SARB concerned about serious dysfunction in administered prices after major NERSA blunder

The South African Reserve Bank (SARB) has raised concerns about what it has labelled as serious dysfunction in administered prices following a multibillion-rand blunder by the National Energy Regulator of South Africa (NERSA).

This follows NERSA’s admission earlier in September of a R54 billion error in calculating electricity tariffs.

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The regulator’s oversight will cost consumers when tariffs increase by more than 8% per year for the next two financial years, instead of between 5% and 6% originally agreed on.

Headline inflation has picked up in recent months, broadly as expected.

The pressure is coming mainly from meat and vegetables, as well as fuel prices, which have been declining at a slower pace than they were before.

The SARB said underlying inflation remains contained, with core inflation around 3%.

Inflation expectations also moderated further in the latest survey, which the bank said shows South Africans are getting used to lower inflation.

But SARB governor Lesetja Kganyago said headline inflation will rise over the next few months, peaking at around 4%.

“Our forecast now incorporates higher electricity price inflation of nearly 8%, rather than 6%, given the recent pricing correction by NERSA.”

He said sector-specific reforms are needed to improve efficiency.

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