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This has resulted mainly from a decrease in fuel prices a few months ago, which also contributed towards lower food inflation. Unlike several other countries in the world, South Africa’s inflation has not been caused by excessive demand but by supply-side shortages and higher commodity prices. A harsh business environment has circumscribed the ability of businesses to pass on cost increases. The diminution in inflation, in turn, has encouraged the belief that interest rates might no longer have to increase. As with building activity, this may have helped encourage private business investment activity that might otherwise not have been forthcoming.
Inflation rates worldwide have been declining since mid-2022, including in South Africa. This reduces pressure on businesses to raise prices, and the concentration of economic power in a small number of large businesses in South Africa leads to a higher proportion of companies increasing prices.
The higher number of businesses expecting an increase in their profitability is partly a function of the high concentration of power in the hands of big business, as alluded to earlier.