Farmers have battled to deal with interest costs in rapid-fire hiking cycle
23 July 2023 - 17:49SA Reserve Bank’s decision
The central bank has chosen to keep the repo rate steady at 8.25%, which also means that the prime lending rate remains unchanged at 11.75%. In explaining its decision, the Bank mentioned that the current repurchase rate is considered restrictive and aligns with the objective of managing inflation expectations and outlook.
Producers are already grappling with high input costs, load-shedding, and a weak consumer environment among other challenges. The first pressure after an interest rate increase is the increased cost of borrowing, which makes it harder for farmers to access affordable credit and finance their operations, limiting their ability to cover input costs, invest in equipment, or expand operations.
As a result, in the short to long term, profitability may be challenged. The increased cost of borrowing reduces farmers’ ability to further invest in their operations. Additionally, the strain on debt repayment can increase financial stress for farmers. Moreover, rising interest rates come at a time of consumer financial pressure which we can observe in the livestock industry where prices are under downward pressure, which can affect farmers' income.
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