• Absa Bank has reported profits of R12.6 billion for the period ending 30th June 2023, despite increased spending on equipment to stave off blackouts.
• The bank spent R313 million on equipment related to loadshedding and power, according to its latest financials.
• It joins some of the largest companies in the country like MTN and Telkom in suffering enormous costs due to Eskom’s power crisis.

One of the largest banks in South Africa, Absa says it had no choice but to increase its spending on equipment in order to mitigate the effects of loadshedding across its operations.

In its latest financials for the period ended 30th June 2023, Absa says that equipment costs primarily to deal with blackouts increased 70 percent compared to the same period the year prior. The bank spent R313 million on this equipment and says these expenses, “mainly reflect higher energy costs due to loadshedding in South Africa.”

It was Absa’s single largest expense increase and dwarfs the 10 percent more it spent on IT infrastructure in the period, as well as the 17 percent increase in other operating costs that business travel and insurance accrued.

“Pressure on the economy as a result of high levels of inflation, rising interest rates, and ongoing loadshedding continued to negatively impact the operating environment in the first half of 2023. This has presented challenges to our clients’ business operations, especially within the SME segment, impacting their ability to meet obligations, as business activity slowed down,” Absa said in the results statement.

Loadshedding, the rolling blackouts imposed by energy utility Eskom to decrease the likelihood of a total energy system collapse has negatively affected the bottom line of several of South Africa’s largest companies, especially those in the telecom space.

Earlier this year Telkom reported that its earnings fell by R2.5 billion due to heightened loadshedding in the last few months of 2022. The telco, partly owned by the South African government had to spend more than R150 million to stave off the harsher effects of power outages. The loss of profits led Telkom to consider laying off staff.

MTN, one of the largest telcos in Africa, has been so affected by loadshedding in its South Africa market that it has begun steps to generate its own electricity, including building new solar, gas and battery storage systems beginning at its Johannesburg headquarters.

The firm lost R700 million to loadshedding-related costs by 31st December 2022.

For Absa, blackouts across areas in the country mean that ATMs become inoperable for at least two hours at a time. Despite its increased spending on loadshedding-related equipment, Absa managed to increase its profits for the quarter year on year.

The bank made R12.6 billion in the period, compared to R11.8 billion the year prior. Headline earnings per share increased three percent to R13.17 (1 317.2 cents).

[Image – Photo by Mitchell Nyathi on Unsplash]