SA’s annual consumer inflation accelerated to 2.9% in November from 2.8% in October, according to the latest data from Stats SA, though the consumer price index (CPI) remained flat month on month, reflecting overall price stability.
Food prices, a key component of household spending, eased further. Stats SA said inflation for food and nonalcoholic beverages (NAB) dropped sharply to 2.3% in November, down from 3.6% in October, and marking the lowest rate in 14 years. Eight out of 11 food and NAB categories recorded declines, including vegetables, milk, eggs, cheese, bread and cereals.
Egg prices dropped by 3.7% compared with the previous year, a big turnaround from the 39.9% rise seen a year ago, according to Stats SA. Prices for bread and cereals also decreased, with items such as maize meal, pasta and rice becoming cheaper. However, some products, such as samp and hot cereals, recorded minimal price increases. On the other hand, prices for oils, fats and fruit increased.
Wandile Sihlobo, chief economist at the Agricultural Business Chamber of SA, said on Wednesday key factors such as easing disruptions in vegetable and meat supply chains, a recovery from the avian influenza outbreak and India’s resumption of rice exports contributed to the moderation in food price inflation.
However, risks remain, particularly with grain-related products due to a poor maize harvest caused by the 2024 drought, keeping white maize prices elevated amid strong regional demand.
“While having eased remarkably in November 2024, grain-related products remain the upside risk to consumer inflation following a poor crop harvest due to the drought. For example, SA’s 2023-24 maize harvest is estimated at 12,72-million tonnes, down 23% year on year due to the 2024 midsummer drought. The white maize growing areas were the most affected,” he said.
“This is a staple crop that is also scarce in the world market. Thus, white maize prices remain elevated. The additional challenge is the strong demand for white maize from Southern Africa, likely to continue through the first quarter of 2025. Still, we don’t expect the potential grain-related product price increase to be substantial as their forecasts point to the ample global wheat and rice harvest in 2024-25, which may cushion the region as substitutes.”
Despite these risks, Sihlobo is optimistic about 2025. He expects La Niña rains to support agriculture’s recovery and help contain food inflation.
Fuel prices rose 0.9% in November, which reduced the annual deflation rate to 13.6%, from 19.1% in October, according to the statistician. The cost of dining out also increased, with restaurant and hotel prices rising by 5.9% from the previous year. Restaurants posted an increase of 5.1%, while hotel prices jumped 7.5%, reflecting stronger demand as consumer confidence improved.
Inflation affects different income groups differently. Stats SA said the poorest households experienced an inflation rate of 3.8% in November, down from 11.3% in April 2023, but still higher than wealthier households, which had a rate of 3%.
Inflation rates also varied by region, with the Western Cape having the highest rate at 3.4%, followed by the Free State (3.2%) and KwaZulu-Natal (3.1%). Limpopo and Mpumalanga had the lowest rates, at 2.4% and 2.5%, respectively. The Western Cape had had consistently higher inflation throughout 2024, Stats SA said.
Despite these inflationary pressures, economic sentiment has improved. The SA Chamber of Commerce and Industry (Sacci) on Tuesday reported a surge in business confidence, with its index reaching 118.1 points in November, the highest level since 2015. This increase was attributed to rising international tourism, stronger metal prices and optimism over market-friendly policies introduced by the government of national unity (GNU).
Consumer confidence is also on the rise, particularly among high-income households, with the FNB/BER consumer confidence index hitting its best festive season level since 2019. Retail confidence also increased, surging to a three-year high in the fourth quarter of 2024, climbing nine percentage points to 54%, according to the latest retail survey conducted by the Bureau for Economic Research (BER).
The economy contracted in the third quarter due to weak agricultural performance, but growth prospects for 2024 remain positive. The Reserve Bank announced two 25 basis point cuts to the repo rate this year, with further reductions expected in 2025. These measures are expected to support disposable incomes, lower debt costs and stimulate investment. GDP growth is projected at 0.5% for 2024, rising to 1.5% in 2025, signalling a slow but steady recovery.
Update: December 11 2024
This story has been updated with comment.
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