Too much diesel in Tiger’s tanks One of SA’s biggest food producers tells how it is dealing with power cuts
● Just south of the Barbara Road off-ramp on the R24 freeway in Isando on Joburg’s East Rand is a sprawling factory owned by JSE-listed Tiger Brands.
A tour of the factory lays bare the disastrous impact on businesses and the broader economy of Eskom’s inability to generate sufficient electricity to meet demand.
For decades the factory has been a key facility for Tiger Brands’s home & personal care division. Well-known products manufactured there include Doom, Status, Ingram’s, Jeyes Fluid and Peaceful Sleep.
The plant makes extensive use of automation. But all that equipment consumes a lot of energy and, despite a recent onsite solar installation, the factory grinds to a halt when the power is cut unless the giant diesel generators are switched on. The problem is the cost of running those generators is three times higher than the cost of grid power. That’s pushing up Tiger Brands’s costs significantly.
I toured the site this week and met the group’s chief manufacturing officer, Derek McKernan, to gain insight into how a manufacturing enterprise as big as his is coping or not.
He describes load-shedding as a huge challenge, particularly given Tiger’s role in food security. The company also makes Jungle Oats, Koo baked beans, Black Cat peanut butter and Ace maize meal, and it owns Albany Bakery.
The Isando site is the first of the company’s factories to deploy solar. The system went live last month, generating 11% of energy demand. McKernan expects this number to rise, but not by nearly enough to meet all the site’s needs. So Tiger is also working with a solar energy company, Terra Firma Solutions, to build a solar farm in the Northern Cape, with that electricity to be wheeled across the grid to its factories around the country.
It’s part of a broader effort aimed at reducing Tiger’s energy requirements. Its factories are being fitted with skylights to replace artificial lights and LED technology is replacing less efficient sources of lighting. Unfortunately, the company has also had to buy more diesel generators to keep its operations ticking over not surprising given that the Isando factory consumes more than 350MWh of electricity every month.
Tiger Brands said in August 2022 that it hopes to source 65% of its energy needs from sustainable sources by 2030. By then, all its 30-plus factories and bakeries will have solar in some form. The first four sites getting solar are Isando, Hennenman Mill in the Free State, King Foods in North West and Tiger’s beverages factory in Gauteng. Those installations will be completed this month, McKernan says, with tenders to be issued soon for the rest.
But there’s a problem: many of Tiger’s factories, including Isando, operate 24 hours a day. Solar is a good solution in the daytime, but using the sun’s energy at night requires expensive and bulky battery storage. That means falling back on diesel generators, and their attendant operating costs and high environmental toll. However, says McKernan, wheeling electricity from the sun-rich Northern Cape will help considerably.
The Tiger Brands case demonstrates how high the cost of state failure is. The company is investing R120m ahead of what it expects will be the worst-yet load-shedding this winter. This includes building extra storage tankers for diesel and ensuring it can secure water from municipalities that struggle with water reticulation when Eskom’s power cuts go beyond stage 4.
In Ashton, a small town in the Western Cape where Tiger Brands has a large fruit canning factory, the municipality was unable to pump water in January because of load-shedding. “We installed a generator for the municipality so they could supply our factory and the entire town,” McKernan says. That’s not an option in bigger municipalities.
While load-shedding is costing Tiger a small fortune it spends up to R20m a month just on diesel a bigger issue is what it means for consumer inflation, especially food inflation. Tiger Brands and its competitors which also have no choice but to invest in energy alternatives, or close their factories will pass on these costs.
“We have to be mindful, as a big producer of food in South Africa, that we have a responsibility to the country as well. Over time, prices will be passed on, but right now we are absorbing most of the additional costs,” McKernan says.
The load-shedding outlook for the next two years is “concerning”, he says.
By 2025, though, McKernan says there’s reason to believe the situation will improve. That’s thanks to huge investments being made by the private sector in new energy generation capacity.
By then, South Africa might have extricated itself from the political party that caused the Eskom disaster in the first place.
McLeod is editor of TechCentral
Nicky Oppenheimer
$8.3bn