Rapidly rising costs are inescapable right now. From the increasing petrol price to more expensive groceries, everyone is feeling the pinch of inflation.

When prices keep going up, it’s worth considering ways to beat inflation in South Africa – including the best assets and investment types.

What’s happening with inflation in South Africa?

Inflation in South Africa hit a 13-year high in the middle of 2022. Inflation was recorded at 7.4% in June, up from 6.5% the previous month.

We’re not alone. Many countries around the world are seeing rapidly rising inflation.

The US and the Eurozone are both experiencing inflation of more than 8%, a level that South Africa is expected to hit by the end of the year. Some countries are seeing staggering levels, such as 137% in Venezuela and 80% in Turkey.

The main driver of rising inflation in South Africa is the rapid increase in the cost of energy (fuel and electricity). Economic modelling shows that for every R1 increase in the fuel price, inflation increases by roughly 0.3% to 0.5%.

Inflation is expected to stabilise during 2023 and decline again in 2024, depending on oil and electricity prices.

5 best ways to protect against inflation

Traditionally, certain types of assets provide much better insulation against economic volatility and inflation than others. These are the recommended assets or investments to protect against high inflation in South Africa.

1. Stocks

Investing in a diversified portfolio of stocks is a great hedge against inflation. Buying stocks allows you to invest in a wide range of companies and industries.

Stocks aren’t risk free, as any investor will tell you. If you pick the right portfolio you can still see decent returns even when inflation is high.

An exchange-traded fund (ETF) is an easier and less risky way to invest in a range of stocks without having to pick individual stocks.

2. Gold

Gold is one of the oldest and most common hedges against inflation because it sees overall positive gains over the years even during high inflation.

Gold can still be volatile. Don’t invest only in gold. Incorporate gold into a diversified investment portfolio.

You can invest in gold through coins like Krugerrands or bullion, but you’ll need to insure them. Alternatively, there are gold-focused mutual funds and ETFs.

3. Real estate income

Owning properties that you rent out, whether they’re residential or commercial, is generally a stable investment with a high potential for passive income.

When inflation goes up, so does rent. This means your income can increase during times of high inflation.

Investing in property when inflation is already high is less advisable but buying real estate is a stable investment to future-proof your portfolio against high inflation.

4. Commodities

Commodities can be anything from energy and oil to livestock and agriculture. When inflation goes up, so does the price of the products that depend on these commodities.

While commodities can be volatile, those that enjoy more stable supply and demand are considered a good investment.

You can consider investing directly in commodities or in companies that are involved in commodities industries. You can also invest in commodities via ETFs.

5. Real estate investment trusts (REITs)

REITs are a way to invest in real estate without having to buy a physical “bricks and mortar” property yourself.

Rental income tends to increase during times of high inflation, which usually spells better returns on real estate investments.

REITs are companies that own and operate income-producing real estate. This pool then pays out dividends to its investors. Local examples include Growthpoint, Investec and Redefine.

When you need a short-term injection of cash to beat inflation in South Africa

In the face of spiralling costs and record inflation in South Africa, Lamna offers a fast, easily accessible source of short-term funding when it’s needed.

Our asset-based loans use a physical asset such as a car or luxury watch as collateral on a short-term loan. These loans are fast, discreet and safe. They don’t affect your credit score.

Instead of selling your assets and breaking up your investment portfolio to beat inflation in South Africa, consider accessing their value through an asset-based loan with Lamna. We have offices in most major cities in South Africa.

For more information about using an asset to secure a short-term loan, contact us on 086 111 2866 or simply complete and submit our online application form.