The Hidden Inflation Burden: Why the Poorest South Africans Pay More

You might have seen the headline this month: South Africa’s annual inflation rate for June 2025 was 3.0%. But that number, while accurate, tells an incomplete story.

It’s a powerful reminder that when it comes to your own money, relying on national averages can be dangerously misleading. Your personal financial reality—from your actual cost of living to your tax burden and retirement needs—is unique.

This month’s inflation data provides a perfect example of why knowing your own numbers is the key to taking true control of your financial future.

Beyond the Average: Understanding Expenditure Deciles

To get a clearer picture beyond the single headline number, Statistics South Africa (Stats SA) provides a more detailed view by grouping households into ten ‘expenditure deciles’. Think of these as ten different brackets, ranked from the lowest-spending households (Decile 1) to the highest-spending (Decile 10).

This matters because the “basket” of goods and services used to measure inflation isn’t the same for everyone. The spending patterns of a low-income household are very different from those of a high-income one. To give you an idea, here’s what some of those annual expenditure ranges look like:

The Data: A Tale of Two Budgets

The difference in the inflation experience across these groups is striking. In June, the data showed:

• The lowest-spending households (Decile 1) faced an annual inflation rate of 4.7%.
• Meanwhile, the highest-spending households (Decile 10) saw a rate of just 2.9%.

Why the Gap? Your Personal Basket of Goods

The trend is clear: the more a household’s budget is dominated by essential goods, the higher its effective inflation rate. This comes down to what each group spends their money on.

The main drivers pushing up the national average in June were essentials:

• Food and non-alcoholic beverages: Increased by 5.1% annually.
• Housing and utilities: Rose by 4.4% annually, driven by an 11.3% increase for electricity, gas and other fuels.

When the prices of non-negotiable items like food and electricity rise sharply, it hits households that spend a larger percentage of their income on these basics much harder.

From Averages to Action: Know Your Real Numbers

Understanding this gap isn’t just an economic fact; it’s a crucial lesson for managing your finances. Averages are for headlines; personal numbers are for making decisions. Here’s how to apply this insight today:

1. Know Your Personal Inflation Rate. Acknowledge that the headline 3.0% may not be your reality. If your budget is heavily weighted towards essentials, your personal inflation rate is the true benchmark you should use to measure your financial progress, evaluate salary increases, and set savings goals.

2. Know Your Personal Tax Rate. Just as inflation isn’t a single number, neither is tax. Your salary increase doesn’t just face your personal inflation rate; it also faces your marginal tax bracket. Relying on an “average” tax rate can give you a nasty surprise. You need to know exactly how much of your next rand earned goes to SARS.

3. Know Your Personal Retirement Goal. Relying on average retirement savings goals is just as risky. Your personal inflation rate, your specific income, and your unique lifestyle goals mean you need a personalised retirement number, not a generic one found in an article.

Conclusion: Your Numbers are the Only Ones That Matter

Headline figures tell us what’s happening on average, but they don’t tell us what’s happening to you. Whether it’s your cost of living, your tax bill, or your retirement plan, the most powerful number is always your own. Take the time to calculate it.