Impending power cuts could affect franchise sector

2 Apr 2013

Despite ongoing warnings of blackouts over the past five years that have not materialised, the Franchise Association of South Africa (FASA) warns that the current chaos at the Madupi Power station, maintenance woes at Koeberg and a narrowly averted strike at Exxaro in Mpumalanga, could well result in rolling blackouts this winter.

At a series of regular breakfast seminars held by FASA for members, both franchisors and franchisees have voiced their concern that this second round of rolling blackouts will have an even greater impact on their businesses than those in 2008.

The general feeling is that back then businesses were at the edge of the economic recession and had the necessary reserves to withstand setbacks caused by the blackouts. According to Vera Valasis, executive director of FASA, this time round, for businesses across the board, but especially small independent businesses, these blackouts, coupled with the looming electricity and petrol hikes, could spell the demise of many small businesses.

"Whilst we are confident that those that are part of a franchise network have the advantage of a strong support system and have a better chance of survival, they are certainly not immune to the hardships that await us all. Franchisees, as part of a network, cannot simply increase their retail prices to consumers to recoup their losses as they have to adhere to finely tuned franchise systems that have set bench-marking forecasts linked to price increases."

Over the past two years, the association has worked closely with government on several initiatives to find ways to stimulate entrepreneurship and generate jobs. Its members have secured funds from the Jobs Fund and the association is looking at initiatives supporting the growth of black businesses.

"Whilst we have committed to helping more people to start SMEs in order to become self-sustainable in the future, these threatening power cuts and other onerous processes associated with starting small businesses will most certainly affect economic and small business growth - an area sorely needed to provide those much needed jobs," says Derek Smith, chairman of FASA.

FASA appeals to its members and all in the franchise sector to focus on the basics of good business practices with effective labour planning, controlling input costs and retain sound inventory controls whilst bracing for the tough times ahead. True to the spirit of entrepreneurship, franchisors have always rallied together giving strong support to their franchisees, ensuring that the show goes on, their customers are satisfied and they continue to be successful.