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.
TEXT SIZE - +
— 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

Algerians Vote in Presidential Election

There were few media reports of protests and clashes around the country, but so far no significant violence More

Sharks More Evolved than Previously Thought

The discovery could “profoundly affect our understanding of evolutionary history” More

Pakistan Military Asked to Protect Polio Workers

Request comes as authorities say a Taliban ban on vaccinations in 2012 and deadly attacks on anti-polio teams have prevented thousands of children from getting inoculated More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Google Buys Drone Companyi
|| 0:00:00
...
 
🔇
X
George Putic
April 15, 2014
In its latest purchase of high-tech companies, Google has acquired a manufacturer of solar-powered drones that can stay in the air almost indefinitely, relaying broadband Internet connection to remote areas. It is seen as yet another step in the U.S. based Web giant’s bid to bring Internet to the whole world. VOA’s George Putic reports.
Video

Video Google Buys Drone Company

In its latest purchase of high-tech companies, Google has acquired a manufacturer of solar-powered drones that can stay in the air almost indefinitely, relaying broadband Internet connection to remote areas. It is seen as yet another step in the U.S. based Web giant’s bid to bring Internet to the whole world. VOA’s George Putic reports.
Video

Video Ray Bonneville Sings the Blues and More on New CD

Singer/songwriter Ray Bonneville has released a new CD called “Easy Gone” with music that reflects his musical and personal journey from French-speaking Canada to his current home in Austin,Texas. The eclectic artist’s fan base extends from Texas to various parts of North America and Europe. VOA’s Greg Flakus reports from Austin.
Video

Video Millions Labor in Pakistan's Informal Economy

The World Bank says that in Pakistan, roughly 70 percent work in the so-called informal sector, a part of the economy that is unregulated and untaxed. VOA's Sharon Behn reports from Islamabad on how the informal sector impact's the Pakistani economy.
Video

Video Passover Celebrates Liberation from Bondage

Jewish people around the world are celebrating Passover, a commemoration of their liberation from slavery in Egypt more than 3,300 years ago. According to scripture, God helped the Jews, led by Moses, escape bondage in Egypt and cross the Red Sea into the desert. Zlatica Hoke reports that the story of the Jewish Exodus resonates with other people trying to escape slave-like conditions.
Video

Video Police Pursue Hate Crime Charges Against Kansas Shooting Suspect

Prosecutors are sifting through the evidence in the wake of Sunday’s shootings in a suburb of Kansas City, Missouri that left three people dead. A suspect in the shootings taken into custody is a white supremacist. As VOA’s Kane Farabaugh reports, he was well-known to law enforcement agencies and human rights groups alike.
Video

Video In Eastern Ukraine, Pro-unity Activists Emerge from Shadows

Amid the pro-Russian uprisings in eastern Ukraine, there is a large body of activists who support Ukrainian unity and reject Russian intervention. Their activities have remained largely underground, but they are preparing to take on their pro-Moscow opponents, as Henry Ridgwell reports from the eastern city of Donetsk.
Video

Video Basket Maker’s Skills Have World Reach

A prestigious craft show in the U.S. capital offers one-of-a-kind creations by more than 120 artists working in a variety of media. As VOA’s Julie Taboh reports from Washington, one artist lucky enough to be selected says sharing her skills with women overseas is just as significant.
Video

Video UN Report Urges Speedier Action to Avoid Climate Disaster

A new United Nations report says the world must switch from fossil fuels to cleaner energy sources to control the effects of climate change. The Intergovernmental Panel on Climate Change released the report (Sunday) following a meeting of scientists and government representatives in Berlin. The comprehensive review follows two recent IPCC reports that detail the certainty of climate change, its impacts and in this most recent report what to do about it. VOA’s Rosanne Skirble has the details.
AppleAndroid