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IOL News
9 hours ago
- Business
- IOL News
SA Reserve Bank cuts interest rates: What it means for consumers
South African Reserve Bank Governor Lesetja Kganyago. Image: Thobile Mathonsi / Independent media. South African consumers cheered as the South African Reserve Bank (Sarb) cut the interest rate this past week, however, a wider view shows that the relief could be undone by other costs increasing. Sarb Governor Governor Lesetja Kganyago decreased the repurchase rate for the country by 25 basis points (BPS), dropping the repo rate from 7.50% to 7.25%, effectively taking the prime lending rate to the country to 10.75%, from 11%. Hayley Parry, Money Coach and Facilitator at 1Life's Truth About Money told Business Report that the cut could not have come at a better time. Parry said, "What that means is that, for anyone paying back any debt, it means that you are going to be able to save on your debt repayment. For example, for every million Rand you have in a home loan for instance you are now going to be paying R515 less per month at this new interest rate, thanks to the reduction in the interest rate." "It could not come at a better time because there has been a lot of pressure on South African consumers, with increasing electricity prices kicking in. This is great news for anyone who has been feeling the pinch and been struggling to make ends meet. Hopefully, this is going to provide a little bit of breathing room. If you happen to have any money leftover thanks to this reduction in the interest rate, my advice as always is to make sure you put aside extra cash into your emergency fund because you never know when that may come in handy," Parry added. Tando Ngibe, a senior manager at Budget Insurance said, 'This move offers some relief to consumers, particularly those managing debt, as it slightly reduces the cost of borrowing on home loans, personal loans, and credit facilities. This modest cut should be seen as a chance to reinforce, not relax, responsible financial habits. We urge consumers to use any savings from lower repayments to prioritise essential expenses, reduce high-interest debt, and build emergency funds. While the rate cut may support economic activity, it's important to remain cautious. Inflation risks still persist, and returns on savings may decline. Consumers should continue to budget carefully in order to remain financially resilient in these uncertain times.' 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. 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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. Next Stay Close ✕ Consumers still drowning in debt Meanwhile, Neil Roets, CEO of Debt Rescue gave a more scathing view on the Sarb's rate cuts. Roets said that the announcement of the 25BPS cut, may be good news for economists but will not shield South Africans from the burden of the fuel and sin tax levies introduced by Finance Minister Enoch Godongwana within his Budget 3.0 projection. Roets said, "Increased taxing of the workforce is not the answer, the fuel-tax levy and raising sin taxes even higher, will put further financial strain on households, driving them to new depths of despair. This, at a time when they are buckling under the weight of multiple unsustainable inflation-related living costs. The reality is that the Finance minister's decision to impose new tax measures will hurt lower-income families most, as they will bear a proportionally higher burden, thus forcing them to make impossible lifestyle choices with the little disposable income they have left." "The reality is that the slow pace of the country's repo rate reductions is perpetuating the debt trap that millions of ordinary South Africans find themselves in, leaving millions with no option but to survive on credit. This scenario has been escalating since the prolonged tightening cycle began towards the end of 2021, when the Monetary Policy Committee raised the repo rate by a cumulative 4.75% between November 2021 and May 2023, taking it from 3.50% to 8.25%, the highest level since 2014. Sadly, this means more and more South Africans are relying on their credit and store cards to put food on the table and keep the lights on," Roets further said. "The likelihood is that they will default on debt and fall into an even deeper trap, as the cost of credit rises due to existing debt. This is most evident with big purchases like home and car loans. South Africans need real financial relief. This is a glaring red flag that should be at the top of the list of concerns of the authorities," Roets said.
The Citizen
2 days ago
- Business
- The Citizen
Rate cut another boost for rising property market
With the inflation rate still below 3% and the Rand stronger against the US Dollar, the Monetary Policy Committee of the Reserve Bank has decided to lower the repo rate by 0,25% to 7,25%. This is the fourth interest rate cut since September 2024 and will take the prime rate and home loan 'base rate' to 10,75%, compared to 11,75% a year ago, notes Berry Everitt, CEO of the Chas Everitt International property group, and will cut the cost of borrowing by around R17 per R100 000. 'This means that on the R1,6m average home price noted in the May BetterBond Property Brief, the minimum monthly bond repayment will drop by R272, making it easier for prospective buyers to qualify for new home loans. 'And for existing homeowners with 20-year bonds at that level, their monthly repayments will now be almost R1100 lower than at this time last year.' The news for first-time buyers is even better, he says, with the minimum monthly repayment on the average first-time buyer home price of R1,28m dropping by R218 and the gross monthly income required to qualify for a 20-year loan of that amount falling by more than R700. 'In addition, the banks have been easing deposit requirements in recent months and the average deposit for first-time buyers is currently almost 9% lower, at R175 000, than it was at this time last year. Coming on top of the Budget decisions to raise the Transfer Duty threshold to R1,2m and not to raise VAT, this means that first-time buyers now require a lot less cash to become homeowners.' Everitt says this is already being reflected in the market, with BetterBond recording a 2,2% year-on-year increase in home loan applications in April, 'which represents a huge comeback from the 15% year-on-year decline recorded in April 2024'. Today's MPC decision follows news released by StatsSA that the inflation rate in April was 2,8%, still under the Bank's current target range of 3 to 6%, despite large electricity tariff increases and higher food prices in recent months. Reserve Bank governor Lesetja Kganyago noted that inflation was also expected to remain lower than initially expected this year largely due to lower oil prices, a stronger Rand/dollar exchange rate and the decision not to raise VAT. On the other hand, economic growth projections are lower and unemployment is higher worldwide, so there is a need to lower rates to stimulate spending, company revenues and employment. Many other central banks have already cut rates in response to this situation, and the US Federal Reserve is also expected to start doing so at its next meeting. Issued by Chas Everitt International
The Star
3 days ago
- Business
- The Star
SA Reserve Bank cuts repo rate offering relief to consumers
Ashley Lechman | Published 4 hours ago South Africans repaying vehicle, home loans and other debts received some joy on Thursday as the South African Reserve Bank (Sarb) lowered the repurchase rate (repo rate) for the country. Sarb Governor Lesetja Kganyago announced a cut to the repurchase rate (repo rate) by 25 basis points (BPS). This came after the central bank's Monetary Policy Committee (MPC) met this week and voted to decrease the repo rate from 7.50% to 7.25%. This means that the repo rate will decrease from 7.50% to 7.25% and the prime lending rate will decrease from 11.00% to 10.75%. "In the previous MPC statement, we warned of downside risks to our growth forecast. We have now trimmed our GDP projections and currently expect growth of 1.2% this year. The outlook for structural reforms remains positive, but there are also headwinds," Kganyago said. Dr Andrew Golding, the CEO of the Pam Golding Property, said the cut is welcome relief for consumers. Golding said, "The MPC seized the opportunity to give South Africa's economy a much-needed boost in sentiment. Furthermore, with inflation surprising on the downside in recent months and, with a petrol price cut likely next month, although partially offset by the hike in the fuel levy, price pressures are likely to remain subdued. The consumer inflation rate is currently well anchored below the lower limit of the 3%-6% inflation target." Meanwhile, Samuel Seeff, the chairman of the Seeff Property, said the rate cut was welcomed, but more is needed. Seeff said, "This is the fourth rate cut by Sarb since the latter half of last year. The Bank missed a crucial opportunity to provide a more meaningful cut of at least 50bps as a vital boost for the economy, consumers and the property market. The conditions for a robust rate cut are ideal given the remarkably low inflation which, despite the recent benign increase to 2.8% is still comfortably below the SARB's 3-6% target range. Additionally, despite global volatility, the strengthened Rand poses no risk of igniting an inflationary spiral, given the subdued demand-side pressures." "Even with the latest rate cut, the interest rate is still above pre-Covid levels. This continues to erode any benefits from previous rate adjustments and remains an impediment to real economic growth so vitally needed. The high interest rate has done considerable damage to the economy. Consumers are struggling, and while this rate cut will bring much needed relief," Seeff said. As a result of the 25bps rate cut, mortgage repayments will reduce by (Based on a 20-year repayment period at the prime rate): R750 000 bond – from R7,741 to R7,614 – thus saving R127 R900 000 bond – from R9,290 to R9,137 – thus saving R153 R1 000 000 bond – from R10,322 to R10,152 – thus saving R170 R1 500 000 bond – from R15,483 to R15,228 – thus saving R255 R2 000 000 bond – from R20,644 to R20,305 – thus saving R339 R2 500 000 bond – from R25,805 to R25,381 – thus saving R424 R3 000 000 bond – from R30,966 to R30,457 – thus saving R509 R5 000 000 bond – from R51,609 to R50,761 – thus saving R848 'With inflation at historic lows and household budgets still under pressure from slow economic growth, any easing in the interest rate environment is a meaningful win for consumers. Lower borrowing costs translate directly into more affordable monthly repayments, which can help unlock greater activity in the property market,' regional director and CEO of RE/MAX of Southern Africa , Adrian Goslett said. 'For buyers, it may be a good time to explore opportunities while rates are still trending lower. For sellers, improved affordability could mean a larger pool of potential buyers, which could mean a quicker sale and more competitive offers,' Goslett added.
The Citizen
4 days ago
- Business
- The Citizen
How Joburg plans to spend R89 billion
For the 2025/26 financial year, Johannesburg will have an operating revenue of R84.8 billion The council chamber of the City of Johannesburg. Picture: Neil McCartney / The Citizen City of Johannesburg Finance MMC Margaret Arnolds has tabled a R89 billion budget to address the city's service delivery challenges. Arnolds delivered her first budget speech at the Connie Bapela Council chambers in Braamfontein on Wednesday. The primary driver of this growth in total revenue is the rise in service charges, mostly for water and electricity. 'Revenue for 2025/26 reflects a 9.3% increase compared to the previous year. This Increase is primarily driven by service charges, which account for the largest share of the City's revenue base.' Electricity service charges are budgeted at R25.6 billion, up by 12.5%. 'This reflects the approved tariff increase of 12.41%, which is a pass-through from Eskom. 'There is also a focused plan to reduce technical and non-technical electricity losses from 28% to 25.8%,' said Arnolds. Water and wastewater charges will generate approximately R20 billion, up 11.8% from the current year. 'This will be underpinned by an average tariff increase capped at 13.9%, despite a Rand water increase of 15.3%,' she said. Refuse removal revenue increases by 6.4% to R3.3 billion, with service reliability a core deliverable tied to the tariff increase of 6.6%. Property rates, the City's second-largest revenue stream, are expected to generate R18.1 billion, reflecting a 4.6% increase. Arnolds described this as a funded budget even through the city has been struggling with rate collection over the years. Keeping the lights on in Joburg R4.6 billion has been allocated to City Power over the next three years. This is meant to stabilise the grid to prevent collapse and strengthen the network to improve efficiency. 'This is also meant for the expansion of the grid to meet growing demand, prevent system collapse due to the ever-growing and changing energy landscape and to ensure revenue enhancement and reduction of technical losses,' said Arnolds. Water and Sanitation Johannesburg Water will receive the second-largest capital allocation of R5.6 billion over three years to address both service backlogs and infrastructure failure hotspots. The city will invest in new sewer connections to informal settlements and densified townships. Roads and Mobility At least R2.8 billion has been allocated to Johannesburg Roads Agency (JRA) for upgrading high-traffic corridors linking townships to economic centres, particularly in Diepsloot, Soweto, and Lenasia. On the other hand, R400 million has been allocated for expanding stormwater infrastructure in Orange Farm, Ivory Park and Braamfischeville, to prevent flash flooding. JMPD The Johannesburg Metro Police Department (JMPD) will be empowered by a R16 million investment in Public Safety. This will enable the city to fight crime using the latest technology. ALSO READ: Morero's vision to make Johannesburg a world-class African city A pro-poor budget? Arnolds said the city had come up with a tariff strategy which is balanced and progressive. 'It ensures services are funded sustainably without excessive burdens. 'It also ensures indigent households continue to benefit from the Expanded Social Package (ESP). 'We are in the process of reviewing our ESP policy to be more inclusive and allow access to more vulnerable individuals,' she said. Arnolds said the city had the poor in mind when crafting the 2025/2026 budget. 'In this budget, all residents will continue to receive the first 6 kiloliters of water for free, 'Expanded Social Package (ESP) qualifying residents receive up to 15 kiloliters of free water, 50 kilowatt hours (kWh) of free electricity, free sanitation, and refuse removal because in Johannesburg, we believe that basic services are a human right, not a privilege,' she said. Pensioners will receive up to 100% rates rebates on homes valued up to R2.5 million. 'Indigent households, child-headed families, people living with disabilities, and the unemployed are supported through targeted rebates and subsidies on municipal services, housing, and transport,' she said. Arnolds said the city will keep the prepaid electricity surcharge unchanged at R200 (excluding VAT). She said this is a deliberate act to protect the poor against rising energy costs. 'This budget makes it clear: we will not govern in a way that reproduces inequality. Our pro-poor programme is a political choice – rooted in the values of equity, dignity, and redress. 'It is a signal that in the City of Johannesburg, no one will be left behind. Not on our watch,' she said. According to Arnolds, employee-related costs remain the largest expenditure item, aligned with the Multi-year Collective Bargaining negotiated agreement of 5.35% salary increase. She said repairs and maintenance spending has been ringfenced and increased to address ageing infrastructure, with a growing share of operating directed toward proactive maintenance over reactive fixes. She said contracted services and professional fees have been limited in growth. 'This ensures the city does not outsource its core responsibilities unnecessarily,' she said. NOW READ: ANC faction takes aim at Joburg mayor Dada Morero
IOL News
4 days ago
- Business
- IOL News
South Africa's take-home pay growth slows as interest rate decision sooms
Average take-home pay in South Africa decelerated for the second consecutive month in April, intensifying focus on the interest rate decision by the SA Reserve Bank scheduled for Thursday. Average take-home pay in South Africa decelerated for the second consecutive month in April, intensifying focus on the interest rate decision by the SA Reserve Bank (SARB) scheduled for Thursday. The BankservAfrica Take-home Pay Index (BTPI), tracking salaries of approximately 3.8 million workers, reported a nominal average take-home pay of R17 495 in April, down 2.0% from R17 846 in March. Despite this slowdown, pay remains 13.8% higher than the R15 370 recorded a year ago. Shergeran Naidoo, BankservAfrica's head of Stakeholder Engagements, noted that while take-home pay has seen gains since mid-2024, recent global and domestic economic pressures are dampening momentum. 'The upward trend in salaries marked a positive shift after years of stagnation, but escalating global trade tensions are weighing on confidence, slowing economic activity,' Naidoo said. Real take-home pay, adjusted for inflation, also declined by 2.2% to R15 005 in April from R15 344 in March, though it remains above year-ago levels. Independent economist Elize Kruger noted that South Africa's consumer inflation, which dropped to 2.8% in April 2025, has bolstered purchasing power. 'With headline CPI projected to average 3.4% in 2025, down from 4.4% in 2024, we're seeing the lowest inflation since 2020's 3.3%,' Kruger said. She attributed this to a stronger Rand and falling international oil prices, which are expected to drive further fuel price cuts in June despite a recent fuel levy hike. However, economic challenges persist. Early data suggest South Africa's quarterly 2025 real gross domestic product growth may be flat or negative, reflecting global trade war impacts and subdued domestic demand. The repo rate, currently at 7.5%, translates to a real repo rate of 4.1% - well above the neutral rate of 2.8%. This restrictive monetary stance, combined with unchanged tax brackets and new levies from the 2025 National Budget, continues to squeeze households. Kruger said a modest 25 basis-point rate cut at the upcoming SARB Monetary Policy Committee meeting could provide relief. 'Lowering borrowing costs would ease pressure on households and businesses, potentially boosting confidence and investment,' she said. However, she cautioned that a more aggressive cut is unlikely given the SARB's cautious approach. Global trade disruptions and sluggish local growth have trimmed economic forecasts, raising concerns about job and income prospects. Kruger stressed the need for structural reforms to address energy, logistics, and governance bottlenecks. 'These reforms are critical to unlocking growth and shielding the economy from external shocks,' she said. The low inflation environment, supported by a recovering Rand and cheaper oil, offers the SARB room to ease monetary policy, following the lead of other developed and developing economies. Yet, debates over lowering the inflation target band could delay relief. 'Prolonged high interest rates are punishing the economy unnecessarily,' Kruger warned. As South Africans await the SARB's decision, the slowdown in take-home pay underscores the delicate balance between fostering growth and managing inflation. With global uncertainties looming, the central bank's next steps will be pivotal for salary earners hoping for financial respite. BUSINESS REPORT Visit:
