Major pain for coffee and tea lovers in South Africa

While South Africa’s headline inflation rate eased more than expected in October, coffee and tea lovers in the country are still reeling from much higher prices.

The latest CPI data from Stats SA recorded inflation at 2.8% in October 2024, down from 3.8% in September and well-below the South African Reserve Bank’s target range of 4.5%.

The main driver of the lower rate was falling fuel prices – where petrol and diesel prices declined by 5.3% between September and October, taking the annual rate for fuel to -19.1%.

The price for inland 95-octane petrol in October was R21.05, the cheapest since February 2022 when the price was R20.14.

Adding to the relief, after remaining steady for six months in the 4.5–4.7% range, annual inflation for food & non-alcoholic beverages (NAB) retreated to 3.6% in October.

This is the lowest rate since November 2019 (3.5%).

Inflation cooled for most food & NAB subcategories in October, except for sugar, sweets & desserts and cold beverages.

Notably, even though it registered a lower inflation rate in October, hot beverages continued to register the highest inflation print among all food & NAB categories at 14.1%.

The rate has eased from 17.6% in July, but remains significantly higher than headline inflation – and coffee and tea lovers would have seen a notable price increases for instant coffee, drinking chocolate and black tea in the month.

Breaking down the data, instant coffee drinkers would have seen prices increase 17.3% between January and October 2024 – year on year, this is up just under 20%.

For those who prefer ground coffee and coffee beans, the price hikes have been a bit lower, though off a higher base, shooting up 10-11%.

Tea drinkers haven’t been spared either, with prices up 18% year-on-year, and 15% year-to-date.

Drinking chocolate, which includes items like Milo or hot chocolate, are also suffering for many of the same reasons as coffee (up 20% Y0Y and 16% YTD).

The primary factor behind these price spikes is declining coffee harvests in major producing countries affected by climate-related challenges and global conflicts.

Brazil, the world’s largest coffee producer, responsible for nearly 40% of global output, saw reduced yields in its 2023 harvest due to unusually heavy rainfall in the Minas Gerais region, which fostered pest and disease outbreaks that significantly impacted crop yields.

Vietnam, the leading producer of robusta coffee, which is essential for instant coffee, has grappled with prolonged drought and high temperatures for two consecutive years, resulting in consistently lower harvests.

Additionally, Indonesia faced pollination issues caused by excessive rainfall, while Colombia saw yield reductions due to similar climate disruptions during its growing season.

Market analysts have noted that certain coffee types—like the Arabica bean—have hit 48 year highs in nominal terms, and some of the highest levels since 2011 in real terms.

Disruptions to global supply chains have left stocks extremely low, and prices aren’t expected to improve until the next harvest and planting season produces yields.

This means that South African coffee lovers should strap in for higher prices to stick around for some time.

Read: What to expect for interest rates in South Africa in 2025