Illustrative image: Money. (Image: iStock) | Grocery basket. (Photo: Freepik) | (By Daniella Lee Ming Yesca) South African consumer inflation raced to 4.0% year-on-year in April from 3.1% in March, a surge triggered by the hefty fuel price hike that month in the wake of the Iran war, with more pain for consumers and the economy lurking menacingly on the horizon.
Driven by a 1.1% monthly inflation spike, it’s the first time the annual rate has breached 4.0% since August 2024, according to Statistics South Africa (Stats SA) data, and takes the read well beyond the Reserve Bank’s 3.0% target.
The Bank’s Monetary Policy Committee (MPC) will announce its next interest rate decision on Thursday, 28 May and it has strongly signalled that rates will go up before they come down again.
It may wait to get a measure on the second-round effects of the soaring fuel price and the trajectory of the Iran conflict before it hikes. At 4.0%, inflation remains at the edge of the 2.0% to 4.0% “tolerance band” around the actual target that is in place in case of short-term shocks which monetary policy can do little to counter.
“The Reserve Bank is naturally concerned that the sharp increase that we’ve seen in fuel prices will ultimately cause a broadening of inflation pressure or the so-called second-round inflation pressure. However, it is too soon to assess it in this data set because these pressures take time to develop,” said Dr Elna Moolman, Standard Bank group head of South Africa Macroeconomic Research.
“But what we have seen in this data set is that transportation costs have risen significantly, from air fares to taxi fares to long-distance bus fares.”
Transport costs in March were in deflationary territory, declining by 1.6% compared with March 2025. But in April they shot up 5.5% on a monthly basis because of the fuel price increase and 4.9% year-on-year, and look primed to keep on going like a Boeing.
So economists are not ruling out a pre-emptive rate hike by the MPC, which would help to shore up the rand against a resurgent dollar since it would widen the rate gap between the currencies. The Reserve Bank’s policy rate is currently 6.75% and the prime rate is still in double-digit territory at 10.25%.
“The [Reserve Bank] may unfortunately hike interest rates to ensure that this increase that is under way in inflation will not lead to secondary inflation pressure,” Moolman said.
Chief Investec economist Annabel Bishop said the Bank “is likely to pre-emptively hike interest rates this month by 25 basis points”.
A breakdown of the numbers shows that food inflation thankfully remains benign at 2.8% – its lowest level in 14 months – breaking from the 3.4% rise recorded in March.
But that trend will not last long with fuel and fertiliser prices soaring in tandem because of the bottlenecks in the Strait of Hormuz and a potential “Super El Niño” forming which is likely to herald scorching drought next summer for South Africa and its neighbours. El Niño is pointedly high on the Reserve Bank’s radar screen.
The petrol price rose by R3.06/litre and the diesel price by R7.33/litre in April, fuelling this inflation spike. This was followed this month by R3.27 and R6.19 rises respectively, and global oil prices remain elevated.
It all points to more pressure on South Africa’s hard-pressed consumers and struggling economy in the months ahead. DM