SOUTH AFRICA- According to a recent audit by Nedbank Commercial Banking, restaurant franchises in South Africa face cost and load-shedding challenges, but the sector remains resilient and promising.

The South African energy crisis has caused serious disruptions in the food service industry. 

According to the audit, frequent power outages have caused shortages in South Africa’s food industry. 

This is because restaurants order exact, specific-sized portions for specific preservation and preparation that require a reliable energy supply. Power outages negatively impact the quality and availability of these portions. 

Chicken shortages in December caused the temporary closure of more than 70 outlets. 

Load shedding also negatively affects chip and frozen snack production since production only starts once there is a guarantee of at least a 3-hour supply of electricity.  

Although most South African restaurants have generators or some form of power backup, running costs continue to rise. 

Karen Keylock, national retail services manager at Nedbank Commercial Banking said, “The recent audit found that the running expenses associated with backup power generation account for between 0.5% and 2.6% of turnover. 

It’s so problematic that some of these large franchise groups are negotiating diesel pricing at group level to help its franchisees. 

The food service sector also faces inflation challenges, which have increased costs. 

The audit cited data from Statistics SA, which revealed inflation peaked at 14% in March 2023 before slowing down in early 2024. 

The audit also encouraged restaurants to balance profitability and pricing. 

Keylock also said, “This respite is expected to be short-lived, however, in the wake of the damage inflicted on many crops by the continual El Niño weather phenomenon. With menu price increases of 3.5 to 6%, it has become a balancing act to ensure restaurants remain profitable without pricing themselves out of the market.” 

However, load shedding has also benefitted restaurants in South Africa. 

A study conducted by Visa and South African Bank in 2023 revealed South Africans eat out more because of load shedding. 

The study also shows South Africans spend more money while eating out as load shedding increases. 

The audit recommends restaurants future-proof their systems in response to these challenges. 

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