Governor Kganyago maintains repo rate at 8.25% in unanimous decision

The South African Reserve Bank’s Monetary Policy Committee said that the repurchase rate for the sate was unchanged. Picture: Oupa Mokoena/ Independent Newspapers

The South African Reserve Bank’s Monetary Policy Committee said that the repurchase rate for the sate was unchanged. Picture: Oupa Mokoena/ Independent Newspapers

Published Mar 27, 2024


The South African Reserve Bank’s (Sarb) Monetary Policy Committee (MPC) announced on Wednesday that the repurchase rate (repo rate) for the state remained unchanged.

Governor Lesetja Kganyago said the repo rate will remain at 8.25%, while the prime lending rate also stays at 11.75%.

According to the governor, this was an unanimous decision amongst the members of the MPC.

Persistent global inflation

“Since the start of the year, we have seen persistent global inflation pressures. Headline inflation rates are generally lower than they were a year ago, but underlying inflation is still elevated. Goods inflation has declined significantly, as supply shocks wear off, but there is evidence of stronger inflation in services, across a range of economies,” Kganyago said.

The governor acknowledged that while other emerging central banks have been lowering rates, these economies had undergone significant rate hikes previously, resulting in their interest rates now being well above inflation.

Unfortunately, South Africa’s economy performed worse than expected in the fourth quarter of last year, expanding just 0.1%.

Growth for 2023 as a whole was only 0.6%, Kganyago explained.

Load shedding should ease

“The main reason for this bad performance was supply-side problems. Electricity load shedding was worse than in previous years. Port and rail problems also emerged as binding constraints on output,” Kganyago stated, adding that he expects the load shedding burden to ease later in the year.

“While we estimate electricity shortages took 1.5 percentage points off GDP last year, we think this will moderate to 0.6 percentage points this year and 0.2 percentage points in 2025,” he noted.

“Overall, we see growth at 1.2% this year, improving to 1.6% by 2026. These projections are better than the 2023 outcome, but below longer-run averages, which are around 2%.”

Inflation still not on target

In terms of inflation, South Africa had a more gradual acceleration in inflation than many peer countries, with a lower peak, after Covid, the governor said.

He noted that the return to target inflation has been slow.

“The most recent inflation numbers showed yet another delay on the way back to our 4.5% objective, with headline up to 5.6% in February. This is nearer the top of our target range than the midpoint. Core inflation also rose, to 5.0%,” Kganyago added.

Economist’s predictions were right

Nedbank Group’s Economic Unit said in a note on Friday that like many other economists they did not think Kganyago would change the interest rate.

The bank said that South Africa’s inflation’s descent towards the 4.5% target stalled over the past two months

There is still hope

Last month during his yearly economic outlook, Standard Bank chief economist Goolam Ballim said that South Africans can look forward to four interest rates cuts of 25 basis points each by the end of 2024.

The Reserve Bank will begin interest rate cuts by the second quarter, he noted and said this would mean that the repo rate would be down from 8.25% to 7.25% by the end of the year.

You home bond payment

So what does this all mean and how will it impact my home loan? That is the question that most South Africans will ask themselves.

If you are paying off a R1 million home loan, your monthly bond repayment is currently about R10,837 a month at the current prime lending rate of 11.75 percent.

If the MPC had decided to implement a 25 basis points cut, reducing it to 11.50 percent, then your bond payment would be R10,664.

These calculations are based on a 20-year bond repayment plan.