Headline Numbers Tell Only Part of The Story

Inflation is one of the most important forces shaping financial planning, investing, and day-to-day life. Every month, Statistics South Africa (Stats SA) publishes the Consumer Price Index (CPI), the official measure of inflation. At first glance, it seems simple: in June 2025, headline inflation came in at 3% year-on-year, up slightly from 2.8% in May. The numbers suggest that inflation is under control, well within the South African Reserve Bank’s target range of 3 to 6% (subsequently been lowered to 3%). Yet when you look closer, the reality is much more complex. The average inflation rate published in the monthly CPI is not necessarily the inflation your household experiences, and this difference can have significant implications for financial planning.

To understand why the headline number can be misleading, we need to look inside the CPI itself. In January 2025, Stats SA implemented a major update to the CPI basket, which is the collection of goods and services used to track prices over time. The revision was based on the 2022/23 Income and Expenditure Survey of around 32,000 households, ensuring the index reflects how South Africans are spending their money.

Seventy-one items were added, fifty-three were removed, and twenty-nine were reclassified, bringing the basket to 391 products, down slightly from 396 before. The additions highlight the changing nature of consumer habits: rosé wine, air fryers, and streaming services all entered the basket, while some older or less relevant items dropped out. This matters, because the CPI is not static, it changes with the way South Africans live, shop, and spend.

The Problem with Averages

While the CPI basket reflects national averages, few households live exactly like the “average” South African. The headline figure, for example, weights food and non-alcoholic beverages at 18.2%, housing and utilities at just over 24%, and transport at around 14%. Insurance and financial services, a new major category, now makes up more than 10% of the basket. These weightings are essential to produce a single national figure, but they can disguise the diverse realities faced by different income groups.

Stats SA publishes CPI figures by expenditure decile, essentially breaking households into ten groups according to income. The difference is stark. In June 2025, the lowest-spending decile (Decile 1) faced an inflation rate of 4.7%, while the highest-spending decile (Decile 10) experienced just 2.9%.

The reason is simple: lower-income households spend much larger proportions of their budgets on essentials like food and electricity, categories that often rise faster than discretionary goods. Higher-income households, by contrast, spend more on transport, services, and financial products, where inflation has been more subdued. The result is that the average CPI, which is heavily weighted by higher-income spending patterns, underestimates the pressure felt by low-income households

The same pattern is visible geographically. Inflation differs across provinces, with areas like KwaZulu-Natal and the Western Cape sometimes running above the national average. Rural households often experience different cost pressures compared to urban ones. Even among pensioners, Stats SA tracks a separate “pensioner CPI,” which in June 2025 came in at 3.6%, higher than the headline rate. All these variations point to the same conclusion: the inflation your clients face depends heavily on who they are, where they live, and how they spend their money.

The Braaibroodjie Index: Inflation You Can Taste

To bring these abstract statistics to life, economists have turned to more relatable measures of inflation. One of the most popular local examples is Johann Biermann’s “Braaibroodjie Index,” which tracks the price of ingredients for the traditional South African grilled sandwich. In April 2025, the index recorded a sharp 2.7% increase in just one month, pushing the average cost of a braaibroodjie to R21.89.

Over the past five years, the index has climbed at nearly 9.8% per year, compared to just under 5% for official CPI. In other words, for households where food makes up a large share of spending, inflation is running almost twice as fast as the headline figure suggests. The Braaibroodjie Index may be light-hearted, but it vividly demonstrates why not all South Africans experience inflation equally.

Why This Matters for Financial Planning

This matters deeply for financial planning and asset management. If a client is told that inflation is 3%, they may expect that their monthly grocery bill or electricity costs will rise at a similar pace. Food prices were up 5.1% year-on-year in June 2025, while municipal electricity tariffs jumped more than 10% in July. For pensioners and lower-income families, these categories represent a substantial portion of their total expenses. Their personal inflation could easily be closer to 6 or 7%, even as the Reserve Bank congratulates itself on hitting the lower point of the target band. Unless this is recognised and planned for, clients may find themselves falling behind in real terms despite seemingly conservative assumptions.

As a financial planner, acknowledging these differences builds trust and strengthens client relationships. Helping clients construct a “personal CPI” is a powerful tool. This involves taking their actual household expenditure, mapping it across the CPI categories, and applying the latest inflation rates to see how their basket is really inflating. For example, a retiree whose spending is 35% food, 20% utilities, and 10% medical costs will face a different inflation profile than a younger professional spending more on transport, restaurants, and digital services. Once the personal CPI is understood, financial planning can be adjusted accordingly.

This has several practical applications. For budgeting, clients can escalate grocery and utility allocations by 5 to 10% annually rather than the headline three percent. Retirement withdrawal strategies can be designed to secure essential expenses such as food, housing, and electricity with inflation-linked annuities or bonds, while allowing discretionary spending to flex with markets. Long-term contracts, such as salary agreements or service retainers, can be tied to the most relevant CPI categories rather than the all-items headline. Even investment strategies can be tailored: clients highly exposed to electricity costs might benefit from allocating capital into renewable energy solutions or efficiency upgrades, effectively hedging their personal inflation risk.

Conclusion

The key message is that inflation is not one number. It is many different numbers, depending on who you are. The CPI basket has been carefully constructed to reflect the national average, but no individual lives like the average South African. For some, inflation feels like three percent; for others, it feels like ten. By recognising this, clients are better equipped to plan, and asset managers can deliver more precise, more personalised strategies.

Inflation planning, then, becomes less about memorising the monthly Stats SA release and more about understanding each client’s unique exposure. Just as the Braaibroodjie Index shows how something as simple as bread, cheese, and tomato can outpace official measures, so too does a client’s own basket of spending dictate their lived inflation experience. For advisors and portfolio managers, the opportunity is to bridge this gap: to move beyond the headline and plan for the reality.