Although South Africans were relieved when the repo rate was cut by 25 basis points, it was not nearly enough to really help.
The repo rate cut was too little too late for millions of consumers who are on the edge of financial ruin, sinking deeper into debt, fuelled by the highest interest rate the country has seen in over a decade.last week elicited a small sigh of relief from many quarters, this was not enough to help the millions of households across the country who are hovering on the brink of financial ruin, Neil Roets, CEO of Debt Rescue says.
The Monetary Policy Committee raised interest rates by a massive 475 basis points since 2021 after extreme inflationary pressures hit the South African economy following the Covid-19 pandemic. This took the repo rate to a 15-year high of 8.25%, where it remained since May last year.2024, down from 4.6% in July and below the expected 4.5%. This was the lowest inflation rate since April 2021, falling just below the South African Reserve Bank’s preferred midpoint target of 4.5%.
Chief economist at Momentum Investments, Sanisha Packirisamy, agrees and says that while the two-pot retirement system may benefit South Africa’s economy in the short term, it will also result in higher inflation and interest rates.Another manifestation of the nation’s financial crisis is the number of South Africans seeking debt counselling. Roets points to the increase in borrowing costs over the past three years that put significant pressure on consumers, especially homeowners.
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