What the interest rate reduction means for you

The interest rate was adjusted 25 basis points downward on Thursday by the South African Reserve Bank.

This means that the repo rate sits at 6.5 percent, and the prime lending rate is now at 10.25 percent.

The lower rate is great for folks with loans and SMEs, though this may differ for investors.

On Thursday, Governor of the South African Reserve Bank, Lesetja Kganyago announced that despite a turbulent economic year, the interest rate would be reduced by 25 basis points.

This puts the repo rate at 6.5 percent and the prime lending rate at 10.25 percent, and, as the governor puts it, showcases the resilience of emerging markets.

“Trade patterns are shifting, but global growth is holding up better than expected. In the euro area, inflation appears contained. However, in other major economies price dynamics are more challenging, with deflation risk in China, and inflation materially above 2% targets in the United Kingdom, Japan, and the United States (US). In emerging markets (EM), by contrast, inflation has eased. Indeed, 2025 has been better than expected for EMs. This is due to stronger capital flows and a weaker dollar, as well as favourable terms of trade,” Kganyago wrote in a statement Thursday.

There are, however, some concerns. While Kganyago notes that consumer spending is strong, much of that strength comes from folks withdrawing from their Two-Pot Pension savings. This isn’t great given that folks are dipping into their retirement savings, but we suppose if folks need the money, they need it now.

The governor also noted that the third quarter proved disappointing for investment.

“We expect an investment recovery in the second half, and if this materialises it will be an encouraging signal that the economy is getting back to its historic growth trend. As it stands, growth is better, but not yet healthy,” Kganyago said.

But what does the reduced interest rate mean for you? Well, that very much depends on who you are.

If you have a loan, this is good news as it means your repayment comes down. It’s also good news for SMEs, according to Lula’s chief risk officer, Garth Rossiter.

“A decrease in the repo rate immediately improves the operating environment for entrepreneurs: it lowers the cost of servicing existing debt and makes new working capital investment more affordable and, therefore, accessible. Importantly, there’s a significant psychological benefit in that it also gives these small businesses the confidence to start investing again,” says Rossiter.

“Critically, this move should also help alleviate the severe pressure on consumer disposable income, translating into improved sales and revenue for businesses across the board. Welcome relief in the run up to the festive season. This is a positive signal that allows business owners to shift their focus from mere survival back to growth and hiring.”

Whether this reduction will stoke investment isn’t clear, but Verto seems to suspect that it may do more harm than good.

“A rate reduction often softens the ZAR, increasing the risk of currency volatility and potentially eroding the profit margins of importers who pay for goods in USD or EUR. This decision underscores the need for proactive FX risk management,” says Verto’s head of revenue, James Booth.

“Our advice to all trading businesses is to move beyond traditional banking structures and utilise multi-currency accounts to shield themselves from immediate ZAR weakness and avoid the massive hidden costs typically associated with high-volatility, cross-border transactions,” says Booth.

Inflation meanwhile sits at 3.6 percent, above the SARB’s 3 percent target, although that goal post has now shifted to be 1 percent lower or higher than 3 percent.

“The tolerance band, of 1 percentage point either side of 3%, does not mean we will be indifferent to inflation anywhere between 2% and 4%. We want to be at 3%. However, no central bank has the tools to deliver inflation at an exact point all the time. As flexible inflation targeters, we also recognise that trying to offset all price shocks would create undesirable volatility in output. To support communication and accountability, we therefore want it understood that inflation will not always be precisely 3%. When there are deviations, we will explain what has driven inflation away from target, and we will do what is required to get back to target,” the governor said.

“Most of the time, we should be expected to keep inflation within the tolerance band, with breaches occurring only when there are severe shocks. We will always be setting policy so that inflation is going back to 3%,” Kganyago added.

This adjusted interest rate is effective as of today, 21st November 2025.

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