Consumer prices in South Africa are soaring due to a perfect storm of Covid restrictions, the war in Ukraine, logistics problems and a Chinese economic slowdown.
And data from Statistics South Africa (Stats SA) shows annual consumer price inflation (CPI) hit 6.5% in May. The figure is an increase of 0.7% from 5.9% in April and March.
Stats SA said the increase exceeds the upper limit of the Reserve Bank of South Africa’s monetary policy target range. This is the highest reading since January 2017, when the rate was 6.6%, he said.
The impact of fuel prices
The agency said transportation and food and non-alcoholic beverages (NAB) accounted for just over half the annual rate, with large price increases recorded in both categories. “Fuel, in particular, continues to be a major contributor. If the impact of fuel is removed from the CPI reading in May, the headline rate drops to 5.1% from 6.5%.
“Diesel prices jumped 8.1% between April and May, bringing the annual rate to more than 45%. The average price of a liter of diesel in May 2021 was R16.20, meaning it cost R729 to fill a 45 liter tank. Twelve months later, with an average price of R23.67 per litre, filling the same tank cost R1,065,” he said.
Gasoline prices moderated between April and May, falling slightly by 0.7%. Despite this drop, gasoline is nearly 27% more expensive than it was in May 2021, StatsSA said.
Cooking oil prices continue to climb
During this period, food and NAB prices jumped 2.1% between April and May, marking the largest monthly increase since February 2016, when the monthly increase was also 2.1%. At that time, the country was experiencing a severe drought.
“The Oils and Fats product group continues to experience sustained levels of high inflation. The annual rate was 26.9% in May, which represents the 17th month that the rate has exceeded 10% (since December 2020). Prices jumped 10.1% between April and May, the first time since 1997 that the monthly rate was above 10%.
“Sunflower oil, the product with the highest weight in the group of oils and fats, is almost 40% more expensive than a year ago. Prices jumped 16.1% between April and May,” Stats SA said.
The monthly rate for bread and cereals was 3.4%, bringing the annual rate to 8.4%. Corn flour recorded a monthly increase of 5.1% and a loaf of white bread was 3.7% more expensive.
Stats SA said annual meat inflation has remained above the 6% mark since November 2020, with a reading for May 2022 of 9.4%. Prices for individually frozen (IQF) portions of chicken and stewing beef rose 13.7% and 12.2%, respectively, in the 12 months to May.
Jeff Schultz, senior economist at BNP Paribas South Africa said a very big rebound in food prices explains the group’s missed estimates. These jumped 2.2% month-on-month to 7.8% year-on-year and are now clearly more reflective of the price pressures seen globally.
He said fuel was in line with the group’s estimates, although public transport prices have actually fallen, but will likely pick up again in July as the public transport industry prepares to raise fares in response to the record fuel prices.
“A significant rebound in food prices accounted for the bulk of the overall CPI failure in May and will concern the SARB as risks of more acute import price inflation materialize,” Shultz said.
“Inflation is expected to exceed 7.0% from June on our estimate. While we already remain well above the consensus on the sell side in our expectations for an earlier upside cycle and on how inflation peaks, we believe the hurdle to a more aggressive 75 basis point hike next month is now significantly lower following today’s CPI detail.
Data from research firm Trade Intelligence and the Pietermaritzburg Economic Justice and Dignity Group shows that in May 2022, the price of cooking oil was up +52% year-over-year. Other notable increases include:
- Potatoes +22%;
- Cake flour +13%;
- sample +12%;
- Bread +10%.
“If we add other elements to make up the average household food basket, it now costs +11.4% more than in May 2021, or more concretely, an additional R473. This brings the cost of the basket to R4,609 per month, a major cause for concern when 70% of households earn less than R10,000 per month and still have other expenses to cover,” Trade Intelligence said.
“We have seen high food and fuel prices before – Brent Crude peaked at $133 a barrel in 2008, and the 2016/2017 drought in many parts of South Africa pushed local food prices.However, in 2008, it cost us “only” 7 rand to buy a US dollar, whereas today it is more than double at 16 rand.
A further breakdown of data from the Pietermaritzburg Economic Justice and Dignity Group shows that the average basket cost by family size has increased as follows over the past year:
- Family of four: R230.56 (7.9%)
- Family of five: R295.83 (8%)
- Family of seven: R408.31 (8%)
The group noted that similar increases have impacted commuters, who pay significantly more for petrol compared to the same period last year.
“Even looking back over the last 12 months, it costs R400-R500 more than last year to fill our cars, and over R3,000 more to fill a truck with diesel. It is not hard to see that such increases will be very difficult to absorb throughout the supply chain,” Trade Intelligence said.
A 95 liter of petrol in June 2021 would have cost a motorist R17,13. In June 2022, this increased by 34% to R24.17. However, this does not take into account government intervention to reduce fuel costs which effectively reduced the cost of petrol by an additional R1.50 for the month.
A 45 liter tank of petrol which would have cost R771 last year will now cost you just over R1088 – adding more R317 to the bill.
This significant increase was largely beyond South Africa’s control, as world oil prices were pushed higher by Russia’s invasion of Ukraine, and the weakness of the rand in the face of a resurgence in the dollar – the other major component of local fuel prices – being largely at the mercy of the world market. tendencies.
|tank size||95 unleaded (June 2021)||95 unleaded (June 2022)||93 unleaded (June 2021)||93 unleaded (June 2022)|
|60 liters||R1,027.80||R1,450.20||R1 014.60||R1,436.40|
Energy regulator Nersa has granted Eskom a 9.6% increase in tariffs for direct customers, effective April 2022, with another increase in municipal electricity tariffs of 7.47% taking effect in July 2022.
The price increases take the average electricity tariff in South Africa from just over R1.33 per kWh to around R1.46. The average reflects the national average – urban customers consuming electricity in the upper blocks will pay significantly more than this.
Mpumalanga has the highest power and energy inflation at 15.3%, followed by Gauteng at 14.8%. The North Cape has the lowest inflationary pressure at 11.1% – however, this remains above headline inflation.
The exact amount you will pay more depends on the type of electricity customer you are. Eskom has published its fee adjustments for 2022/23 and has included a fee calculator and comparison tool.
An urban resident using around 200kWh per month in Gauteng would see their monthly electricity bill rise to R550. increase to R600.
Eskom said an average household in South Africa uses 30 kWh per day or 900 kWh per month. It would have cost a household R2,290 in June 2021 and now costs R2,487 per month – an increase of 8.6%.
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