The proposed new price hike from Eskom may have negative implications for the Reserve Banks’ determination of interest rates – which would have a direct adverse effect on the cost of living and the economy’s ability to create jobs.This is according to David Ross, shadow deputy minister of finance, who has written to the Speaker of the National Assembly, Baleka Mbete, requesting an urgent debate on the subject in Parliament.
“If electricity tariffs were further increased, it would in all likelihood result in an interest rate hike as the inflation outlook would accelerate outside the Reserve Bank’s 3% to 6% target band,” Ross says. “This means higher cost of living for every South African, as food and transport costs would increase significantly.”
Reserve Bank Governer, Lesetja Kganyago, has said that leaving interest rates unchanged “cannot be maintained indefinitely”, and that the interest rate outlook depends largely on Nersa’s decision whether or not to grant Eskom an additional 12,6% tariff increase. Nersa is expected to make a decision on 29 June.
“While Eskom has already increased electricity tariffs by 12,67% for the year, a further 12,6% increase will bring the total tariff increase to over 25% for the 2015-16 year,” says Ross. “It is estimated that a 15% to 25% increase in electricity tariffs will cost the economy about R10-billion to R16-billion.
“While Eskom continues to pose a major risk to our economy in the form of unending power outages, increased inflation as a result of additional tariff hikes will further constrain the economy’s ability to grow and create the millions of jobs unemployed South Africans so desperately need,” he adds.