{"id":683425,"date":"2023-04-27T17:00:20","date_gmt":"2023-04-27T15:00:20","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=683425"},"modified":"2023-04-26T17:18:11","modified_gmt":"2023-04-26T15:18:11","slug":"reserve-bank-explains-how-load-shedding-is-ruining-the-economy","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/683425\/reserve-bank-explains-how-load-shedding-is-ruining-the-economy\/","title":{"rendered":"Reserve Bank explains how load shedding is ruining the economy"},"content":{"rendered":"<p>Load shedding adds materially to inflation, and it will likely continue to do so, says the South African Reserve Bank (SARB).<\/p>\n<p>When looking at the effects of rolling blackouts in 2022, which were tamer compared to this year so far, the SARB estimated that approximately <strong>14% of business hours were lost in the industrial sector, while the commercial and agricultural sectors varied between 11% and 12%.<\/strong><\/p>\n<p>&#8220;With load-shedding expected to increase from 157 days in 2022 to 250 days in 2023, the loss in business hours is expected to rise,&#8221; said the central bank.<\/p>\n<p>SARB has estimated a 0.5 percentage point inflationary impact on inflation because of load shedding.<\/p>\n<p>In an attempt to circumvent the downtime caused by load-shedding, businesses are using expensive alternative energy sources like solar power and backup generators.<\/p>\n<p>SARB said that backup generators have <strong>variable fuel costs, which are likely to be passed on to consumers<\/strong> and contribute to inflation.<\/p>\n<p>To come up with a 0.5 percentage point effect on inflation estimation, the SARB has a two-step approach:<\/p>\n<ul>\n<li>Firstly, the additional electricity costs from generating power off-grid are calculated.<\/li>\n<\/ul>\n<ul>\n<li>Secondly, the impact of the additional electricity costs on consumer price index inflation is assessed.<\/li>\n<\/ul>\n<p>Regarding the additional costs that load shedding brings, the SARB has made the following assumptions:<\/p>\n<ul>\n<li>Load-shedding takes place at various stages (stages 1 to 6) to account for the intensity and variability in productive business hours across the sectors<\/li>\n<\/ul>\n<ul>\n<li>Generators only run during the business hours of the respective sectors<\/li>\n<\/ul>\n<ul>\n<li>In total, 67% of firms use diesel generators during load-shedding<\/li>\n<\/ul>\n<ul>\n<li>The cost of power from running a generator is 133% higher than that of power provided by the municipal grid<\/li>\n<\/ul>\n<ul>\n<li>The share of electricity costs to total costs varies across each sector<\/li>\n<\/ul>\n<ul>\n<li>In total, 90% of the additional generating costs are passed on to the final prices<\/li>\n<\/ul>\n<p>SARB said that based on top of the aforementioned assumptions and with load shedding forcing producers to pass on 90% of the additional energy costs to final consumer prices &#8211; load shedding raised CPI by 0.6% in 2022.<\/p>\n<p>On 22 March, StatsSA reported that annual consumer price inflation was 7.0% in February 2023 &#8211; up from 6.9% the month before.<\/p>\n<p>Stats SA reports that the primary factors behind the 7.0% yearly inflation rate were housing and utilities, transport, food and non-alcoholic beverages, as well as miscellaneous goods and services.<\/p>\n<p>The central bank went on to state that load shedding will further raise inflation by 1.1% in 2023.<\/p>\n<p>&#8220;This further implies an inflation rate impact of 0.5 percentage points (i.e. 1.1% &#8211; 0.6%) in 2023 from load-shedding,&#8221; said SARB.<\/p>\n<p>Ultimately, there will be significant upward pressure on headline inflation, which will impede the current process of disinflation, noted the bank.<\/p>\n<p>This could be made worse by unexpected supply chain disruptions and shortages, particularly in the food industry.<\/p>\n<hr \/>\n<p><strong>Read: <a href=\"https:\/\/businesstech.co.za\/news\/finance\/683439\/new-data-delivers-some-comforting-news-for-south-africa\/\" target=\"_blank\" rel=\"noopener\">New data delivers some &#8216;comforting&#8217; news for South Africa<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The South African Reserve Bank breaks down the material effects of load shedding on the price of goods in South Africa. <\/p>\n","protected":false},"author":10,"featured_media":667287,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[26],"class_list":["post-683425","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-headline"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/683425","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=683425"}],"version-history":[{"count":5,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/683425\/revisions"}],"predecessor-version":[{"id":683525,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/683425\/revisions\/683525"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/667287"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=683425"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=683425"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=683425"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}