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Retailers still feel Eskom blues
05/05/2008 13:21 - (SA)
Vic de Klerk*
Pretoria - "Was R6 699. Now R5 499."
At Builders' Warehouse in Montana, Pretoria, there are at least 200 yellow boxes, filling nearly the whole showroom, with a notice saying that the price has been reduced by nearly 20%.
They are 5.5 kw.h petrol-driven generators, clearly part of a special delivery to Massmart, Builders' Warehouse's holding company.
The sales staff was keen, despite the long weekend.
One said that the generator has a 22 litre fuel tank. That would be enough for quite a few hours, but he couldn't say how many. At least five hours, a possible buyer said.
I started making a few calculations. It will cost R220 to fill the tank. Five hours at 5.5 kw.h, that gives a running cost of at least 400c to 500c per kw.h. At the moment, we pay Tshwane 46c per unit, which will increase to 60c/unit if Eskom puts its prices up.
I asked one of the salesmen whether Builders' Warehouse hadn't perhaps bought too many of these generators, since Eskom announced last Thursday that scheduled load shedding was over.
Yes, the good news is that domestic consumers and especially Eskom's large industrial customers have saved so much that there will be no more load shedding, both scheduled and unexpected, for the time being.
No, the salesman said, he hadn't heard that, but in any case he didn't believe anything Eskom said.
However, he was very upset about the large bonuses being paid to Eskom's management.
As usual, I didn't get involved in an argument. Especially not when the other party is as knowledgeable as a Builders' Warehouse salesman.
But it was difficult to ignore the piles and piles of boxes, each containing a generator. It was also difficult not to notice that the price had already been reduced from R6 699 to R5 499.
That's nearly 20% of the selling price.
I didn't see anyone buying any of the generators, which made me a little worried about my own small investment in Massmart shares.
Normally a shop the size of Builders' Warehouse in Montana would not have more than ten generators on its floor. Especially not household-size generators.
Somewhere in the larger group, a purchasing manager had clearly become too excited about the opportunities that scheduled load shedding would offer a group like Builders' Warehouse.
And just like many other South Africans, the buyer was and is probably so anti-Eskom that he wasn't prepared to do some research.
This he could have simply done by visiting the Eskom website. I'm just wondering whether the buyer will still qualify for a bonus or a share option scheme at Massmart. It almost looks as if he was blinded by the bonuses being paid to Eskom's top managers and took a fairly emotional decision.
The build-up to the excessive number of yellow boxes on Builders' Warehouse's floor probably started on January 24 this year, though there may have been a preliminary phase before that.
On that day, Eskom decided that it didn't have enough power and that there was a danger of the whole South African power network collapsing. That would leave the country without power for at least 30 days.
In emergency correspondence, Eskom warned its approximately 130 large industrial customers, including the country's mines, which together consume about 30% of Eskom's total capacity, that there was a crisis and that it couldn't guarantee the provision of power to even this group of select consumers.
Very sensibly, a number of especially the deep-level gold mines announced they were provisionally suspending underground activities for safety reasons.
Local journalists went berserk, and headlines like Eskom closes SA mines were to be seen everywhere, even reaching CNN.
This inflicted permanent damage to the decision-making capacity of many South Africans, and probably of generator buyers too.
Professor Anton Eberhard of Cape Town gives the following interesting example of the state of affairs for electricity on January 28 2008.
The January 2008 electricity crisis
Eskom capacity plus imports = 39 855 MW
Operating reserves = 1 800 MW
Planned maintenance = 3 715 MW
Breakdowns (e.g. boiler tube ruptures) = 4 235 MW
Reduction in capacity (wet or insufficient coal) = 2 694 MW
Total capacity unavailable for supply = 31%
It's easy to be wise after the event, but if our buyer had looked at these figures, it would've been clear that the end of January this year was a bad time for Eskom.
The percentage capacity unavailable for supply would certainly fall in the next few months. Demand would therefore improve dramatically.
Add to this the planned saving of 3 000 MW from large consumers, municipalities and the man in the street, and it's clear the position is now much less tense than it was four months ago.
I wouldn't like to be stuck with 200 yellow boxes of unsold emergency power generators on my showroom floor. It's like stocking last season's mini-skirts - items which are likely to move very slowly.
Other stickers are perhaps necessary now to move the supplies, something like: "Was R6 699, now R2 999."
* Vic de Klerk owns shares in Massmart, Builders' Warehouse's holding company
- Fin24.com
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