Consumer inflation remains just inside the Reserve Bank’s 3-6% target range, but producer price inflation is still in double digits, which points to more pain ahead for South Africa’s cash-strapped consumers.  

South Africa’s producer price index (PPI) accelerated to 10.5% in February from 10.1% in January, Statistics South Africa (Stats SA) said on Thursday. The only consolation is that it is less than the decade-high of 10.8% that was reached in December.  

Oil prices remain the main fuel behind this inflationary spurt. Producer petrol prices were up 32.6% in the year to February and diesel prices almost 34%. Russia’s invasion of Ukraine will continue to stoke such pressures. 

But Thursday’s announcement by the Treasury to temporarily cut the general fuel levy by R1.50 per litre, for the period 6 April to 31 May, should help to contain inflation, at least a bit, on this front. 

“This will reduce the levy for petrol from R3.85 per litre to R2.35 per litre. The levy on diesel will be reduced from R3.70 per litre to R2.20 per litre,” Finance Minister Enoch Godongwana said in a speech to Parliament.  

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South African consumers are already forking out a record R21.60 for petrol in the inland region and prices are expected to rise again in April. So any containment measures will be welcomed by consumers and producers alike.  

On the production side, factory-gate price increases need to be absorbed or passed on to consumers, or costs have to be cut. South African consumer  inflation remained unchanged on an annual basis at 5.7% in February and while the consumer price index does not quite follow PPI the way it did in the past, the latter still exerts a lot of pressure on the former.  

The latest PPI read therefore also cements the central bank’s case for the rate-tightening cycle that it has embarked on against the backdrop of rising rates elsewhere to contain global inflation.

Inflation takes its greatest toll on the poor and indicators such as a record unemployment rate of 35.3% and rising social unrest suggest that South Africa’s poor are getting poorer. DM/BM

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