News / Africa

    South African Restaurants Hurt by Climbing Electricity Prices

    Waiter Terence Kamanda poses for a picture as he serves customers in The Corner Cafe restaurant in Durban, April 26, 2012.
    Waiter Terence Kamanda poses for a picture as he serves customers in The Corner Cafe restaurant in Durban, April 26, 2012.
    South Africa’s historically low electricity prices have increased dramatically over the last four years, and are expected to continue to do so over the next five.  For those in the restaurant business, it means lower profit margins, rising prices and layoffs. 

    The lifeblood of a restaurant is in the kitchen.  Inside that backroom, stoves are constantly burning, ovens baking and dishwashers cleaning.

    In terms of electricity, the meter is always spinning upward and costs are growing quickly.

    The price of electricity in Johannesburg has risen by an average of 27 percent each of the last four years.  This year, Eskom - South Africa’s electric utility - raised prices by 16 percent. Similar increases are expected annually over the next five years.

    "We have made it clear that we will be applying for the above inflation increases because our maintenance costs are going up by more than inflation.  But also we have to be in position to finance the very large new build program that we are in the middle of at the moment," said Hilary Joffe, the spokeswoman for Eskom.

    Eskom is building new power stations to try to meet rising demand as more and more poor South Africans get on the grid in the post-apartheid era.

    Slimming profits

    In Fordsburg, a primarily Pakistani and Indian neighborhood in Johannesburg, restaurateurs are dealing with these rising costs in various ways.

    The entrance of Rashid Ebrahim’s bakery - in an old church building - is lined with displays of doughy, sweet pastries.  In the back, his bakers slide trays in and out of ovens.  But with rising energy costs, he’s had to make changes.

    "I haven’t raised the prices as of yet,  I’m just absorbing on my profit, taking a lesser profit," he said.  "The turnover is still the same, but the profit margins are lower."

    Those slimming margins have led him to cut his staff from 15 down to 10.

    "I don’t feel that’s the right thing to do, but it’s the only way to go if you want to really survive," he said.

    Ebrahim is now looking at raising prices on his goods 15 to 20 percent.

    Making money in the restaurant business isn’t always easy, especially for those just starting out, says Larry Hodes with The Restaurant Code, a consultancy firm in Johannesburg.

    "Restaurant utility bills used to be about 2.5, 3 percent of expenses of sales as a percentage. Now suddenly you are looking at 4 to 5 percent.  It’s quite crazy right now in terms of utility costs," he explained.

    Energy-saving tips

    There are some steps he’s advising restaurants to take.

    "Even this week I walked into a restaurant where, you know gas and electricity - the stoves are left on all the time," said Hodes. "One of the key things, it sounds simple - but you know it comes from management - is that you have to train your staff how to more effectively and efficiently use your gas and your electricity and everything.  You know that is where possibly a restaurateur can have the biggest impact immediately."

    Eskom also has several programs to help ease the costs of electricity, including, Joffe says, some that subsidize pre-approved energy efficient products bought by businesses.

    "If enterprises can show us that they have effective savings, we will compensate them for those," she said.

    She says Eskom is working with businesses across the country to upgrade equipment which will put less strain on the country’s energy supply.

    "Really, the economics of it work for us," she said.  "It is much cheaper to invest in energy-efficient technology which will reduce the amount of new generation capacity that we will need in the future than it is to invest in building new power stations. We estimate we are upgrading about 1,000 commercial customers a month to more energy efficient technologies."

    Shutting down

    But for some, these new costs are just another strain on business.

    Restaurant owner Azhar Chaudhry worked as a cameraman for two decades before settling in Johannesburg to open an establishment serving his native Pakistani fare.

    But increasing prices - along with his restaurant being robbed several times last year - means Chaudhry is thinking of selling his business and moving to Dubai.

    "Rent is not coming down.  Electricity is going up.  Salaries will go up every year for the staff, so you cannot carry on," he said. "Thank you very much South Africa.  I’m going back. I’m definitely trying to sell and leave.”

    He says, in the meantime, he’ll consider raising prices, but it likely won’t be good for business.

    You May Like

    New EU Asylum Rules Could Boost Rightists

    New regulations will seek to correct EU failures in dealing with migrant crisis, most notably inability to get member states to absorb a total of 160,000 refugees

    More Political Turmoil Likely in Iraq as Iran Waits in the Wings

    Analysts warn that Tehran, even though it may not be engineering the Sadrist protests in Baghdad, is seeking to leverage its influence on its neighbor

    Forced Anal Testing Case to Appear Before Kenya Court

    Men challenge use of anal examinations to ‘prove homosexuality’; practice accomplishes nothing except to humiliate those subjected to them, according to Human Rights Watch

    By the Numbers

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Tensions Rising Ahead of South China Sea Rulingi
    X
    May 03, 2016 5:16 PM
    As the Philippines awaits an international arbitration ruling on a challenge to China's claims to nearly all of the South China Sea, it is already becoming clear that regardless of which way the decision goes, the dispute is intensifying. VOA’s Bill Ide has more from Beijing.
    Video

    Video Tensions Rising Ahead of South China Sea Ruling

    As the Philippines awaits an international arbitration ruling on a challenge to China's claims to nearly all of the South China Sea, it is already becoming clear that regardless of which way the decision goes, the dispute is intensifying. VOA’s Bill Ide has more from Beijing.
    Video

    Video Painting Captures President Lincoln Assassination Aftermath

    A newly restored painting captures the moments following President Abraham Lincoln’s assassination in 1865. It was recently unveiled at Ford’s Theatre in Washington, where America’s 16th president was shot. It is the only known painting by an eyewitness that captures the horror of that fateful night. VOA’s Julie Taboh tells us more about the painting and what it took to restore it to its original condition.
    Video

    Video Elephant Summit Results in $5M in Pledges, Presidential Support

    Attended and supported by three African presidents, a three-day anti-poaching summit has concluded in Kenya, resulting in $5 million in pledges and a united message to the world that elephants are worth more alive than dead. The summit culminated at the Nairobi National Park with the largest ivory burn in history. VOA’s Jill Craig attended the summit and has this report about the outcomes.
    Video

    Video Displaced By War, Syrian Artist Finds Inspiration Abroad

    Saudi-born Syrian painter Mohammad Zaza is among the millions who fled their home for an uncertain future after Syria's civil war broke out. Since fleeing Syria, Zaza has lived in Lebanon, Egypt, Jordan and now Turkey where his latest exhibition, “Earth is Blue like an Orange,” opened in Istanbul. He spoke with VOA about how being displaced by the Syrian civil war has affected the country's artists.
    Video

    Video Ethiopia’s Drought Takes Toll on Children

    Ethiopia is dealing with its worst drought in decades, thanks to El Nino weather patterns. An estimated 10 million people urgently need food aid. Six million of them are children, whose development may be compromised without sufficient help, Marthe van der Wolf reports for VOA from the Metahara district.
    Video

    Video Little Havana - a Slice of Cuban Culture in Florida

    Hispanic culture permeates everything in Miami’s Little Havana area: elderly men playing dominoes as they discuss politics, cigar rollers deep at work, or Cuban exiles talking with presidential candidates at a Cuban coffee window. With the recent rapprochement between Cuba and United States, one can only expect stronger ties between South Florida and Cuba.
    Video

    Video California Republicans Weigh Presidential Choices Amid Protests

    Republican presidential candidates have been wooing local party leaders in California, a state that could be decisive in selecting the party's nominee for U.S. president. VOA's Mike O’Sullivan reports delegates to the California party convention have been evaluating choices, while front-runner Donald Trump drew hundreds of raucous protesters Friday.
    Video

    Video Kurdish Football Team Helps War-Torn City Cope

    With the conflict still raging across much of Turkey’s predominantly Kurdish southeast, between the rebel PKK and the Turkish state, many Kurds are trying to escape the turmoil by focusing on the success of their football team Amedspor in Diyarbakir. The club is increasingly becoming a symbol for Kurds, not only in Diyarbakir but beyond. Dorian Jones reports from southeast Turkey.
    Video

    Video ‘The Lights of Africa’ - Through the Eyes of 54 Artists

    An exhibition bringing together the work of 54 African artists, one from each country, is touring the continent after debuting at COP21 in Paris. Called "Lumières d'Afrique," the show centers on access to electricity and, more figuratively, ideas that enlighten. Emilie Iob reports from Abidjan, the exhibition's first stop.
    Video

    Video Florida’s Weeki Wachee ‘Mermaids’ Make a Splash

    Since 1947, ‘mermaids’ have fascinated tourists at central Florida’s Weeki Wachee Springs State Park with their fluid movements and synchronized ballet. Performing underwater has its challenges, including cold temperatures and a steady current, as VOA’s Lin Yang and Joseph Mok report.
    Video

    Video Somali, African Union Forces Face Resurgent Al-Shabab

    The Islamic State terror group claimed its first attack in Somalia earlier this week, though the claim has not been verified by forces on the ground. Meanwhile, al-Shabab militants have stepped up their attacks as Somalia prepares for elections later this year. Henry Ridgwell reports there are growing frustrations among Somalia’s Western backers over the country’s slow progress in forming its own armed forces to establish security after 25 years of chaos.
    Video

    Video Nigerians Feel Bite of Buhari Economic Policy

    Despite the global drop in the price of oil, Nigerian President Muhammadu Buhari has refused to allow the country's currency to devalue, leading to a shortage of foreign exchange. Chris Stein reports from Lagos businessmen and consumers are feeling the impact as the country deals with a severe fuel shortage.

    Special Report

    Adrift The Invisible African Diaspora