Reserve Bank’s 25 basis point rate cut comes under fire

Consumers can breathe a sigh of relief as the prime lending rate is now at 11.5%. This follows the South African Reserve Bank’s Monetary Policy Committee’s decision to cut the repo rate by 25 basis points to 8% with effect from Friday.

The unanimous decision marks the first time since May 2023 that the committee has changed rates. The announcement has brought relief to some homeowners with the hope that this cut is the beginning of a rate-cutting cycle putting money in the pockets of homeowners.

Property entrepreneur Carlo Mariani says the reduction of interest rates doesn’t guarantee lower property costs.

Leading Economist Dr Roelof Botha has also been scathing in his criticism of the Reserve Bank’s Monetary Policy Committee.

He maintains that consumers remain under extreme pressure with the cost of debt for consumers at 9.2% of their disposable income. This is the highest level in 15 years.

“People are losing houses and we are not creating jobs”: Dr Roelof Botha

‘Reduced repo rate far lower’

Meanwhile, the Economic Freedom Fighters (EFF) Member of Parliament, Sinawo Tambo says the Committee could have reduced the repo rate far lower than what it is now.

The party has rejected the reduction. It says the cut should have at least been by 50 basis.

In a statement, the party says the Reserve Bank has outsourced its thinking to the West and the financial sector, with interest rates driven by profit rather than the needs of the people.

Tambo elaborates, “The inflation in South Africa is causing the people of South Africa to be in a very high debt-driven environment. Where we’re paying our loans, our home loans, and our car loans at a much higher rate. This has been a misguided policy by the Monetary Policy Committee of the South African Reserve Bank where they have increased the inflation under the pretence that there’s a high demand and the need for it, but actually it isn’t for the benefit of the financial sector. And we know that in South Africa right now the economy needs a massive cash injection, it needs to create jobs. So there were necessary means to cut the basis points by much higher rates in order to alleviate the economic problem that is confronting people.”

SABC News Specialist Researcher Velemseni Mthiyane takes a practical rands and cents look at what this means for you:

SABC News Producer Cathrine Mawila went out to speak to a few people about their expectations, which gave us a good sense of what was at stake.