SA’s retail and fast-food giants demand tax relief from government

Big corporations in the food and essential products manufacturing and retail industry are calling for tax breaks as they see the cost of doing business in the country spiralling out of control.

The companies say they can no longer carry the burden of keeping the South African ship sailing without government’s support.

The CEOs of JSE-listed companies Shoprite, Tiger Brands, Famous Brands and Pick n Pay are just some that endorsed an open letter to President Cyril Ramaphosa, under the letterhead of the Consumer Goods Council of South Africa (CGCSA) – of which they are all a member. In the letter the group asks the president for leniency ahead of his annual State of the Nation Address (Sona) on Thursday (9 February).

Read the full open letter here.

The pleas by the member companies come as the country sees record levels of load shedding and the rapid deterioration of essential infrastructure – such as roads, rail, water and policing – which have led to the up-shoot in many firms’ operational costs.

“We are alarmed and dismayed by the levels of load shedding which we have all had to endure over the past decade, and which have escalated catastrophically in recent months,” the companies wrote.

“While we have maintained our operations and supply chains so far by using emergency power generators,  this has been at an unsustainable financial cost. It is crippling our businesses, and will, in the end mean, much higher prices for consumers, who are already under severe financial strain.”

Read: Pick n Pay spends nearly R350m on diesel in 10 months

Demands

In the council’s list of demands to Ramaphosa, the group has called for the following:

• The rapid implementation of the plans already in place to solve the overall energy crisis
• Removal of regulatory red tape and escalating indirect taxes such as the health promotion levy to enable investment and business sustainability
• Address the deterioration of essential infrastructure including water, roads, rail, and policing
• A suspension of the fuel duty levy and road accident fund for the consumer goods businesses and value chain, for as long as regular load shedding continues. This is a critical sector that should be considered for fuel rebates similar to the mining, agriculture, fisheries and forestry sectors.
• Effective tax and other incentives to install localised renewable energy at a small and medium scale
• Action to ensure that critical infrastructure, such as essential food production, medicines and distribution facilities are not only exempted from load shedding but are prioritised on the safety and security list, and
• Accelerate the fight against illicit trade across the economy as it reduces the tax base and deprives government of crucial revenue at this critical time.

By not heeding their call, the member companies believe that the president, along with his government, risks jeopardising the supply of food, medicine and other essential food, as the companies say they can no longer stretch themselves to make up for government’s failures.

Read: Shoprite staring down a R1bn-plus annual diesel bill

Impact of load shedding

Load shedding’s impact on company profits has been well documented. The cost of blackouts on the bottom line is the newest reporting item in JSE-listed firm’s financials.

On Wednesday food and clothing retailer Pick n Pay said it has spent almost R350 million on diesel in the last 10 months in attempts to limit the impact of blackouts on its operations.

Its biggest competitor, Shoprite further reported spending R560 million on diesel between July and December of 2022 to ensure uninterrupted trade at its stores during Stages 5 and 6 of  load shedding.

Other retailers like Mr Price, The Foschini Group and Truworths have also reported on how the rolling blackouts have affected operations, robbing retailers of hundreds of thousands of trading hours and costing them millions of rands as they try to insulate their operations from the power crisis.

In an update to the market leading up to the release of its 2022 financial results last year, food producer Tiger Brands reported that heightened load shedding had seen its electricity bill almost quadrupling because of additional diesel costs to keep generators running during blackouts.

While branded food services company Famous Brands, in its latest interim financial results, said it expected to see a consistent rise in menu prices across its fast-food and restaurant format brands because of rising food and fuel costs which continue to chip away at the bottom line.

Read:

TFG invests in backup power to insulate turnover from load shedding

SA’s power crisis is untenable: Mr Price chair

Generators see Tiger Brands’s power bill spike 4 times the norm