Interest rates will be on the rise next week making it difficult for ordinary citizens to fulfill basic necessities and make ends meet as monthly repayments would increase in line with the rate hikes.1 Various analysts and researchers who specialize in finances have stated that this began with another increase, making it the tenth consecutive hike to the rate cycle, which began two years ago in November 2021.2 The next hike is expected to be announced by the South African Reserve Bank (SARB) Monetary Policy Committee (MRC) on the 25th of May.3 In its latest Weekly Review, the Bureau for Economic Research (BER) said that it still suspects the SARB to hike the repo rate by 25 bps next week; however, a surprise 50 basis point hike cannot be ruled out, especially if the rand does not strengthen meaningfully.4
All this can be attributed to spiraling inflation, and the rising cost of living.
The rand took a toll late last week following accusations by the US ambassador in South Africa that South Africa sold arms to Russia – crushing investor sentiment and bringing the rand to its lowest point in history. Since then, the currency has still not recovered and remains bogged down by load shedding and a poor reputation. In March, the MPC surprised the market when it hiked the rate by 50 basis points, increasing the repo rate to 7.75% and the prime lending rate to a 14-year high of 11.25%. This had severe knock-on effects on cash-strapped South Africans, who were forced to pay more on monthly instalments such as bonds and vehicle asset financing every month. Another hike will likely add more financial pressure to these households. Benay Sager, the head of DebtBusters, said that credit has become far more burdensome for many consumers as interest rates rise. Sager said, for example, taking into account the most recent rate hike, the average bond rates increased from 8.3% to 11.4% per annum in a short space of time. Average vehicle finance rates rose from 12% to 14.8% during the same period. (More pain coming for households in South Africa next week)
The fact that the United States (US) ambassadors apologized for making the statement without having provided evidence to support his claim and still manage to ruin the South African markets shows that he should sincerely resign his position. One unjustifiable comment made by a diplomatic official, has become a burden to ordinary South African families. The costs of maintaining load shedding without providing suitable sources of power has also had its contribution to make. The impact on production has been a burden for businesses. The untrustworthiness of the rand stems from the abuse of the Minister of Finance and other key positions in cabinet, going back to the era of President Jacob Zuma. The current government is still trying repair the damage.
Meanwhile it is South African families that are now paying the price for how this affair has been mishandled. The financial burden added to South African families can be felt by the rise in interest hikes goes to show, that the state needs to come up with a plan to fix the load shedding to alleviate the financial burden on the markets. Otherwise South Africans will end up paying more than they bargained for in terms of bonds. They will financially be unable to support their families. They will become bankrupt. The South African state needs to recover from the falsehood concerning the sale of weapons to Russia and put itself back on track.
More pain coming for households in South Africa next week
Next week is set to bring another interest rate hike making it harder for everyday South Africans to make ends meet as monthly repayments… 1 2 3 4