. She has had to steer the ship amid the energy crisis, all while grieving her loss and learning the ropes. We deal on a daily basis with firms who have less than 50 employees, Bagraim says. They cant afford alternative power sources and invariably if they are involved in service or manufacturing, they cannot afford to keep open. It becomes too expensive to ask staff to come in for two or three hours a day, and it becomes impossible for staff to pay for transport to earn only for those two or three hours a day. The only alternative has been to undergo retrenchments. Normally, we would advise to put people on layoff during load shedding like we did in the past but now, unfortunately, this is a daily occurrence and layoffs arent an option.

A bakery owner, speaking on condition of anonymity, says, Our big ovens take 1.5 hours to warm up, and then just as we put the cakes in, the electricity goes off. Theres a huge waste of paid working time and ingredients. My cold rooms get warm and iced cakes dont cool enough to travel. It would cost half a million rand for a generator to run our ovens, and it would be so big, it would take up most of our parking area. Thats before you buy the diesel, which would push the prices so high, no one would buy the cakes.

Even with a generator, entrepreneurs are struggling. Shelene Shaer, the co-owner of Tanaz Hair, says Our generator pulls a huge amount of power because of the hairdryers. Its the cost of diesel thats prohibitive. Sometimes the diesel cost equals our electricity bill. Our electronic equipment is affected because of power surges.

Architect Michelle Maltz Shevelew from M2S Architects says, I have had to purchase an inverter which is now struggling to recharge its batteries. The batteries dont last, and I will need to layout another few thousand rand to replace them with lithium batteries.

Her large-format plans need to be printed at a copy shop. They turn off their machines prior to load shedding, and they take a while to warm up afterwards. So, If I need prints done, I need to check the schedules and prepare accordingly. For a project on site, the contractor requires electricity for many operations. This causes delays which then have a potential cost implication for the client. If a generator is hired, its a cost for the client. Theres always an unknown factor and uncertainty.

Lynn Rose creates private label cosmetic ranges from concept to formulation, including making products, sourcing packaging, logos, and labels, and delivering product ready for the shelves. My suppliers, who all manufacture, whether packaging or product, have had severe delays because of load shedding. At the capacity they produce and the amount of heat they need to produce, its not always conducive to use a generator, so they are inoperable during power cuts.

I then cant deliver on time to my clients, which causes cash-flow problems, delays in re-ordering, and therefore a decrease in monthly sales. I worry about the damage to my reputation because of my inability to deliver on time. Im still waiting for packaging to be made that was supposed to go out as a complete order in November. Ive always supported local suppliers and will continue to do so, but its becoming more and more tempting to import supplies. Jewish entrepreneurs are incredibly resilient in the face of all this. ORT JET Johannesburgs Helene Silberman Itzkin, says that of the 152 businesses on its books, none have shut down because of load shedding. The organisation supports small businesses by offering mentoring, training, and networking opportunities. These small businesses often dont have the revenue to get off the grid, she says. And yet load shedding affects every aspect of their businesses. What we do is help them to retain a strong mindset and be strategic, for example, helping them decide if its worth getting an inverter or solar panels or making use of a shared office space with green energy.

Lisa Sandler of ORT JET Cape Town says that providing space for entrepreneurs to share their experiences also helps them navigate challenges. Its been one battle after the next for them, from the pandemic to load shedding, says Silberman Itzkin. But entrepreneurs have grit and perseverance. We provide mentors and life coaches for them to talk to, and to help them not give up. Our aim is to give people the skills and tools so that they can support their families so that welfare is a last resort. Our work is critical to the continuation of the community.

QUESTION 1 (20 Marks) Using any examples from the article as the basis of your answer, recommend how the leaders of these organisations should deal with the risks that their entities face. (discuss at least 10 points in detail)