Inflation in South Africa

A short history of inflation in South Africa

Sanctions and the Debt Standstill (1985 to 1986)

South African inflation peaked at 20.9% in the year to January 1986, and the cause was political isolation becoming financial. In August 1985, after a speech that disappointed expectations of reform, foreign banks refused to roll over their loans to South Africa; the government declared a standstill on debt repayments, and the rand lost roughly half its value against the dollar within months. For an economy importing oil and machinery, that passed directly into prices, and sanctions and disinvestment kept the pressure on for the rest of the decade.

Independence and Targeting (1996 onwards)

Inflation stayed in double figures until the early 1990s and came down with the political settlement. The Reserve Bank's independence was written into the 1996 constitution, and an inflation target of 3 to 6% was adopted in 2000. It is a wide band by international standards, chosen for an economy exposed to commodity prices and to swings in the rand.

Post-Covid Inflation (2021 to 2023)

In South Africa, prices rose fastest in July 2022, at 8.1%. The causes of the post-Covid inflation were global in nature, beginning with the lockdowns: factories and ports closed and the shipping between them fell out of sequence, so goods took longer to make and longer to arrive. Governments had spent heavily supporting household incomes through those closures, so when restrictions lifted there was money waiting to be spent and not enough on the shelves to spend it on. Then in February 2022 Russia invaded Ukraine, disrupting two of the world's largest suppliers of wheat, fertiliser, oil and gas at once, and the cost of everything grown, heated or transported rose with them.

Because the causes were shared, so was the timing: most countries peaked within a few months of one another in late 2022. The major inflation events covers this episode and the others in more detail.