Winter is here: Inflation, debt cools the economy

There is a snap in the air, as South Africa faces strong economic headwinds. Russia’s war in Ukraine has sent prices to extreme highs, causing the South African Reserve Bank to raise the cost of debt — and consumers are feeling the chill.

Data showing the depth of the country’s jobs crisis is set to drop next week. With the real unemployment rate having already pushed past 46%, there is little indication that South Africa will have stemmed the tide of job losses.

To avoid higher inflation, the Reserve Bank announced last week that it would raise the repo rate by its highest margin since 2016. The bank’s hawkish stance signalled that more 50 basis point hikes could be on the horizon. And although its governor, Lesetja Kganyago, defended the hike, noting that inflation preys on the pockets of the poor, he immediately faced backlash.