The cause of the price increase is called inflation. Inflation, by definition, is a general increase in the prices of goods and services. In other words, money loses value over time. R100 today will buy you fewer goods and services than the R100 in 2017. Inflation causes money to be less valuable over time. According to Statistics South Africa, inflation averages 5.9 per cent in May 2022, which is relatively high. In the following section, we focus on a few causes of inflation,
Covid-19 supply chain bottleneck – lockdowns in many countries globally disrupted the supply chain of several goods and services.
KZN unrest and floods – KZN is one of the destination harbours for most goods from abroad and relies on the trucking system to dispatch them across the country. Due to the damage to the infrastructure and disturbance of the free flow of transportation, prices had to be hiked.
Climbing oil prices – energy prices were rising before the pandemic. However, the situation is exacerbated by the Russia-Ukraine dispute because Russia is one of the largest exporters of oil to global markets. The war and sanctions imposed on Russia reduced the oil supply, causing an oil shortage in the market.
The South African Reserve Bank is mandated to control inflation, and the commonly used instrument is to hike interest rates to manage it.
– Sibusiso is a professional in the financial services sector in Carletonville.
