South Africa’s reliance on coal for most of its energy makes it an ecological pariah, but it’s also helping to keep inflation under control, according to S&P Global Ratings.
While energy prices in have skyrocketed as European nations scramble to find alternatives to Russian gas supplies Following its invasion of Ukraine, power utility Eskom has remained relatively unscathed when it comes to coal procurement.
“One of the reasons inflation in SA is easier to manage than other countries is the fact that Eskom is largely a coal-fired generator and the coal is sourced locally, mostly under long-term contracts,” said Omega Collocott, S&P director of corporate ratings for the country.
That means the world’s 13th largest greenhouse gas emitter “ironically doesn’t have as much inflationary pressures as dirty power generation,” she said.
The Inflation in the Eurozone has averaged 7.9% since March and 6.1% in South Africa.
< p>South Africans might struggle to find other redeeming qualities, however – the energy utility, which accounts for 80% of the country’s electricity Generated from coal and experiencing a record annual power outage in just seven months of the year.
“Whether the power is off or on is a different story, but I think that’s an interesting observation and could be a ray of hope in the dark,” said Collocott.
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