In South Africa, economists have frequently pointed to fuel prices as a key driver of rising food costs, particularly during periods when fuel was significantly more expensive. However, as fuel prices have recently declined, the expected reduction in food prices has not been as widespread, raising questions about price stickiness and the reliability of official inflation figures.
Fuel prices have a direct and indirect impact on food costs in South Africa, a country heavily reliant on road transport for goods due to its vast geography and underdeveloped rail infrastructure. Higher fuel prices increase transportation costs, which ripple through the supply chain, elevating the price of agricultural inputs, processing, and distribution. For example, in 2022, South Africa’s consumer price index (CPI) inflation hit a 13-year high of 7.4% in June, driven largely by fuel and food price increases. Food inflation reached 9.0%, the highest since February 2017, exacerbated by global commodity disruptions from the Russia-Ukraine conflict and domestic challenges like load shedding, which increased reliance on costly fuel-powered generators.
Historically, studies have shown that fuel price increases have a significant bearing on inflation. Granger causality tests from a 2018 study indicated that fuel price changes directly influence non-fuel commodity prices, including food, in South Africa. This is particularly pronounced in a fuel-importing nation like South Africa, where fuel prices rose by 21% in 2018 alone, contributing to cost-push inflation. In 2023, food inflation surged to a 14-year high of 11%, driven by global commodity prices, a weaker rand, and domestic issues like power outages and animal diseases, with fuel costs playing a central role.
Despite recent fuel price declines, such as a projected decrease in May 2025 due to a stronger rand and lower global oil prices, food prices have not decreased proportionally. This phenomenon, known as price stickiness, occurs when businesses—particularly small retailers and transport providers—do not lower prices in response to reduced input costs. Evidence suggests that transport service providers often maintain higher margins when fuel prices drop, as their prices are “downwardly sticky.” Small businesses, which lack the bargaining power of larger retailers, struggle to negotiate lower wholesale prices and are reluctant to pass on savings to consumers due to thin margins and high competition.
For instance, in July 2025, fuel prices rose by 2.6% month-on-month, pushing the annual fuel inflation rate from -11.2% in June to -5.5%. Meanwhile, food and non-alcoholic beverage (NAB) inflation climbed to 5.7%, driven by sharp increases in beef prices (28.8% year-on-year for stewing beef). Despite fuel prices being 10.2% lower in December 2024 compared to the previous year, food inflation remained elevated at 2.5%, suggesting that other factors, such as persistent high input costs and supply chain inefficiencies, prevent price reductions.
This stickiness disproportionately affects poorer households, who spend up to 80% of their income on food. With food comprising just under 21% of the CPI basket, its impact on low-income consumers is far greater than the official weighting suggests, amplifying the perception that inflation is higher than reported.
In South Africa, fuel prices significantly influence agricultural costs, affecting food production and prices. As a fuel-importing nation reliant on road transport for 80% of agricultural goods, rising fuel costs increase expenses for inputs like fertilizers, pesticides, and machinery operation, as well as transportation to markets. In 2022, fuel price hikes contributed to food inflation reaching 9.0%, with producer prices for agriculture surging 15.0%. For example, transporting citrus from Limpopo to Durban ports became 20% costlier during peak fuel price periods in 2023.Despite recent fuel price declines—down 10.2% year-on-year in December 2024—agricultural product prices remain sticky.
Farmers and transporters often maintain higher prices to offset thin margins, as seen in beef prices rising 28.8% in July 2025 despite lower fuel costs. This stickiness burdens consumers, particularly low-income households spending up to 80% of income on food.The 2024-25 winter crop season illustrates the impact: a mid-summer drought and high fuel costs earlier in the year led farmers in the Northern Cape and Free State to reduce wheat plantings, resulting in a 5% drop in national wheat production to 1.94 million tonnes. High fuel costs also strained irrigation-dependent farms, increasing reliance on costly diesel generators amid load shedding.To mitigate these challenges, South Africa must invest in rail infrastructure to reduce transport costs and support export-led growth, especially in key markets like Asia. Policymakers should also address price stickiness through competition oversight to ensure fuel price drops benefit consumers, sustaining agriculture’s role in economic growth and job creation.
VIEWPOINT- Trusts — The Ugly, the Bad and the Good
South Africa’s inflation figures, published monthly by Statistics South Africa (Stats SA), are calculated using a CPI basket based on over 70,000 price samples, covering a wide range of goods and services. In July 2025, headline CPI inflation rose to 3.5%, a 10-month high, driven by food (5.7%) and fuel price increases, though it remained within the South African Reserve Bank’s (SARB) 3-6% target range. Core inflation, excluding volatile food and fuel, was lower at 3.0%, indicating that these two categories significantly influence headline figures.
Stats SA’s methodology is robust, with frequent updates to the CPI basket and weights, as seen in January 2025. However, the national averaging of prices across urban and rural areas, a practice adopted during COVID-19, may mask regional disparities. Additionally, the slow adjustment of tax brackets for inflation, as discussed in the context of bracket creep, erodes purchasing power, making inflation feel more severe. In 2025/2026, SARS is expected to collect R19.5 billion due to unadjusted tax brackets, further squeezing disposable income.
Fuel prices undeniably influence food costs in South Africa through transportation and production expenses, as seen in high inflation periods like 2022 and 2023. However, the failure of food prices to decline with falling fuel prices, as projected for May 2025, highlights price stickiness, driven by transport providers’ margins and small businesses’ inability to pass on savings. While Stats SA’s inflation figures are methodologically sound, they may not fully capture the lived experience of low-income households due to the CPI basket’s weighting and national averaging. The additional pressure from bracket creep further amplifies the perception that inflation is higher than reported. To address these issues, policymakers could consider targeted relief for low-income consumers, improved transport infrastructure to reduce reliance on fuel, and more transparent communication about how inflation is measured to rebuild public trust.
GREEDINESS- is maybe the problem why the Figures does not look good and South Africa consumers pay too much to live.
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