South Africa's Eskom Increase May Dim a Good Inflation Outlook

(Bloomberg) -- The price increase granted to South Africa’s power utility may help to keep the lights on, but it could also darken the inflation outlook.

The nation’s energy regulator said on Thursday Eskom Holdings SOC Ltd. can raise electricity prices by 9.4 percent from April 1. That takes the total increase to 13.8 percent after adding the 4.4 percentage-point increase for the recovery of cost in the four years through 2017 that the regulator announced in October. It’s almost 50 percent more than the assumption the central bank used in its latest projections for 2019, which forecast inflation will stay below 5 percent this year.

Still, the increase is less than what Eskom had asked for.
Higher power prices could add to domestic inflation pressures after gasoline costs rose 7.7 percent in March from a year earlier. Taxes and levies on fuel will increase more than 5 percent from April 1. Consumer prices rose 4 percent from a year earlier in January, the slowest pace of gains in 10 months.

To contact the reporter on this story: Rene Vollgraaff in Johannesburg at rvollgraaff@bloomberg.net

To contact the editors responsible for this story: Benjamin Harvey at bharvey11@bloomberg.net, Ana Monteiro, Michael Gunn

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