May 26, 2023

South Africa’s interest hike: What you need to know

South Africa's interest hike

South Africa’s interest rate hike keeps on climbing. Is there any way we can prepare for the economic fallout?

Since November 2021, South Africa has been on a long and hard hike up a steep mountain that is the interest rate of everyday living. Since the initial spike, the Monetary Policy Committee (MPC) has predicted nine interest hikes until a hopeful decline in 2024.

If the predictions are true, we are either at the peak of this strenuous interest hike and can expect a steady decline, or consumers should start gathering non-perishables while they still can. South Africa is currently at the highest interest rate in a decade, with the repo rate at 7.75%. The latest hike (25 May 2023) adds an expected 25 basis points rise, with the repo rate sitting at 8.25%.

Rising inflation

The cost of living is steadily increasing, and South Africa’s salary expectations across industries remain the same. In March 2023, inflation data showed the Consumer Price Index (CPI) is at 7.1%, and food inflation is at a shocking 14%, leaving it at the highest in 14 years. Will South Africans revert to growing their own crops and raising their own livestock?

While we sit with no food in our cupboards due to staggering high inflation rates, we also sit in the dark as loadshedding continues interfering with daily routines. Though this should allow consumers to save on their electricity – seeing as we only use electricity for six to eight hours of the day – somehow, electricity bills are still the same (or higher) than months without loadshedding.

While interest rates continue to rise, along with inflation rates, so does the cost of electricity. This increase can be due to our part in the Russia-Ukraine conflict, impacting our currency’s depleting value.

Although we live by candlelight and buy food with SmartShopper points, at least we have running water, but at what cost? Announcements of an 18.65% tariff increase are applicable effective 1 July 2023.

Dark times ahead

Consumers find themselves in a situation where inflation is at an all-time high; load-shedding will continue indefinitely with no plan to end, tariff rates are increasing, and the Rand is weakening with each announcement.

The cost of living includes many factors like electricity and food, including medical coverage and insurance. Insurance companies can increase their rates when appliances break due to loadshedding outages. In the same way, medical aid schemes have increased their rate for 2023 to an average of 8.2% higher than last year due to demand.

All of these factors mean that South Africans are tightening their belts and hoping for the best while debt climbs and savings are depleted. Unfortunately, the far-reaching effects of the latest rate hike remain to be seen, but many Saffas are positive in the face of dark times.

South Africa’s interest hike: What you can do

South Africans have always found ways to keep busy when the lights are out. We’re a creative and adaptable group of people; we accept that challenges might arise and come up with solutions.

However, you may need help to circumnavigate the new interest hike and any current debt you’re dealing with. If that’s the case, choose Debtline. We are passionate about helping people regain control of their finances and live debt-free.

Debtline stands to protect your assets with an expert team of registered debt counsellors. As South Africa’s most innovative debt management company, we’ll help you make a plan when all else fails, so please reach out to us for a free callback!