Super El Niño could push inflation into double digits

South Africa’s inflation outlook faces significant upside risks from a developing super El Niño phenomenon, which could drive consumer price inflation (CPI) into double digits by 2027. Investec chief economist Annabel Bishop highlighted the threat, noting that while easing oil prices may temporarily ease fuel costs, the El Niño’s impact on agriculture and trade deficits poses a far greater challenge. The El Niño, characterized by unusually warm Pacific Ocean temperatures, disrupts global weather patterns, often bringing drought and reduced agricultural output to southern Africa. This could destabilize food prices and widen trade deficits, compounding existing economic vulnerabilities. The South African Reserve Bank has already flagged the phenomenon as a potential inflationary risk. Agricultural economist Wandile Sihlobo warned the 2026–27 summer crop season—planted from October 2026—could suffer drought effects, with grain prices potentially rising by late 2026. Higher fertilizer costs and persistent fuel expenses, which account for 90% of food transport in South Africa, will further strain food prices. Despite these risks, South Africa remains well-supplied for now, with a record 21 million-tonne summer grain and oilseed harvest expected in the 2025–26 season. The conflict in the Middle East may also ease fuel price pressures, offering some relief to inflationary trends. MCB Group noted the El Niño adds to existing risks, including the Middle East war, rather than acting as an isolated shock. The phenomenon’s potential to disrupt rainfall, raise temperatures, and reduce ocean productivity could exacerbate food inflation and trade imbalances in the coming years.