South Africa's headline inflation increased to 3% year-on-year in December 2024, slightly above expectations, with a minimal monthly rise of 0.1%. This brought the overall inflation rate for 2024 to 4.4%, down from 5.9% in 2023 and marking the lowest level since 2020.
The figures indicate positive economic momentum as the South African Monetary Policy Committee (MPC) prepares for its first meeting of 2025, with inflation remaining at the lower end of the South African Reserve Bank's (Sarb) target band.
Impact of drought on agricultural production
Despite the drought-induced production disruptions with the country’s summer crop harvest (maize, soybeans, sunflower, groundnut, sorghum, and dry beans) cut by 22% year-on-year to 15.40 million tonnes, 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% year-on-year after posting a high of 11% in 2023. Food inflation closed the year with a marginal uptick to 1.7% year-on-year in December 2024; except for November’s 1.6%, it was the lowest since December 2010.
Key food categories driving inflation changes
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% year-on-year in December despite elevated grain and oilseed prices with white maize surging by 51% year-on-year in December to a record high of R6,531/ tonne and sunflower up by 12% year-on-year at R10,371/ tonne.
Meat remained in deflationary territory for the second consecutive month at -0.4% year-on-year in December from -0.1% year-on-year in November, but the monthly pressure was 0.5% month-on-month 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% year-on-year underpinned by strong gains in meat and vegetable oils categories.
Looking ahead, the near-term upside for grain prices is likely to persist given the tight stock levels but will slow down in the second half of 2025 due to a bullish summer crop harvest outlook. Further rand appreciation poses a side risk to grain prices in the medium term.
