Higher energy costs, weather risks and rising metal prices are giving South Africa’s economy a mixed outlook, according to Coface economist Simon Lacoume.
In an analysis of global commodity markets, Lacoume said prices had gone up across energy, farm products and industrial metals. He said this brings both risks and chances for South Africa.
“Global commodity markets have entered a period of renewed volatility,” Lacoume said.
He said commodity prices affect inflation, food costs, export earnings, business expenses and growth prospects. For South Africa, the changes have a direct effect on all of these, according to the analysis.
Finance Minister Enoch Godongwana announced fuel price relief at Wednesday’s Medium-Term Budget Policy Statement. However, IOL reported that South Africa still relies heavily on imported crude oil and refined fuels. This leaves the country open to rising world energy prices.
Lacoume said tensions in the Middle East and fears of supply problems had pushed oil prices higher. He said tight global energy markets were keeping fuel costs high.
When energy prices stay high, transport and delivery costs usually rise too. This adds to inflation. Higher fuel bills can also leave households with less money to spend, and raise costs for businesses.
Farm markets face the same uncertainty. Smaller global harvests and weather worries have driven up the prices of wheat, maize and sugar as supplies get tighter.
Forecasts point to a growing chance of El Niño weather problems in Southern Africa during the coming farming season, the analysis said.
“Reduced rainfall and higher temperatures could affect crop production, livestock farming and water availability,” the analysis warned.
If several farming regions produce less food at the same time, consumers could pay more for food. In South Africa, food takes up a large part of household budgets. Higher prices for staple foods could cut the money people have left to spend.
The analysis also pointed to good news for mining. Copper prices have reached record levels, and stronger metal prices could support South Africa’s mining sector.
Lacoume said demand from electrification, renewable energy projects and data centres was holding up prices for several industrial metals. South Africa is one of the world’s leading producers of several strategic minerals.
Mining remains a main source of export earnings, jobs and investment in South Africa. The analysis said the benefits would depend on which minerals are mined and on market conditions.
“While higher prices may create opportunities for exporters and commodity producers, they also introduce additional uncertainty into an already challenging operating environment,” Lacoume said.
He said businesses that closely watch commodity markets and climate risks would be in a better position to deal with the changes.
Lacoume previously worked as a sector analyst at the French Embassy in South Africa, where he covered the mining and industrial sectors.
Source: this article is based on reporting by IOL. Image: IOL. Written with the help of AI and published by the Tzaneen Voice News desk. See our Editorial Standards.
Kgomotso Maake covers news and politics for Tzaneen Voice. Kgomotso reports on government, Parliament, municipalities, courts, crime and service delivery across South Africa, with a close eye on how national decisions reach towns like Tzaneen and the wider Limpopo province. Stories are written in plain English and focus on the facts: who made the decision, what it means, and what happens next.