Deputy governor of the South African Reserve Bank (SARB) Daniel Mminele said on Tuesday that the country's high inflation rate was driven by a rigid wage and price setting process, lack of competition and expectations from private economic agents.
In recent years, South Africa's consumer price inflation has regularly exceeded the median levels for both the world and large emerging markets. However, there was a time not so long ago when it was much higher.
Speaking at the S&P Dow Jones Indices South African Seminar in Pretoria, Mminele said since inflation targeting by SARB began, annual consumer price inflation has averaged 5.7%, compared to 10% in the 1990s and as high as 15% in the 1980s
"The rand's long-term depreciating trend, caused by positive inflation differentials with trading partners as well as a structural current account imbalance, has fuelled such expectations: it has directly impacted on the prices of consumer goods, as a large fraction of them is either imported or subject to import parity pricing," Mminele said.
After remaining stuck above five percent for four whole years to February 2017, it has now been in the 4% to 4.5% range for more than a year.
Mminele said the contributing factors in the inflation slowdown were the decline in food inflation that began in early 2017 as crops recovered from a drought-induced plunge a year earlier, the impact of the one percentage point value-added tax (VAT) which proved lower than expected, and slowing housing costs.