The South African Reserve Bank has published five staff economic notes assessing the resilience of South Africa’s 3% inflation target and several structural constraints affecting inflation, growth and policy autonomy. Model results indicate a 78% chance that inflation will remain between 2% and 4% under normal conditions and a 62% weighted probability that it will stay within that range when exposed to combined shocks. Typical standalone shocks to major inflation drivers would move inflation by less than 1 percentage point from the target over one year. A separate survey found that 48% of firms correctly identified the new target, while another 38.4% placed it between 3% and 4.5%. Both groups lowered their inflation expectations during 2025, reducing concerns that inattention would slow convergence to 3%. The remaining notes identify domestic market concentration, de-dollarisation and refinery closures as constraints requiring stronger domestic policy and institutions. Weak competition, particularly in food and agro-processing, contributes to rapid price increases and slower declines after cost shocks, while also weakening monetary policy transmission. De-dollarisation is unlikely to increase South Africa’s policy autonomy without deeper markets and stronger macroeconomic fundamentals. Operational refining capacity has fallen to about 250,000 barrels a day, imported products now supply more than half of fuel demand, petroleum-related manufacturing output has declined about 20% since 2019 and an estimated 5,400 direct and indirect jobs have been jeopardised.
2026-09-08South African Reserve Bank
South African Reserve Bank publishes staff assessments of the 3% inflation target and structural economic risks
South African Reserve Bank staff research finds the 3% inflation target can withstand typical shocks, with a 62% weighted probability that inflation will remain between 2% and 4% under combined shocks. Nearly half of surveyed firms identified the new target correctly, and expectations declined across respondent groups. Other notes warn that market concentration, refinery closures and weak domestic fundamentals constrain monetary transmission, energy security and the potential benefits of de-dollarisation.