Small and medium-sized enterprise (SME) financier Business Partners has launched a R400-million Energy Fund aimed at helping SMEs finance viable sources of alternative electricity and thereby keep them in business during loadshedding.

According to data published by the South African Reserve Bank, the accumulative loss to business during Stage 6 loadshedding amounts to between R204-million and R900-million a day, with a portion of these losses incurred by thousands of small businesses that do not have the resources to install back-up sources of energy.

Through Business Partners' Energy Fund for SMEs, small businesses will gain access to loans of between R250 000 and R2-million, which it says will be offered at a competitive, risk-adjusted interest rate with a repayment term of up to five years.

Business Partners Limited has enhanced the accessibility and affordability of these loans by offering no repayment obligations for the first six months.

Business Partners executive director and CIO Jeremy Lang says that, while the ongoing energy crisis presents many uncertainties, loadshedding will continue to be a reality for the foreseeable future.

“South African businesses need to mitigate this risk by decreasing their reliance on the national grid and start investing in systems that will provide a consistent and reliable source of power. Not only will this be a vital contributing factor to business continuity, but it will also bring small businesses one step closer to realising their sustainability goals,” he says.

In preparation for making their application to the Energy Fund for SMEs, Lang urges small businesses to ensure their financial statements are up to date, and that they have an equipment quote from a reputable and accredited installer of their choice.

Loans from the Energy Fund for SMEs can be used for the purpose of buying alternative energy solutions, such as solar systems, back-up batteries, inverter systems, diesel-powered generators, as well as other energy generation-related products.

SMEs whose loans are approved may also be able to take advantage of the latest tax incentive, announced in this year’s government Budget. The incentive enables businesses to reduce their taxable income by up to 125% of the cost of their investment in renewables.

FACTS

Business Partners asked SMEs whether they had the necessary funds to invest in energy solutions, such as generators, inverters and solar-powered systems, in its fourth quarter of 2022 SME Index survey.

Thirty-five per cent of respondents revealed they had budgeted for this investment, while 37% reported that plans to divert to alternative energy systems were being put into place.

However, about 30% of small businesses reported not being able to afford the large outlay required to make this investment.

“These findings are a strong indicator of a dire and urgent need that exists within the SME sector,” he says.

Lang adds that small businesses have been impacted on by power cuts in a number of ways, not the least of which include loss of output, increased overheads, additional capital expenditure, operational challenges and supply chain disruptions.

“Ultimately these consequences result in turnover reduction, margin shrinkage and long-term financial distress.”

“What we also need to realise is that the intermittent return of power does not always mean an immediate return to business as usual. This is particularly true for SMEs who run manufacturing plants. Some machinery takes an hour or two to ‘warm up’ and become fully operational,” he says.

This is compounded by the need to clear and clean machines of materials when the energy supply is cut off, as well as raw materials being wasted.

In the case of Stage 6 loadshedding, getting operational after a power cut only to face another cut a few hours later can have “devastating” effects on business operations, according to Business Partners.

Finding ways to access a reliable energy supply is, therefore, not only a matter of sustainability but also one of survival.

“The long-term benefits of running a more energy-secure business will far outweigh the cost of the investment. With alternative energy sources, businesses can futureproof their operations, position themselves as potential contributors to the impending embedded generation programme, while also reducing the cost of energy,” says Lang.

Loan applications for the Energy Fund for SMEs are now open and can be processed online on Business Partners' website.