As the VAT hike debate remains a hot topic ahead of the revised Budget Speech next week, economists have warned of the impact an increase would have on consumers – and the Reserve Bank’s position on interest rates.
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As reported by The South African website, prior to last month’s unprecedented postponement of the Budget Speech, economists saw room for further interest rate cuts in 2025.
However, given the current turbulent global climate – particularly surrounding US President Donald Trump’s trade and tariff war – experts no longer see rate cuts happening in the near future.
That ‘bad’ news is, however, offset by ‘better’ news that inflation is sustaining at lower levels, suggesting there is room for as much as 50 basis points of cuts before the end of the year.
Worst-case scenario
As detailed below, there are three South African Reserve Bank’s (SARB’s) monetary policy committee (MPC) meetings scheduled for the second half of 2025 – in July, September and November.
However, this could of course all be undone in a worst-case scenario in Wednesday, 12 March’s Budget Speech.
If the National Treasury does elect to hike VAT amid global tensions, inflation could spike, ending all prospect of interest rate cuts in the short term.
As a reminder, the South African Reserve Bank’s (SARB’s) monetary policy committee (MPC) will meet for the second time in 2025 on Thursday, 20 March.
The MPC will have just over a week to digest the Budget Speech news and decide what to do with interest rates in the country.
What did the MPC decide in January?
There was some good news for South Africa’s homeowners and those looking to enter the property market for the first time back in January when the MPC decided on a 25 basis point cut which no doubt came as welcome news to all those South Africans in debt.
Reserve Bank Governor Lesetja Kganyago confirmed that the decision was not unanimous and that four MPC members voted for a 25 basis point cut, while the remaining two members preferred rates to have remained unchanged.
The repo rate currently stands at 7.50% while the prime lending rate is 11%.
Who are the SARB?
The South African Reserve Bank’s (SARB’s) monetary policy committee (MPC) meets every second month to announce changes – if any – to the country’s repo and prime lending rates.
The meetings take place in January, March, May, July, September and November – and always on a Thursdayat 15:00.
Currently, the committee comprises of six people, with Lesetja Kganyago holding the position of governor of the SARB.
| Month | Date |
| January | 30 January – 25 basis point cut |
| March | 20 March |
| May | 29 May |
| July | 31 July |
| September | 18 September |
| November | 20 November |
Monthly bond repayment table
The South African website’s table below shows the current monthly bond repayments on various bond values over a 20-year period assuming no deposit and repayments at prime.
| Bond | Current (11%) |
| R750 000 | R7 741 |
| R800 000 | R8 258 |
| R850 000 | R8 774 |
| R900 000 | R9 290 |
| R950 000 | R9 806 |
| R1 000 000 | R10 322 |
| R1 500 000 | R15 483 |
| R2 000 000 | R20 644 |
| R2 500 000 | R25 805 |
| R3 000 000 | R30 966 |
| R3 500 000 | R36 127 |
| R4 000 000 | R41 288 |
| R4 500 000 | R46 448 |
| R5 000 000 | R51 609 |
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