South Africa’s inflation rate hit a 44-year low in November with consumers paying less than one US cent more than last year on an average basket of goods and services.
The official Statistics South Africa said annual growth in consumer price inflation slowed to 0,4% in November from 1,5% in October this year.
”Consumers are only spending on average half a cent more than they were this time last year — this is the lowest rate of inflation since December 1959,” said Elna Moolman, an economist with Standard Bank.
According to Statistics SA, rises in house prices decreased to 4,3% in November from to 9,1% this October, while clothing and footwear decreased to 0,8% from 1,9% and transport fell to 0,8% from 1,6%.
Prices in South Africa skyrocketed after the rand’s collapse when it plummeted by 37% in 2001 to an all-time low of 13,85 to the dollar in December of that year.
The poor were the hardest hit as basic products like maize and paraffin became much more expensive.
In the past two years however, the rand has been the world’s best performing currency against the greenback, firming by 35% in 2003 to its current level of around R6,50, over and above the 43% it gained in 2002.
Consumers have also benefitted from a series of interest rate cuts in 2003.
South Africa’s central bank dropped its interest rate to eight percent from 13,5% at the start of the year — the lowest level in 17 years — to boost business activity.
Luwani Luso (34) a Malawian immigrant, who works as a gardener in an upmarket suburb in Johannesburg, agreed that prices were roughly the same this year.
”I earn very little — about R1 500 a month, so life is always very expensive for me. Last year I was spending R250 a month on buying a 12kg bag of maize, meat and vegetables,” he said.
”This year I buy the same things for about R280, but my employers are paying me more, so I can send more clothes and groceries to my daughter and wife in Malawi than I did last year.”
Angela Matthewson (33) works as a public relations officer in in Port Elizabeth and spends a large portion of her money on luxury items likes cheese, chocolates, toys for her child and cologne for her husband.
”Toys, gammons (hams) and turkeys are the same price as last year, so if you take increases into account, then they are probably cheaper, but my own economy hasn’t improved at all — my boss refused to give me a bonus this year and earlier this year he held back on an increase too,” she said.
South Africa’s Standard Bank predicts that inflation will average 5,9% in 2003 and drop to an average of 0,9% in 2004.
But despite its positive effect on inflation, the strong rand is worrying local producers, who have not only seen export incomes nosedive but also face stiffer competition from importers offering products at cheaper prices.
Economists say the economy urgently needs to speed up its growth rate — 0,8% for the first nine months of 2003 — to create jobs for South Africa’s nearly eight million unemployed adults.
The country’s mining industry, which makes up 40% — R480-billion ($71-billion) — of the Johannesburg stock exchange, has warned that the rand’s continued strength could put an estimated 120 000 jobs at risk.
Labour-intensive industries such as the export-based manufacturing sector, which contributes 18,2% to GDP and contracted by an average of 3,6% in the first three quarters of 2003, have sounded similar warnings.
Colen Garrow, an economist with Brait Bank said the proof that local manufacturers were disadvantaged by cheaper imports, could be seen by the 9,6% fall in import producer prices in November.
”The local producer price index rose 0,2% for the year in November, so the loss of comparative export advantage comes as little surprise as South Africas rand-ravaged export sector battles the adverse impact of a multi-yeared appreciation in the currency,” Garrow said. – Sapa-AFP