Paul Makube
South Africa’s headline inflation advanced slightly higher but still below expectations at 3% y/y in December 2024, with the monthly pressure just 0.1% m/m. This brought overall the overall headline inflation for 2024 to 4.4% relative to 5.9% in 2023 and the lowest level since 2020. This is a positive outcome ahead of the South African Monetary Policy Committee’s (MPC) first meeting for 2025 as headline inflation remains at the lower end of the South African Reserve Bank (SARB) target band.
Despite the drought-induced production disruptions with the country’s summer crop harvest (maize, soybeans, sunflower, groundnut, sorghum, and dry beans) cut by 22% y/y to 15.40 million tons, the food inflation trajectory for 2024 remained on the downside in 2024. Overall food inflation for 2024 reached the lowest level in six years at 4.1% y/y after posting a high of 11% in 2023. Food inflation closed the year with a marginal uptick to 1.7% y/y in December 2024 and except for November’s 1.6% it was the lowest since December 2010.
Gains in the “oils & fats”, “fruit”, “vegetables”, and “sugar, sweets, and dessert” CPI categories more than outweighed declines for meat and the deceleration for “fish” and other “foods”, while “bread and cereals” and “milk, eggs and cheese” remained flat.
“Bread and cereals” inflation still surprised on the downside at 3.7% y/y in December despite elevated grain and oilseed prices with white maize surging by 51% y/y in December to a record high of R6,531/ ton and sunflower up by 12% y/y at R10,371/ ton. Meat remained in deflationary territory for the second consecutive month at -0.4% y/y in December from -0.1% y/y in November, but the monthly pressure was 0.5% m/m after steadying in November 2024.
Meanwhile, the global food inflation as measured by the United Nation’s Food and Agriculture Organization (FAO) showed a further acceleration for the fourth consecutive month in December at 6.6% y/y underpinned by strong gains in meat and vegetable oils categories.
Looking ahead, near-term upside for grain prices is likely to persist given the tight stock levels but will slowdown in the second half of 2025 due to a bullish summer crop harvest outlook. Further rand appreciation poses downside risk to grain prices in the medium term.
Paul Makube, Senior Agricultural Economist, FNB Commercial.He writes in his personal capacity.
