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More Inflation Lurks Ahead for South Africa


South Africa's state-run power supplier, Eskom Holdings Ltd gain and average 31.3 percent temporary tariff increase from the regulator. The result is increased electricity bills for miners and smelters, which aggravates the county's inflation and consumer's disposable income


The temporary increase will be from July 1, 2009 to March 31, 2010, according to the National Energy Regulator of South Africa.

 

The increase in the price of electricity will alter consumer spending, since consumer's disposable income will decrease. This works against the central bank's goals to increase consumer spending to ease out of the recession.

 

At an 8 percent inflation rate, consumers are already facing high food prices that might not come back down any time soon, while companies will have to bear higher costs that might cut into their falling profits.

 

 

The price increase "will add 0.6 percentage points to the month-on-month increase" said Danelee van Dyk, an economist at Standard Bank Group Ltd.


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