Watch: SA inflation accelerates sharply in April

Added: 2026-05-22

[00:00:07]Welcome back. Now, South Africa's inflation rate has moved higher as rising global tensions and increased energy costs continue to place pressure on consumers. Headline consumer inflation accelerated to 4% year-on-year in April, up sharply from 3.1% in March and slightly above market expectations.

[00:00:28]The increase comes as the impact of the conflict involving the US and Iran feeds through into global oil prices, adding to concerns for fuel imports dependent economies like South Africa. We're joining us to unpack the numbers and what they could mean for consumers and interest rates. Very important going forward is independent economist John Loos. Hi John, good to chat to you once again. Right, 4% I would have expected more, but perhaps that's just because we're so plugged into what's happening with the news. What's your take?

[00:01:03]I got I didn't expect more. I actually expected slightly less, but in much of a muchness.

[00:01:09]Um, look, this is the first round impact. This is very much just the early April fuel price increase, which was very significant due to the higher oil prices due to the whole Gulf War conflict um coming into the numbers.

[00:01:23]But I think we must remember that there's another significant fuel high high coming through in the May numbers, too, which will possibly drive inflation up further. The transport cost component. And then of course, with time, there are the second round effects. What are those? Well, uh fuel costs are an input into many parts of the economy and as they start to bite, so suppliers try to pass their uh cost increases down the supply chain with cost incre price increases of their own. So, it can be a broader inflationary impact ultimately, but that normally takes a little while. Yeah.

[00:02:02]Right, so those transport costs, the knock-on as you said. Where else are you seeing pressures? Because it's not only about fuel, there other factors as well that play into this.

[00:02:15]Well, I think there's the broader energy challenge for South Africa. We know that it's electricity prices have been going up for years at well above inflation and continue to do so. If we look at the CPI, this country CPI inflation rates main contributors, that it's not actually the transport cost inflation that's the main contributor, it's actually the housing and utilities CPI.

[00:02:39]That is in a big part due to rental inflation, which is around about 4%, but then also due to municipal rates and various tariffs, including electricity most notably, inflating at well above the 4% CPI inflation rate. And that housing and utilities CPI contributes 1.2 of a percentage point of the overall 4% inflation, which is the biggest single contributor. So, so yes, it's not just the transport cost side of things, it's the the other fuel as well, and that's electricity. Yeah, that's the big problem. All right, we've got this MPC meeting coming up next week. Looking at that, I mean, are we looking at 25 basis points or will our central bank, our MPC, will they pull back and have a look at what the US Fed's doing first? Because a lot of banks have been very cautious at the moment.

[00:03:35]I My my thinking is that they'll probably hike by 25 basis points. Um, I think if we'd had some resolution of the conflict by now and oil prices were meaningfully less, uh, significantly less and there was light at the end of the tunnel, maybe they would have put put it on hold.

[00:03:53]But I think, you know, two and a half getting on for three months in, there's still no clear sign of a resolution which is going to bring down oil prices meaningfully. So, they'll be worried about that second round in impact where producers where where there's where they used fuel as input, their costs have increased, their input costs or a certain part of the input input cost. And then they'll be trying to pass those cost increases on to their markets or to their their clients.

[00:04:23]If they if we don't put the brakes on demand, they are more able to do so.

[00:04:27]That's what the Reserve Bank typically is concerned about. It's a second round effects which can then lead to in general inflation expectations rising and become anchored at a higher level. So, I think they'll probably act proactively, mildly but proactively. Yeah. Lesetja Kganyago and the MPC has been known to do that as well. He they read the situation really well. Are we not perhaps looking at a shock of 50 basis points because they're looking at those secondary fuel costs coming through, those inflationary pressures coming through?

[00:05:02]And he has been hinting lately that he needs to do something. Could it be something like that?

[00:05:09]Well, I suppose it's not out of the question, but no, the the most likely scenario generally these days for the for the Reserve Bank is to hike and cut in 25 basis point increments.

[00:05:20]Um and I think they will be mindful of the fact that this economy is weak. Even though we had some growth improvement last year, we're talking about 1.1% and this whole oil price spike, even without interest rate hiking, looks set to take to to slow our growth back to below 1%. Um that's not a job-creating or you know, a meaningful growth rate at all. So, I think they'll be mindful of that. And when growth is weak, there aren't too many homegrown inflationary pressures in the pipeline. So, I think 25 basis points for now would probably suffice. Yeah. John, if there is peace tomorrow, perhaps peace today, and everybody puts down their weapons, and they open up the straight, it's still going to take a very long time for the effects to wear off. I mean, I would think we're looking at this inflation thing being high for quite a while.

[00:06:14]It's it's possible, but let let's say that were to happen today, and oil prices were to go back to, say, $70 a barrel, roughly where they were before the conflict.

[00:06:23]That can Yes, there's still some second-round inflationary impacts which would probably have to work through. You take things like agriculture, industries like agriculture, diesel is a big input there, and of course, fertilizers have been disrupted um because a large chunk of that has to come through the Strait of Hormuz, too.

[00:06:43]Uh so, it it it could be a number of months, but I think it were that to happen hypothetically, then you could get a scenario that the Reserve Bank says, "Okay, well, we'll live with uh this bump in inflation, which will take a good number of months to work its way through the figures, and come back to come back down um because there is light at the end of the tunnel." But, at the moment, yes, we we wait for that day. Yeah, let's see what happens.

[00:07:08]Worrying times. John, thanks so much for uh chatting to us on Business Lunch this afternoon. I appreciate it.

[00:07:14]That was independent economist John Loos.