South Africa’s inflation outlook is shifting from fuel-driven pressures to rising food costs, with the South African Reserve Bank (SARB) warning that the next major inflation shock is likely to come from what households put on the table.The Reserve Bank recently increased the prime lending rate by 25 basis points to 10.5%, citing growing inflation risks and the need to keep price increases under control.

Governor Lesetja Kganyago noted that while there has not yet been a full food shock, conditions suggest one is imminent due to higher production and transport costs.Farmers are facing increased input costs, particularly diesel and fertiliser, which are directly feeding into higher supermarket prices.Inflation rose to 4% in April from 3% in March, largely driven by fuel costs, and the SARB now forecasts headline inflation averaging 4.4% this year and 3.7% next year.

The Monetary Policy Committee also examined several risk scenarios, including geopolitical tensions in the Middle East, potential disruptions in oil supply, and the impact of El Niño weather patterns that could trigger drought conditions in South Africa.In more severe scenarios, inflation could peak above 5% or even exceed 6%, potentially requiring additional interest rate hikes.

Further pressure is expected from the phasing out of fuel levy relief, which will add significant costs per litre of petrol and diesel in the coming months.

Economists warn that combined increases in fuel, food, and borrowing costs are creating a compounding effect on households, reducing disposable income and weakening consumer confidence.Climate-related disasters such as floods have also added uncertainty to agricultural output.

Overall, the article highlights a tightening economic environment where food inflation is becoming the central driver of financial strain for South African consumers.