SA Reserve Bank cuts repo rate by 25 basis points to 7%
This brings the country's repo rate down to 7%, and the prime lending rate to 10.5%. It's the first time the repo rate is at 7%, since the Covid-19 pandemic.
The unexpected decision was taken during the monetary policy committee's (MPC) fourth meeting this week to deliberate on the policy rates.
SARB governor, Lesetja Kganyago made the announcement on Thursday in Johannesburg.
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SA Reserve Bank rate cut offers relief to consumers
South African Reserve Bank governor Lesetja Kganyago. Image: Thobile Mathonsi / Independent Newspapers South African consumers were given some reprieve this past week as the South African Reserve Bank lowered interest rates in the country. Sarb Governor Governor Lesetja Kganyago announced that the central bank's Monetary Policy Committee (MPC) voted to cut the repurchase rate (repo rate) by 25 basis points (BPS). This means the repo rate will decrease from 7.25% to 7%, effectively taking the prime lending rate to the country to 10.50% from 10.75%. Kganyago said that the decision was unanimous by the MPC members. "For policy, as we showed last time, lower inflation allows for lower interest rates. In our Quarterly Projection Model, for a 4.5% objective, rates bottom out around 7%. By contrast, the forecast for a 3% objective has roughly five more cuts, over the medium term, taking interest rates slightly below 6%. The logic of the model is that interest rates need to fall as inflation eases, to prevent the inflation-adjusted rate, or real interest rate, from rising too much. Real rates are nonetheless temporarily higher for a 3% objective, and there is a modest growth sacrifice, which helps anchor expectations at lower levels," the Sarb Governor said on Thursday. Frank Blackmore, Lead economist at KPMG said that that the repo rate was reduced because the stronger rand helped moderate inflationary pressures. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ "Although there is some increase in food price inflation, headline inflation is seen by the bank to come in at around 3.3% for 2025. One of the most interesting statements made by the governor of the Reserve Bank at this MPC announcement was that the Reserve Bank will start to aim at the bottom of the inflation target range which is at 3% as their inflation target going forward," Blackmore told Business Report. "There are several benefits to lowering that inflation target from the current 4.5% to the 3% level. Firstly, the core inflation remains close to 3% instead of reverting back up towards 4.5%. However, expectations will take a while to come down to this 3% level as well. Secondly, there will be further rate cuts on the 3% target scenario. The governor mentioned up to five more possible cuts, this would lead us to level of around 5.75% on repo or 9.25% prime," Blackmore added. "This would lower the borrowing costs and support the strength of the Rand. Reducing inflation to this level is an exciting prospect going forward," Blackmore said. Meanwhile, Neil Roets CEO of Debt Rescue said that the latest repo rate cut offers little real relief for millions of South Africans battling financial strain. Roets said, "Consumers are facing a looming crisis, as both global and local economic pressures combine to hit household budgets even harder. 'What's coming could make the challenges of recent months look mild by comparison. A major concern is the 30% tariff hike on South African exports, which took effect on Friday, 1 August." 'This is not just a trade issue, it's a direct threat to consumer financial stability,' Roets added. 'Sectors like agriculture, wine, metals, vehicles, and manufacturing are all at risk. The knock-on effect will be felt in rising costs for food, fuel, and other essentials, along with job losses and business closures,' he said. 'Consumers are expected to survive under impossible conditions. Their budgets are stretched to the last rand. Hope has been their only lifeline — and even that is beginning to fade,' Roets said. He warned that the current wave of economic setbacks could be the final blow for millions. 'We're not just talking about financial strain anymore — we are staring down the possibility of widespread social unrest. The warning signs are clear, and urgent action is needed.' 'My advice to those who have fallen into a debt trap is to seek help from a registered debt counsellor who can assist them to manage their financial predicament. This has been a very successful solution for thousands of consumers who are plagued by over-indebtedness,' Roets said. BUSINESS REPORT
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Aquarius Energy acquires 37% stake in Saldanha Bay crude oil terminal
The logo of Glencore is seen in front of the international commodity trading and mining company's headquarters in the Swiss town of Glencore-Tristar joint venture Aquarius Energy has acquired a 37% stake in the 10 million barrel capacity Saldanha Bay crude oil storage and blending site, Image: Suplied The Glencore-Tristar joint venture Aquarius Energy completed a purchase of a 37% stake in the 10 million barrel Saldanha Bay crude oil storage and blending site, Quantum Commodity Intelligence reported online on Friday. Aquarius bought the stake from Oiltanking, a company which, an online search showed is owned by the privately held energy and chemicals company Marquard & Bahls AG, which operates petroleum product terminals in 23 countries, and the terminal has been renamed to Aquarius MOGS Saldanha (AQMS). Saldanha Bay is strategically located between the Atlantic Basin and the Indian Ocean, which is a major shipping route for crude oil cargoes, particularly during the Covid-19 pandemic when a global oversupply of oil appeared almost overnight. Quantum Commodity Intelligence reported that the utility could again benefit from a slowing global economy and gradually increasing crude supply coming to the market, which may lead to an oversupply of barrels. In 2025, 20 tankers have called at Saldanha to unload a combined 20.4 million barrels of crude from locations as varied as the US, Nigeria, Angola, and Brazil, according to Kpler data. Aquarius also owns oil storage and blending sites in Mozambique, Zimbabwe, and Ghana in Africa, as well as Argentina, Mexico, Belgium, and the UAE. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Ad loading Crude oil futures slid at the end of the week due to expectations of a significant increase in Opec+ output, exacerbating a sell-off after prices touched six-week highs during Thursday's trading session. Brent futures settled at $69.67 per barrel on Friday versus $71.70 per barrel on Thursday. Last week, Reuters reported that the Opec alliance could add as much as 548 000 barrels per day of extra production when it met over the weekend. Visit:
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a day ago
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Words on wealth: why are interest rates still high when inflation is so low?
Explore the complex dynamics between interest rates and inflation in South Africa, as we analyse the South African Reserve Bank's strategies and their impact on the economy. Image: Bloomberg Inflation is something we can't avoid – it's a bit like death and taxes. Traditionally, South Africa has had high inflation in comparison with developed countries, and that's a fundamental reason why the rand has steadily declined against the currencies of those countries. The Covid-19 pandemic upended that trend, and who knows what the effects of US tariffs will be. Whether we return to what now seems was a much safer, more stable world before Covid remains to be seen. As of June, our year-on-year Consumer Price Index inflation rate was 3.0%. Over the years, the SA Reserve Bank (SARB), through controlling interest rates, has done an admirable job of keeping inflation within its target range of 3-6%, for the most part. In comparison with other African countries, our inflation is low. Zimbabwe is an obvious example of a collapsing economy with runaway inflation, but even in countries with stable, growing economies, inflation is a problem. Nigeria has inflation of over 22%, according to Trading Economics; Egypt's rate is about 15%; and Rwanda's is over 8%. Kenya and Namibia are in a similar band to us – their current rates are 3.8% and 3.7% respectively. Looking further abroad, Brazil's rate is 5.4% and Turkey's is a terrifying 35.1%. Recently, the SARB has said it wants to bring the inflation target down so that 3% becomes the middle of the target band. Ironically, to do this, it would need to keep interest rates high, and I would suggest that they are too high as it is. Inflation rate vs interest rate In the following exercise, I compare the CPI inflation rate with the prevailing interest rate (the bank repurchase, or repo rate, as determined by the SA Reserve Bank). A fair comparison of the two rates involves percentages of percentages, which sounds complicated, but bear with me. Before Covid, inflation was averaging 4.5%, smack in the middle of the SARB's target range of 3-6%, and the repo rate was averaging 6.75%. Therefore, the repo rate was 50% higher than the inflation rate. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Ad Loading When Covid hit, the economy froze and inflation plummeted, reaching a low of 2.1% in May 2020. By then, the SARB had already started slashing the repo rate – it plunged from 6.25% in February 2020 to 3.5% at the end of July, remaining at that record low for over a year. For most of that time, between July 2020 and March 2021, inflation hovered around 3.1%. The difference between the two rates was minor: the repo rate was just 13% higher than the inflation rate. By the end of the pandemic, inflation had soared, reaching a high of 7.8% in July 2022. Over the following two years, it steadily declined to 2.8% in October 2024, and it has averaged about 2.9% since then. When inflation was at 7.8% in July 2022, the repo rate was 5.5% – in other words, the repo rate was about 30% lower than the inflation rate, in a rare reversal. But by then, the SARB was rapidly hiking the repo rate to catch up with the high inflation, so that by July 2023, the repo rate reached a high of 8.25%. It remained there for a year, until July 2024, by which time inflation had dropped to 4.6%. The rates had righted themselves: the repo rate was now 80% higher than the inflation rate. Fast forward to June this year. The repo rate at 7.25% is 142% higher than the inflation rate at 3.0%. That's an enormous difference, considering it was only 50% higher before Covid. Even with a drop to 7%, it will still be 133% higher than the CPI inflation. This means that even in a bank savings account with a relatively modest 6% interest rate, you're getting a substantial after-inflation return of 3%. But while the high repo rate is great for savers, it's terrible for borrowers – think of mortgage bond holders whose interest rates are high, but where inflation is not substantially increasing the value of their properties. Juggling act Things are not as simple as I have perhaps conveyed. The SARB's rate decisions are forward-looking, and with the current uncertainty around tariffs, it has been justifiably cautious – inflation could rear its head again at any moment. On the other hand, keeping rates high unnecessarily is bad for economic growth. It's a delicate juggling act, as beleaguered US Federal Reserve Chairman Jerome Powell knows all too well. Commenting on the SARB's low-inflation stance, FNB economists Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole, and Koketso Mano say they think the shift will happen soon, with the SARB trying to take advantage of the currently benign inflation environment. But they say such a process takes time, and factors such as weather patterns, cyclical food inflation, and the need for traction on structural reforms may derail it. 'We still anticipate inflationary pressures that will make it difficult to sustain the current rate of inflation and believe that the SARB will have to work towards a 3% target as a medium-term objective,' the FNB economists say. Foord chief investment officer Nick Balkin says SARB's thesis is that a lower inflation rate will shrink Treasury's debt‑service bill and release scarce funds for social priorities. But although the SARB has generally delivered on its mandate to keep prices stable within its target range, he says real economic growth has barely averaged one per cent a year since 2014. 'Stabilising prices has not unlocked capital expenditure or boosted economic growth. If anything, it was the weaker growth that helped keep inflation in check,' Balkin says. 'Without meaningful, structural state interventions to address the root causes of constrained economic growth, the debt burden may even worsen.' * Hesse is the former editor of Personal Finance. PERSONAL FINANCE
