In July, South Africa’s inflation increased to its highest pace in 13 years, according to government figures released on Wednesday as employees demonstrated against the country’s high cost of living.
In July, consumer prices increased at an annual rate of 7.8 percent, up from a rate of 7.4 percent in June, according to a statement from the national statistics office, StatsSA.
The release of the most recent numbers was timed to protests in major cities against the deteriorating economic situation, which has been especially difficult for the continent’s poorest residents in the most industrialised nation.
The two major trade unions in South Africa staged protests calling on the government to take action against the rising cost of living and poverty in the most unequal nation in the world.
Although the new inflation rate is bad news for consumers, economists expect inflation will begin to decline in the following months as the nation is likely approaching a tipping point.
According to Annabel Bishop, chief economist of Investec bank, this “is probably the pinnacle in the current inflation cycle.”
According to Dawie Roodt, an economist with the financial services company Efficient Group, inflation will be lower at this time next year.
The relaxing of Covid restrictions, supply chain disruptions, and rising oil and food prices as a result of Russia’s invasion of Ukraine have all contributed to increasing inflation rates around the world.
According to the statistics office, this has caused the cost of basic needs including food, energy, fuel, and medicine to rise for South Africans.
Even while grain prices are falling across the board, according to Roodt, “it can take up to two years before a price shock spreads throughout the economy.”
Bread and grain prices increased by 13.7 percent in July compared to 11.2 percent in June. According to the statistics office, this implies that a loaf of white bread now costs 17.84 rand ($1.05) as opposed to 15.57 rand ($0.91) a year ago. Fuel costs are now 56.2 percent higher than they were a year ago.
The nation’s central bank raised the benchmark interest rate by three-quarters of a percentage point last month as a result of rising inflation.
According to Christie Viljoen, senior manager and economist for PwC South Africa, it will have a domino effect on the overall economy because higher rates would force consumers to make larger loan repayments, which will put a strain on household budgets.
“This, in turn, results in reduced spending power for consumers and companies. This is a challenge for South Africa which is a consumer-driven economy,” he said.
The people is suffering from the growing expense of living since the jobless rate is currently about 34%.
On Wednesday, the administration expressed “great worry” over the jobless rates and said more needed to be done to help the situation after the pandemic.
“Job creation and economic recovery remain the top priorities for government,” said cabinet spokeswoman Phumla Williams in a statement.