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| "Growth rates have tested the limits of our existing infrastructure. However we do not see an economy on its knees" |
Year-on-year inflation hit 10.1% in March and Mboweni said in an interview in mid-May that the Reserve Bank of South Africa’s quarterly core forecasting model expected the rate to start falling. He said the rate will gradually decline to "below the 6% upper end of the inflation target range during the fourth quarter of 2009."
He did warn, however, that the request by power utility Eskom for a 60% increase in electricity prices from the middle of this year, and for a similar rise next year, "will have a material impact on the inflation outlook".
Since the beginning of the year South Africa has suffered from power outages brought on by a lack of government investment in the electricity generating industry. So far the government has approved a 14.2% price increase for 2008/09, well below the level that Eskom is seeking. At a summit held last month to discuss Eskom’s proposed price hike, Alec Erwin, public enterprises minister, agreed that an increase was necessary, although he said that it would be a shock for the economy.