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Johannesburg - Eskom's proposed electricity price hike will increase inflation by between a half and one percentage point.
Econometrix chief economist Dr Azar Jammine said South Africa will be fortunate if inflation falls to within the Reserve Bank's target range for the consumer price index of 3% to 6%.
"Inflation may fall below 6% in the second quarter of next year, but after that it will climb to 7% and stay there," Jammine told the annual congress of the South African Chamber of Commerce and Industry (SACCI) in Johannesburg on Friday.
"If the Reserve Bank is really serious about inflation-targeting, it will have to raise interest rates. The solution may be to raise the inflation target to 4% to 7% for the duration of the increases."
Jammine said South Africa's power situation is seriously concerning. "Our electricity will run out within seven to nine years if we do not begin to build power stations other than Medupi and Kusile," he warned.
According to Jammine the price increases will lead to reduced demand for electricity and have the consequence that investment, especially for capital intensive projects, will decline.
"Just consider the dreadful news of the abandoning of the Coega smelter project," he said.
- Sake24.com
For more business news in Afrikaans, visit Sake24.com.