South Africa’s headline inflation accelerated to a 10-month high of 3.5% in July 2025, up from 3.0% in the previous month, diverging from the easing trend seen across other major African economies.
The uptick marked a second consecutive month of acceleration, driven largely by higher food, rent and utility costs.
“The main contributors to the 3,5% annual inflation rate were food and non-alcoholic beverages (5,7% and contributing 1,0 percentage point) and housing and utilities (4,3% and contributing 1,0 percentage point),” Statistics South Africa said in its latest Consumer Price Index report.
Regional inflation trends diverge
While South Africa saw prices pick up, Nigeria, Egypt and Ghana all posted declines. Nigeria’s rate eased to 21.8% in July from 22.2% the previous month, extending a four-month disinflation streak as core inflation cooled.
Egypt recorded a three-month low of 13.9%, while Ghana’s inflation slowed to 12.7%, its lowest in nearly four years, supported by stronger macroeconomic conditions.
In South Africa, month-on-month inflation rose by 0.9 percentage points, while core inflation — which strips volatile food and fuel — edged up to 3.0% from 2.9% in June.
Goods inflation climbed to 3.2% from 2.3% in the prior month, whereas services inflation eased slightly to 3.6% from 3.7%.
South Africa’s misery index rises in Q2
South Africa’s misery index — the combined rate of inflation and unemployment — rose to 36.1 in Q2 this year, up from 35.8 in the previous quarter, underscoring persistent economic pressures in Africa’s biggest economy.
According to the latest Quarterly Labour Force Survey (QLFS) from Statistics South Africa, the unemployment rate rose quarter on quarter by 0.3 percentage points to 33.2% in Q2, its highest level in a year and the second consecutive quarterly increase.
Between April and June, the number of unemployed people grew by 140,000 to 8.4 million, while employment rose only modestly by 19,000 to reach 16.8 million. The labour force expanded by 0.6% (159,000 people), against a working-age population of 41.8 million.
The expanded unemployment rate, which includes discouraged job seekers and others not actively seeking work, edged down 0.2 percentage points to 42.9%, or 12.6 million people.
On the jobs front, the formal sector added 34,000 positions, driven mainly by trade (+28,000) and private households (+8,800). These gains offset losses in services (42,000), agriculture (24,000), and finance (24,000). Informal sector employment fell by 19,000.
Inflation remains within target band but risks persist
Inflation has stayed comfortably within the South African Reserve Bank’s (SARB) 3-6% target band throughout the year, enabling policymakers to cut rates at three of the last four policy meetings.
In July, the central bank lowered its prime lending rate by 25 basis points to 7% and signalled support for narrowing the inflation target to 3% from the current 4.5% midpoint.
The proposal still requires approval from Enoch Godongwana, the country’s Finance Minister, who has indicated more consultation will be needed ahead of the medium-term budget in October.
Analysts warn, however, that a sustained rise in food and utility prices could complicate the SARB’s disinflation drive.
“Rising costs in essentials like food and utilities could make achieving a lower target difficult without significant policy interventions, which may require SARB to begin increasing rates at some point,” said Zain Vawda, South African-based market analyst at MarketPulse by OANDA.
Governor Lesetja Kganyago has long argued that the existing target range is too wide, saying it undermines the competitiveness of Africa’s most industrialised economy.
For now, price growth remains contained, but the divergence from regional peers underscores the delicate balance facing policymakers.
