The franchise industry is the latest business sector to call on the government to take urgent action to resolve the download crisis and rein in national security to prevent an explosion of riots and civil disobedience.
The Franchise Association of South Africa (FASA) says that franchises contribute around 14% to the country’s gross domestic product (GDP) across fourteen different sectors and FASA members comply with government guidelines while continuing to help maintain the ‘economy in progress.
FASA CEO Freddy Makgato says the government’s inadequate response to providing the basic services that enable businesses to operate and thrive is unsustainable. “FASA calls on the government to act with the urgency it requires to resolve the energy crisis and prevent further anarchy and the collapse of the economy.”
“The current situation not only has a damaging impact on the economy, but also has wider, more devastating ramifications that include franchise staff and their families. During the pandemic, riots, looting and load shedding, the business sector held the economy together through its efforts to remain viable, keeping its doors open and employing as many people as possible.”
Makgato says FASA is dismayed by the current crisis in the country which is putting the livelihoods of all citizens at risk and warns that if it continues, most businesses may not be able to recover and people may lose their jobs while the ‘economy, which is already in danger. narrow, they will stop.
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Franchises get no help rebuilding after floods, riots
“The retail sector bore the brunt of the crisis, particularly after the riots and floods, and has yet to see any meaningful steps from the government to help those who had to rebuild and start from scratch.”
Reports from members indicate that if immediate and urgent action is not taken, rioting and looting will resume and intensify nationwide, he says. Food safety is also under threat as the removal of cargo puts pressure on manufacturers, food producers and meat and poultry suppliers who report massive wastage as products spoil.
“This disruption in the value chain is critical to feeding the nation and cannot be ignored. The side effect of producers is not being able to bring products to market, along with retailers being forced to close operations during load shedding or simply not being able to afford the cost of alternative energy will affect every community across the country.”
Makgato says the destruction of not only businesses and property, but also basic infrastructure and services themselves, from the collapse of essential services and inadequate policing to water security, is cause for alarm.
In addition, the fast food and restaurant sector, which was strained during the pandemic, is receiving another devastating blow with up to 10 hours of daily load shedding further weakening the sector as, even with generators , the restaurants are still unable to generate. enough income during off-peak hours and end up with no customers and costly wastage.
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The cost of franchises to remain open
“Nor is it as simple as flipping a switch to diesel or petrol. Those with generators often lose thousands of rands as they have to spend more on additional overheads such as fuel, labor and maintenance with each discharge. The equipment it also gets damaged due to power surges and all of these affect the bottom line.”
The wider franchise sectors, from automotive products and services, office building and home services, business to business, health and beauty, education and training to real estate, all agree that the offloading and energy crisis in South Africa will limit economic growth. and increase costs across the board.
Richard Mukheibir, CEO of Cash Converters and FASA board member, says the reality of living with downloads stretching into ten more hours a day requires businesses to come up with an action plan. Whether it’s a generator, inverter, solar panels or a combination of these, people have to find extra money to invest in their businesses just to keep them going.”
Franchisees are caught between the devil and the deep blue sea. While rising costs of doing business hurt the bottom line, not trading during the extended shutdown is worse for business, according to many franchisors in less energy-intensive sectors.
“These companies have bounced back and because of their setup, they can continue to trade off the back of improved computer systems, a few lights and the Internet. They’re a little bit better off than the companies that need a lot of power to keep going, like those that use dishwashers, ovens, stoves, refrigerators, freezers and ovens that consume a lot of energy.
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Impact on the purchasing power of consumers
Tony Da Fonseca, former president of FASA and managing director of OBC Better Butchery, which has stores in lower income areas, believes the impact on South African consumers who have to find money to live through major power cuts it affects companies like consumer spending. The electricity is cut, to the point that many stop working.
James Noble, head of wholesale, retail and franchising at Absa and board member of FASA, the cost of running a business has been rising over the past two years even before the Covid- 19.
“The biggest costs are rent, staff, increased cost of sales due to inflation, electricity and the impact on discharge costs, which not only reduces income due to the limitation of business hours, but it increases the cost of operating the business if you have solar power or generators to keep the business open during those times.”
To alleviate the electricity crisis, FASA suggests as a short-term solution the government offers some kind of discount or reduced tariffs to key sectors to provide some relief to the industry. “It would be a tragedy if, as a result of an incompetent administration and inaction on the part of the government, the sector faced an irreversible collapse,” says Maria D’Amico, president of FASA for 2023/ 2024.