By Thebe Mabanga
The inflation rate for February eased to 3.0% on the back of slowing food and fuel costs, but this may merely represent the calm before the storm as the outlook for inflation has been clouded by the regional war involving Iran.
On Wednesday, Statistics South Africa reported that the Consumer Price Index (CPI) fell to 3.0% in February, down from 3.5% in January.
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CPI excluding food and non-alcoholic beverages, fuel and energy also slowed to 3.0% from 3.4%. The outlook for inflation is now highly uncertain as the conflict in the Middle East enters its third week.
The hostilities have sent the price of oil above $100 per barrel, and the longer that shock persists the more the outlook deteriorates. Nedbank has now revised its average inflation forecast for the year from 3.4% to 4.0%.
Nedbank noted that “the downward pressure emanated primarily from a sharp drop in transport costs and food inflation”.
Fuel costs have fallen by 3.1% over the past month and 10.1% compared with a year earlier, driven largely by a stronger rand and relatively lower oil prices at the beginning of the year. Private transport operating costs also fell by 5.9% while new vehicle inflation eased from 0.8% to 0.5%.
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Food inflation also eased from 4.4% in January to 3.7% in February, with most categories slowing as fruit and some other agricultural products benefited from favourable seasonal conditions. Meat prices, which had been elevated over the past year because of foot-and-mouth disease, slowed from 13.5% to 12.2%.
Housing and utilities inflation remained at 4.8%.
In the months ahead, South African consumers will have to contend with a much higher rand oil price due to both a weaker currency and the war-driven jump in crude prices.
They will also face higher fuel taxes after February’s budget raised the general fuel levy by 9 cents a litre for petrol and 8 cents for diesel, the carbon fuel levy by 5 cents for petrol and 6 cents for diesel, and the Road Accident Fund levy by 7 cents a litre.
At the same time, Eskom said NERSA has approved an average electricity price increase of 8.76% for customers supplied directly by Eskom from 1 April 2026, up from the earlier 5.36% determination. Municipal bulk purchasers will implement increases averaging 9.01% from 1 July 2026.
All eyes will now be on the South African Reserve Bank’s Monetary Policy Committee, which meets on 26 March, for its updated outlook on inflation and interest rates.
Many economists who had previously expected a cut now see the bank holding steady because of the inflation risks linked to the Iran conflict.
Nedbank expects the committee to pause its easing cycle, keeping rates unchanged until the second half of 2027.
