Consumers in SA told to remain resilient following interest rate decision

South African Reserve Bank Governor Lesetja Kganyago. Photo by Simphiwe Mbokazi / Independent Newspapers.

South African Reserve Bank Governor Lesetja Kganyago. Photo by Simphiwe Mbokazi / Independent Newspapers.

Published Jan 28, 2024


The South African Reserve Bank (SARB) kept interest rates in the country unchanged this past week.

This means that the repo rate will remain at 8.25%, while the prime lending rate also stays at 11.75%.

Frank Blackmore, the lead economist at KPMG SA, said the bank’s reasoning was more than one-fold.

“Firstly there are serious upside risks to inflation, any combination of which could push inflation once more above the upper target of 6%. Secondly, the inflationary expectations in the market and the general public remain un-anchored at either around 5.8% for business, or 6.1%, which is far higher than the 4.5% that the Reserve Bank expects. Thirdly, specifically, fuel and food prices show a lot of volatility and have a lot of risks that may impact these two items,” Blackmore said.

He further told Business Report, “There is a lot of uncertainty over those even though fuel inflation showed a decrease over the recent past. Fourthly, the Reserve Bank has mentioned that besides monetary policy, a lot more could be done by the public sector by limiting the amount of public debt we have and increasing any energy availability, so to factor, would boost growth and be good for inflation.

If administrator prices were kept lower and of course, if there’s an increase in labour or the wage rates were increased in line with productivity gains, these things would all be good for the future outlook of inflation. An important additional point that the Governor made when asked questions of when we can expect interest rates to decrease, he said, that interest rate decreases are not dependent on time, they are dependent on state.”

Blackmore said, “What he means by that is once inflation has been reduced to a sustainable level of around 4.5% then we will see the interest rates being reduced and not before then. It's hard to answer this question on a time basis because irrespective of the time the state of stable inflation around 4.5 needs to be met.”

Hayley Parry, Money Coach and Facilitator at 1Life's Truth About Money, told Business Report that the SARB’s governor’s announcement contained good and bad news.

She said, “The good news is that interest rates have not gone up. The bad news is they haven't gone down either. In our first MPC meeting of the year, Governor Lesetja Kganyago, announced that they were leaving interest rates unchanged. So, despite being at 14 years high, these interest rates have remained unchanged for the past nine months.

“This is in line with economists’ expectations, but the outlook remains uncertain. What that means for us as consumers is that we are not sure if and when interest rates will be going go down. So, for the foreseeable future, it is all about making sure that you manage the money you do have well, because you are not likely to see much relief in interest rates any time soon.”

Brina Biggs, a senior manager at 1Life, said consumers can breathe a sigh of relief that rates were not hiked.

Biggs said, “This being the fourth consecutive decision to do so by the MPC. We are not yet primed for a decrease, or increase, as the longer-term economic outlook remains uncertain due to geopolitical tensions, climate change affecting the full supply chain, load shedding and what is seen as a year of elections across the globe. Inflation is on a downward trend, so hopefully we will see some rate cuts, albeit much later than initially thought. If this pattern holds and tensions do not worsen.”

She added, “South Africans are still under the cosh, with 51% of respondents in the third annual 1Life Generational wealth survey, reporting concerns on covering basics such as rent and petrol and utilities. 2023 has shown us that we are resilient and 2024 will be no different in continuing to shop the specials, run a tight budget and make some tough financial decisions to make ends meet. But this we can do.”