Eskom increase may dim a good inflation outlook

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 can raise electricity prices by 9.4% from April 1. That takes the total increase to 13.8% 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% more than the assumption the central bank used in its latest projections for 2019, which forecast inflation will stay below 5% 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% in March from a year earlier. Taxes and levies on fuel will increase more than 5% from April 1. Consumer prices rose 4% from a year earlier in January, the slowest pace of gains in 10 months.

© 2019 Bloomberg L.P