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Eskom monopoly rewards inefficiency

Business Report Online:

28 June 2012:

Alarm bells should be ringing regarding state-owned monopoly Eskom’s plans to nearly double the price of electricity from the level of 50c a kilowatt-hour at financial year end 2012, to 97.5c in 2017. These targeted increases amount to 14 percent a year, well above the Reserve Bank’s inflation target of 3 percent to 6 percent and have to be seen in the context of three important factors.

First, energy prices are collapsing globally as a result of weak economic growth and technological advances. The price of Brent crude has fallen from $125 (R1 050) a barrel to $90 in the last three months, and coal prices have fallen off a cliff, following oil and gas prices down. These declines are a healing balm to confidence, inflation and job creation. South Africans, however, are facing a witch’s brew due to Eskom’s plan to double electricity prices. Read more…

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