IMF supports higher electricity rates to stimulate growth

Severe electricity shortages, the worst since 2008, have become the greatest obstacle to growth, reducing economic activity, sapping confidence, and discouraging investment.

So said the International Monetary Fund (IMF) in its report, released on Tuesday, following an official mission to South Africa earlier this month.

“Higher electricity tariffs, and the envisaged government support, is necessary to make Eskom financially sustainable, but should be complemented by cost containment (including through improved procurement practices), efficiency enhancements, and governance improvements to minimise the impact on consumers and business costs,” said an IMF spokesperson.

He added that at the same time consideration should be given to further private participation to increase capacity and reduce the cost of generation. “Addressing other infrastructure bottlenecks, for example in transport, is important; the planned rail expansion is a step in the right direction,” he said.

The IMF report noted further that downside risks to SA’s economy continued to prevail, with the main domestic risks including further delays in easing electricity shortages, policy and regulatory uncertainties, and renewed labour tensions.