. This, together with load shedding and sharp declines in South Africa’s commodity price index and a lack of economic growth, could see Finance Minister Enoch Godongwana cut back on spending when he announces the “mini” budget in October.
He said the weak current account balance has seen the rand depreciate much more than emerging marketing currencies, only faring better than Argentina, Turkey and Russia, which have seen instability that led their currencies to slide dramatically. “The UN Food and Agriculture Organization index shows that food prices have declined in dollar terms and have entered negative territory, but in rand terms, the index had remained sticky. It's only recently when we’re seeing food prices decline and for the first time, we’re seeing food inflation declining just below 10%,” he added.
A hint that the MPC is unlikely to be moved by the recent drop in headline inflation to 4.7% in June and will rather adopt a wait-and-see approach in its last two meetings of the year. Inflation has by far been highest for South Africa’s vulnerable, according to the data from Statistics SA. If you break the income earnings into deciles, then you see that the poorest deciles are experiencing the highest inflation. Their inflation rate [of 9.3%] is way above the target. While higher-income earners are experiencing an inflation rate of 4.3%, pensioners are experiencing an inflation rate of 5.3%.