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SA shoppers abandon trolleys as load shedding kills pay points

Chaotic scenes of frustrated consumers abandoning trolleys as point-of-sale machines run flat could become more common as SA’s load shedding woes intensify.

With Eskom warning that load shedding could reach unprecedented levels this week, the periods between each bout of load shedding are expected to become shorter, making it increasingly difficult for retailers to recharge these devices. In addition, the ongoing theft of reserve batteries from cellphone towers is exacerbating the situation.

Alan Salomon, executive director of JSE-listed Capital Appreciation, one of SA’s largest point-of-sale terminal suppliers to large commercial banks and retail merchants, said there was no doubt that “widespread load shedding” was “impacting retailers and micro merchants nationwide”.

Salomon said a critical component of these payment devices was the ability to connect to the respective acquiring bank to process the card for payment and settlement to the merchant.

“Unfortunately, with the theft of reserve batteries in the cellphone towers and the extended periods of load shedding, even those towers with battery power are struggling to maintain operation over the extended period without national power,” he said.

He said many retailers were still using older generation payment terminals, which relied solely on SIM cards and data connectivity to process card payments. As a result, the “lack of cellphone tower up time” was causing a “dramatic knock-on effect on the merchants who need the ability to process card payments the most”.

Salomon said fortunately, most of the newer generation card payment terminals were now equipped with Wi-Fi connectivity and “bring your own internet” software, which enabled merchants to connect their payment terminal to their own Wi-Fi network in-store. This ensured they were “able to keep trading even when the lights are out”.

But unfortunately, it would take a long time for old generation terminals to be replaced with the latest software technologies, he said.

Sasfin Wealth senior equity analyst Alec Abraham said there was no question that people were leaving trolleys and baskets of goods behind when they were unable to pay with cards and that another noticeable trend was that people tended to reduce their trips to shopping centres during increased periods of load shedding. While this situation was likely to impact discretionary spending more, it could also provide a welcome boost for grocery delivery services, similar to what was seen during the Covid-19 pandemic lockdowns, he said.

Abraham said overall, though, load shedding was a “huge problem for retailers” and “would definitely negatively impact the economic growth this year”.

He said with weaker mining and manufacturing production data weighing on GDP figures, the country’s “reasonable retail numbers” had been a “glimmer of hope until now” because 65% of the economy was “driven by the consumer side”.

But now, the economy was in a “very precarious” position with “yet another pillar of growth (retail) falling as well”.

“It is inevitable we are going to see GDP growth downgrades, to probably 1.4% or 1.5%, similar to forecasts for next year and the year after that. And anything under 6% is just not enough GDP growth to make a dent in providing employment opportunities for the growing population, let alone absorb the current unemployed workforce. We are facing a situation where trolleys of goods are left behind because people cannot pay for them as point-of-sale devices run out of battery life or people are staying away because they don’t want to be caught up in traffic or in a dark centre without power”.

Immediate impact

Makwe Masilela, who heads up Makwe Fund Managers, agreed that sales were being lost through point-of-sale devices running out of battery life, adding that the smaller retailers, which do not have the luxury of large balance sheets, would “feel the impact immediately because when you are small every single sale counts”.

He also expected more affluent customers to increasingly opt to shop online like they did during the height of pandemic, saying this would benefit the larger retailers which were all expanding their digital platforms.

But ultimately, extended periods of intense load shedding affected both large and smaller retailers especially if trolleys and baskets of perishable goods were abandoned as these needed to be traded quickly, said Masilela.

Apart from the frustration of point-of-sale device problems, retailers, both large and small, are already under enormous pressure because of the cost of back-up generation.

The Consumer Goods Council of South Africa (CGCSA) said that while retailers “have and continue to invest in back-up power infrastructure for both business and climate change sustainability”, some “small and medium retailers may not have the balance sheet strength to afford alternative power supply during load shedding”.

Protea Capital Management senior analyst Richard Cheesman agreed the biggest impact of the latest round of load shedding would be felt among smaller retailers, as they were “less likely to have back-up plans in place and more likely to close up” during load shedding period than the likes of Checkers, Pick n Pay or Woolworths. More worryingly for Cheesman was the impact on sentiment that load shedding had, with the effects expected to be more keenly felt over the longer term.

With consumer confidence dented, there could potentially be a pull back on discretionary spending on items such as fashion. Over an even longer time period, it could encourage greater levels of emigration, which would negatively affect overall economic growth.

Casparus Treurnicht, portfolio manager and research analyst at Gryphon Asset Management, said smaller retailers were definitely hit the hardest by load shedding, but  that overall he believed most people simply adjusted their shopping habits “depending on what the situation was with load shedding”.

Nonetheless, when there was load shedding he noticed that smaller line shops often had to close up shop completely while some of the larger anchor tenants remained open.

For him a bigger concern for the retail market was the pressure that disposable incomes were under due to soaring inflation.

The CGCSA said that that even those retailers with “back-up power supply” were “experiencing higher energy costs due to the prolonged periods of load shedding and power interruptions”.

There is therefore a need for urgency to resolve the power crisis, which is now the “single biggest threat to sustained economic recovery and investment in the country,” it said. –