Page 24 - SA Chamber UK February Newsletter. 2024

GEOPOLITICAL CHALLENGES

IMPERIL SA’S DISINFLATION

PROSPECTS

South Africa witnessed a decline in its annual consumer price inflation in December 2023,
dropping to 5.1% year-on-year from 5.5% in November, reaching its lowest point in four

months. This consistent trend ensures that consumer price inflation continues to fall within
the target range of 3% to 6% outlined by the South African Reserve Bank (SARB), a feat
maintained for the past seven months. Additionally, core inflation, which excludes volatile
elements like food and non-alcoholic beverages, fuel, and energy, remained steady at 4.5%
in December, unchanged from November.

While the recent figures might suggest a semblance of control over inflation, it is imperative
to acknowledge the looming threats posed by global disruptions, notably the Red Sea crisis
and the Panama Canal drought, which could undermine South Africa’s inflation management
efforts. These external factors present significant risks that warrant attention.

Alongside global disturbances, domestic factors such as the recent sanctioning of a 12.74%

increase in electricity tariffs for Eskom, scheduled to commence from April 2024, further
jeopardise South Africa’s ability to manage its inflation levels. As businesses transfer these
escalated costs to consumers, it triggers inflationary pressures.

Ongoing Red Sea Crisis

The prolonged Red Sea crisis has significantly
disrupted global trade routes, particularly
through the vital Suez Canal. According to
the United Nations Conference on Trade
and Development (UNCTAD), trade volumes

experienced a sharp 42% decrease from
November 2023 to January 2024. This
disruption has reverberated across South
Africa’s major trade partners such as India,
thereby altering the dynamics of the country’s
trade landscape.

Roughly 12% of global trade traverses the
Suez Canal, making it a critical conduit for
international commerce. The repercussions

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SA CHAMBER UK NEWSLETTER FEBRUARY 2024