Photo by [Boksburg Advertiser]
The SARB Monetary Policy Committee (MPC) is set to meet next week to discuss the adjustments in the interest rates in the country to combat the excessive rises in inflation. However, the MPC’s decisions will depend on the adjustments of the US’s interest rates.
Patrick Bond, Professor of Sociology at the University of Johannesburg, said that considering the inflation figures reported by Stats SA on March 22, the MPC will likely increase the interest rates by 25 basis points.
“If you’re thinking about the policy and you especially have just seen the [US] Federal Reserve raise its interest rates to 0.25% even after three major banks collapsed … Ironically, the [Federal Reserve] should be lowering interest rates and stimulating growth, it’s doing the opposite … The South African Reserve Bank is very likely in about … seven days [when] they meet the monetary policy committee to raise our interest rates yet again to combat inflation.”
Rocketing Inflation in the Country
According to Statistics SA, food, non-alcoholic beverages, and transport were the main contributors to the increase in consumer inflation. The annual consumer inflation rose to 7.0% in February from 6.9% in January.
The rise in consumer inflation is the first in over four months. The 0.7% inflation between February and January is the largest since July 2022.
In 12 months, the prices of food and non-alcoholic beverages increased to 13.6% from 13.4%. This percentage is the highest recorded since 2009. In addition, eggs, milk and cheese rose to 12.3% from 10.9%. (While the prices may differ depending on the brand, last year January, a tray of 18 eggs cost approximately R42.00, this year, the price can cost between R50.00 and R60.00)
The inflation on maize-meal continues to show high inflation rates at 34.7%. Protein inflation saw an uptick from 11.2% to 11.4%, the highest increase for meat since 2018.
However, fuel prices rose moderately to 10.9%, the lowest showing since 2021. Likewise, fats and oils slowed for the sixth consecutive month at 16.7%. (Last year, two-litre cooking oil soared well above R115. However, the prices decreased this year, and it now costs approximately R75 per two litres.)
Bond said he was not surprised by the inflation figures considering how weak the rand is to the dollar and how that affects the imports of food products to South Africa.
“It comes across as surprising only if we’re not watching the Rand to Dollar. We import too many things we should be making locally because the rand has fallen over 10% in January and into early February. [Which] was one of the main reasons for the knock-on of having imported prices, including grains and some of the other foodstuffs we import. But those 14% increases we’ve just seen year-on-year in the food prices, without drought conditions, are very disturbing.”
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Localisation, Possible Solution?
Bond highlighted some contributing factors to the increase in food prices, including South Africa importing food and products that could be locally sourced.
Domestically, the energy crisis and the volatile political climate negatively affect the economy. In addition, the unrest in certain parts of the world creates instability and disruption in the global supply chain. And having too much reliance on delayed imports could lead to potential food shortages in the country.
Bond hinted that import substitution might be a viable solution, considering the country’s food sovereignty is at stake. The very idea of localisation promotes industrialisation, employment and growth.
“The critical thing is that we need to have more sovereignty, state sovereignty and protection for these struggling local producers. We’ve lost so much, haven’t we? Clothing, textiles, appliances, electronics and footwear. So many industries were producing about 24 of the GDP back in 1990. With the World Trade Organization and the government’s free-market policies, we lost about half of that manufacturing output and most of those labour-intensive sectors. [However] building them back isn’t impossible. Many countries have done it.”
Given NERSA’s final approval of Eskom’s 18% tariff increase, skyrocketing inflation on necessities and the possibilities of an increase in interest rates, one thing is sure South Africans are in for the long haul.
