Eskom tariff hike will lead to higher interest rates, warns economist

National energy regulator Nersa on Thursday announced a 19% tariff hike for the 2023/2024 financial year, a move which Jammine believes will see the South African Reserve increase the repo rate by 0.5% during the next meeting of its monetary policy committee.

The new tariff is set to kick in from April.

Jammine says the 19% tariff increase was higher than expected.

"If you look at the forecasts of electricity that are used to generate forecasts for inflation, more generally that being in a region on 10 -to 15%, so this 18.65% is somewhat higher than that. Theoretically it would translate to inflation turning out to be about 0.2% higher than would have been anticipated. That, in turn, could compel the Reserve Bank to increase the repo rate by half a percentage instead of a quarter percent."

The monetary policy committee is expected to meet at the end of January.

Jammine also warns the latest hike will have the biggest impact on  poor consumers.

"The impact on consumers is fairly severe and one of the ironies is that it will impact the poorer consumers more than the richer ones, because the richer consumers have often been in a position to install and adopt alternative measures to reduce their dependence on electricity or energy generation.

"Poorer sections of society are unable to do so, but at the same time they haven't been paying for the electricity they are using at all, as we know from the huge debts that have been accumulated by municipalities. The fact is this will impose an additional burden on consumers. One is unclear as to how much this will be because the situation is dynamic as people are moving to other sources of energy."

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