By Daniël Minnaar
Inflation
The annual inflation rate decreased slightly from 7,4% in November to 7,2% in December. The biggest contributor to this rate was once again food and non-alcoholic beverages, which were 12,4% more expensive year-on-year, and contributed 2,1 percentage points to the overall inflation rate of 7,2%.
While food prices globally continue to decline, the Reserve Bank has again revised its expectations for local food price inflation upwards, partly due to the delayed impact of the weaker exchange rate.
In 2022, food price inflation hit 9,2%. The Reserve Bank now predicts that food prices will increase by 7,3% (revised upwards from 6,2%) in 2023, and by 4,4% (upwards from 4,2%) in 2024.
Interest rate
In its first session of the year, the Monetary Policy Committee raised the repo rate by 25 basis points to 7,25%. This brings the prime lending rate to 10,75%. This was the eighth consecutive session of the committee where the interest rate has been raised.
Two committee members voted for a 50-basis-point increase, while the other three voted for a 25-point increase.
The disastrous impact of load shedding on the South African economy prompted the committee to adjust its economic growth expectations for 2023 to a shocking 0,3%. Reserve Bank President Lesetja Kganyago said in a statement that up to two percentage points of 2023’s expected economic growth rate had been deducted as a result of the country’s power crisis.
Given the inflation rate that is still high and falls outside the Reserve Bank’s target band of 3% – 6%, it is expected that the interest rate may be increased by a further 25 basis points at the next committee session in March.
Fuel
The agricultural sector must brace itself for a fuel price increase in February, according to the latest data published by the Central Energy Fund (SEF).
The price of 95-octane petrol is expected to increase by 52 cents per litre, while the price of diesel may increase by between 22c and 33c per litre. The price of paraffin is expected to increase by 38c per litre.
Any increase in the fuel price comes at a bad time for the agricultural sector which currently relies on diesel-powered generators during the power crisis.
Dam levels
The Western Cape’s average dam levels are still declining and currently (23/01/2023) stand at 56,3%. This is 20% lower than a year ago when the average level stood at 76,3%.
