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By Gustav Reinach*
Understanding inflation is an important factor when it comes to financial success. If you do not factor inflation in when deciding where to put your money – whether that’s savings accounts or investing – you could find your pot shrinking over time.
The inflation statistic is one economic metric many people are familiar with, but potentially misunderstand. Inflation is often used as a key benchmark to review investment returns. Beat inflation, and you are doing well. Not so fast, as there are layers to inflation.
Past 10 Years of inflation in SA:
The 10 year annualised inflation rate is calculated at 5.07%.
The prices of a variety of goods – food, fuel, utilities (electricity especially) and medical aid – go up by much more than the median rate and these pose a risk to investment returns. There are a lot of debates that inflations is a lot closer to 10% in South Africa if it is not more.
The long-term effects of inflation can cause crippling financial pain in the course of your lifetime, but particularly at the point of retirement if you fail to plan sufficiently.
On an inflation rate of 5.07%, today you will need R1,640 to buy the equivalent in essential goods and services you may have bought for R1,000 in 2011.
But as mentioned above let us do an example of inflation rate at 10%.
On an inflation rate of 10% that indirectly sounds more realistic for an average income household, today you will need R2,594 to buy the equivalent in essential goods and services you may have bought for R1 000 in 2011. More than double. The purchasing value of your investments, savings and pensions are therefore, essentially being eroded.
On the graph below showing four of the biggest balanced funds in South Africa the past 5 years:
A South African Balanced fund would normally try and achieve a return of inflation +4% (CPI+4%). This would mean on an inflation rate of 4.47% annualised (refer to the CPI index table illustrated earlier), balanced funds would have wanted to achieve a return of 8.47% per year.
This was hardly the fact in SA. If this example were done with the debated inflation rate of 10% the outcome looks even worse.
At Brenthurst we are very aware of this dilemma that South Africans are facing. We are actively looking for solutions and portfolios to combat this elephant in the room. This is one of the big reasons why we have been moving capital to offshore equity holdings for about 10 years apart from long term rand depreciation.
Rand depreciation over 10 years (7.26% annualised):
It is essential to invest intelligently and ultimately, not simply relying on cash deposits for ‘inflation-proofing’. Maintaining a standard of living is critical for all of us, and according to research, a significant percentage of people actually underestimate the future cost of being able to afford and provide the essentials, at different points in their lives.
Although it is difficult to identify the impact of inflation, for example, in your monthly outgoings, it is inevitable that the price of your lifestyle will increase. This increase in prices can be damaging if, for any type of reason, you stop working and have to resort to living off your life savings.
A long period of inflation means many household staples cost considerably more now than they did 10 years ago, meaning your money has to work a lot harder to buy the same things.
The cost of some foods, for example, has rocketed.
The latest research from the Pietermaritzburg Economic Justice and Dignity Group (PEJDG) shows that food prices rose by 17% over the course of 2020, spiking much higher than inflation for the year.
In December 2020, the total price of a basket of food to feed a family in a month was at R4,002.42, marginally lower than the same basket in November (R4,018.22).
However, when comparing a like-for-like basket of goods between December 2020 and December 2019, a family would be paying almost R520 more. That is roughly a 14.93% increase year-on-year.
Worryingly, the price hikes are being driven by a number of staple and ‘core’ foods in the basket. These are food items which are purchased first by most families in South Africa, which take priority over more ‘luxury’ items.
Here, items like sugar beans, rice, bread and flour have seen price hikes between 31% and 68%. Fresh fruit and vegetables – necessary for a nutritionally complete diet – have also seen major price increases.
Read more about investment planning.
- Gustav Reinach as a financial advisor at Brenthurst Wealth Pretoria.
Megan joined the Brenthurst Wealth team in March 2026 as an Administrative and Fiduciary Services Assistant at our Val de Vie Office in the Western Cape. Prior to joining Brenthurst, Megan gained three years of experience in the retail sector, where she developed management and client service skills.
I obtained my National Diploma in Financial Information Systems from the Cape Peninsula University of Technology in 1999 and have worked in the wealth management industry since January 2000. Over the years, I have gained extensive experience in various roles, including Portfolio Manager Assistant, Planner Assistant, and Paraplanner.
Esmarelda Isaacs-Andreas joined the Brenthurst Wealth Stellenbosch office in October 2025, taking on the dual role of Receptionist and Fiduciary Administrator.
I obtained my National Diploma in Financial Information Systems from the Cape Peninsula University of Technology in 1999 and have worked in the wealth management industry since January 2000. Over the years, I have gained extensive experience in various roles, including Portfolio Manager Assistant, Planner Assistant, and Paraplanner.
Ashley joined Brenthurst Wealth in January 2025 as Office Administrative Assistant and Receptionist for the Stellenbosch Office.
René Heystek joined Brenthurst Wealth in November 2023, as receptionist and administrative assistant in the newly established George/Garden Route office.
Michelle Heystek has built a career in the financial services over the last two decades, after obtaining her B.Com degree in Financial Management in 2005. Once she joined Brenthurst in 2006, she continued her academic journey, obtaining her Certificate in Wealth Management from INSETA in 2007, followed by a Postgraduate Diploma in Financial Planning from the University of the Free State. In 2008, she earned the Certified Financial Planner (CFP®) designation.
Anelle joined Brenthurst Wealth as a Receptionist and Administrative Assistant to Brian Butchart in the Cape Town office in December 2023. She has a wealth of knowledge from working as a liaison between Financial Advisers and clients at TMA and Absa Investment Management Services (Aims) since 1998. She obtained her B. com degree from the University of Port Elizabeth in 1997.
ADMITTED ATTORNEY | FINANCIAL PLANNER & HEAD OF BRENTHURST FOURWAYS
Sanet was appointed in April 2020, joining our Cape Town team as an Executive Administration Assistant to Renee Eagar. She has been in the financial services industry since 1990. Her previous experience includes positions at Sanlam, BJM and ABSA. She spent her last 12 years working at Alexander Forbes Private Client Wealth as a Senior Wealth Management Assistant. She has received numerous accolades over the years which include but not limited to, Alexander Forbes Client Service Excellence – Silver award in 2014,2015 and 2017. Sanet has also obtained her Certificate in Wealth Management (NQF 5) in 2012 and achieved “Best Student of the Year” from Moonstone.
Maria Smit is a Certified Financial Planner® with over 10 years of experience in the financial planning industry.
