Rise in electricity tariff could spike inflation, says Reserve Bank
By Paul Vecchiatto - Mar 14th, 09:08
SA’s electricity tariff increases could push the inflation rate up by 0.75 percentage point, Reserve Bank deputy governor Kuben Naidoo said.
The nation’s energy regulator said last week that Eskom would be allowed to raise electricity prices 9.4% from April 1, taking the total increase to 13.8%. That’s almost 50% more than the assumption the central bank used in its latest projections for 2019, which forecast that inflation would stay below 5% in 2018.
The Reserve Bank assumed a power-price increase of 9.7% for 2018 its in January forecast, which sees inflation accelerating to 4.8% by the end of 2019. The total adjustment that was granted to Eskom could add about 0.3 percentage point the rate, Naidoo said at a conference in Cape Town.
The Reserve Bank increased its key interest rate for the first time in more than two years in November, even as the economy had just come through a recession and hasn’t expanded at more than 2% annually since 2013. It kept borrowing costs on hold in January and trimmed its projection for policy tightening as it lowered its inflation forecast.
While the central bank doesn’t position itself as being in a hiking or softening cycle, “it is no secret that the US is now in a softer interest-rate cycle and this will lessen pressure on the rand,” Naidoo said.
Inflation slowed to a 10-month low of 4% in January.
Food and beverages giant PepsiCo makes offer to acquire Pioneer Foods
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In a vote of confidence about SA’s long-term prospects, New York-based food and beverages giant PepsiCo has made an offer to buy Pioneer Food Group, which makes Sasko breads and Ceres juices, in a deal worth at least R25.4bn.
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SA's manufacturing sector grew a marginal 1% year on year in May but failed to hold onto a surge experienced in April, when the sector rebounded after being hit by load-shedding in first quarter of 2019.
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Trade conditions in South Africa remained under pressure in June 2019, according to the South African Chamber of Commerce and Industry (Sacci).
Cyril Ramaphosa wants SA to embrace 4IR
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