THE IMPACT OF ELECTRICITY PRICING SHOCK ON THE SOUTH AFRICAN ECONOMY: A CGE ANALYSIS1 Draft

After ESKOM2 announced the company’s largest loss of R9.7bn in August 2009, a new application for higher tariffs was due by the end of September. How an emerging country like South Africa can develop its economy under restrictive energy constraints is an interesting and important research subject. This article describes the impact of electricity pricing shock, such as increase by 35 % in the prices set by ESKOM on South African’s economy. In view to understand the interrelationships between the electricity price shocks and the economy of South Africa, a Computable General Equilibrium Model is used to analyse the issue. The results in this paper may be useful for providing important recommendations to the government of South Africa. The policy implication is that South African electricity consumers should use electricity more efficiently through market signals instead of interventionist rationing