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South Africa’s inflation outlook is expected to shift higher in the near term as fuel costs, and largely stalled reforms, feed into low economic growth and higher consumer prices.

According to a client note from advisory firm Frans Cronje Private Clients, inflation is projected to rise to 4.0% in March from 3.0% in February (when the data are released later this week). The increase is largely attributed to higher fuel prices, following elevated international crude oil prices during the month.

This pressure is compounded by structural weaknesses in South Africa’s energy policy framework. The country has maintained highly counter-productive oil and gas policies and has failed to secure meaningful investment into the considerable reserves off its coastline. Environmental restrictions have further deterred exploration and development activity. At the same time, legislation around fuel standards has rendered much of the country’s refining capacity unviable, increasing reliance on imported refined fuel. Efforts to expand coal-to-fuel technology have also stalled, removing what could have been a significant competitive advantage.

The anticipated rise in inflation comes after the South African Reserve Bank kept interest rates unchanged at 6.75% at its 26 March meeting. The decision reflects expectations that inflationary pressures would increase in the short term but remain within the central bank’s target range.

The note indicates that the Reserve Bank is likely to maintain a cautious policy stance in the months ahead. Interest rates are expected to remain unchanged until inflation trends back towards 3%.

The inflation outlook is set against a weaker growth trajectory. Last week, the International Monetary Fund downgraded South Africa’s 2026 growth forecast to 1.0% from 1.4%. The country remains one of very few that has failed to conclude a trade and investment agreement with the United States, while domestic reforms continue at a slow pace.

Ongoing uncertainty around property rights, together with the effect of taxing capital on arrival, continues to constrain investment. Fixed investment remains at around 15% of GDP, a level consistent with an economy growing at approximately 1%.