- South African inflation rose to 4.5% in September on fuel costs.
- Fuel prices were 27.9% higher than a year earlier.
- Minerals Council warns of rising fuel and financing costs for miners.
- Central bank raised its repo rate to 7.25% on September 23.
SOUTH AFRICAN mining companies face rising fuel and financing costs after inflation climbed to 4.5% in September, above the central bank’s target range, the Minerals Council South Africa said.
Statistics South Africa data released on October 21 showed annual consumer inflation edged up to 4.5% in September from 4.4% in August, slightly below what analysts had expected.
Transport prices rose 10.8% from a year earlier, up from 8.8% in August, and added 1.5 percentage points to the headline rate. Fuel prices were 27.9% higher, compared with a 20.0% rise in August.
Core inflation, which excludes food, fuel and energy, eased to 4.0% from 4.1%.
The Minerals Council’s economics department said on Tuesday that it expects cost pressures, mainly from higher fuel prices, to keep inflation above the upper end of the central bank’s target range. The Reserve Bank targets inflation of 3%, with a tolerance of one percentage point either side.
Goods inflation rose to 4.1% from 3.3%, while services inflation eased to 4.9% from 5.1%, the council said. It said near-term cost pressure is concentrating on goods and operational inputs.
Strong export prices help miners absorb higher transport costs, but the cushion thins when commodity prices fall.
The Reserve Bank and National Treasury expect inflation to moderate over the medium term. But current policy and prime lending rates are keeping financing conditions restrictive, the council said.
Higher premiums and financing costs raise current spending and make investment less affordable, it said, particularly where infrastructure damage, theft, illegal mining or production interruptions push up insurance and security requirements.
The Reserve Bank raised its repo rate by 25 basis points to 7.25% on September 23, taking the prime lending rate to 10.75%. The decision was unanimous. Governor Lesetja Kganyago said the fuel-price shock, which had seemed to be unwinding, “has intensified.”
The central bank’s next policy meeting is on November 19, a day after Statistics South Africa publishes October inflation data.
