The repo rate cut of 25 basis points brings the repo rate to 7% and the prime lending rate for commercial banks down to 10.50%.
Although economists were happy with the decision of the Reserve Bank last week to cut the repo rate by 25 basis points, there is not much for consumers to smile about as they try to prepare for the impending financial disaster.
The backlash of a combination of global and local economic factors aligning to hit their pockets very hard in the near-term will make the hardships of previous months look like a walk in the park, Neil Roets, CEO of Debt Rescue, said.
The announcement of the repo rate cut, despite inflation edging up to a four-month high, will not ease the pain of millions of hard-working citizens across the country in the months to come, he said.
“Leading economists predicted this move by the Monetary Policy Committee. One of them was the Bank of America, that also believes a formal shift to a 3% inflation target is now almost certain.
“In fact, in its latest South Africa Viewpoint report, it notes that the South African Reserve Bank (Sarb) increasingly indicates in explicit communication that this agreement with the National Treasury and key stakeholders is already in place.”
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Last opportunity to cut repo rate before inflation increases due to US tariff
Roets says this is likely the last opportunity to ease the financial burden on consumers, with inflation at the lower end of the Sarb’s 3% to 6% target range for nine consecutive months.
“With the 30% US tariff hike on South African exports set to start and threatening to have a potentially devastating impact on the country’s export market, US president Donald Trump’s latest warning of an additional 10% tariff on Brics-aligned nations, where South Africa is a member, escalated uncertainty in the market even further.”
He pointed out that this is a direct threat to consumers’ financial stability. “Combined with high inflation, this move by the US could severely impact key sectors such as agriculture, wine, metals, vehicles and manufactured goods, leading to increased costs of fuel, food and other essential goods.
“This is likely to trigger job losses and business closures. Food prices also keep escalating, with food inflation reaching a 15-month high of 5.1% in June, while the country faces ongoing challenges with water infrastructure, leading to potential shortages and rationing.
“It is incomprehensible that consumers are expected to navigate these turbulent waters at a time when households are stretched to their very last rand.
“The only way forward is for South Africans to tighten their belts (if that is even possible) and brace themselves for a very challenging period ahead.”
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Real disaster coming from US tariffs in blow to SA’s economic growth
Economist Dawie Roodt has warned that the real disaster resulting from the expected 30% (or more) tariff on South Africa’s exports to the US last week will be a severe hit to economic growth. He said that, while the net impact of the US tariff may be relatively small, the real issue is the effect this will have on South Africa’s economy.
“At the beginning of the year, everyone was predicting economic growth of around 2%, but every time new statistics are released, this number declines.
“South Africa is almost certainly going to report sub-1% economic growth in 2025, with my current prediction being a paltry 0.8%”, he said.
Roets warned that the latest volley of economic blows will decimate the lives of millions of citizens, who have been grappling with incessantly rising costs of essential goods and services for far too long.
“People are running out of hope, the only lifeline that has kept them going over the past volatile years. When that well runs dry, we are very likely looking at a country on the brink of social unrest.”
The latest Debt Rescue Savings Survey also paints a grim picture of a nation living from month to month, with one of the key insights showing that nearly half (48%) of respondents cannot afford basic necessities such as food, housing and health care, while another 41% say they only just manage.
“Food insecurity is by far the most concerning issue for households, with families now having to choose between keeping the lights on and having three nutritious meals per day,” Roets said.
This admission recently came from Electricity Minister Kgosientsho Ramokgopa who admitted that energy poverty is rising, with the rapidly escalating cost of electricity forcing households to choose between food and energy.
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People cannot afford food
While the latest Household Affordability Index, released by the Pietermaritzburg Economic Justice and Dignity Group, shows a small decrease in the price of the monthly food basket, this minute drop is simply not enough to make any discernible difference in the lives of working-class South Africans, he said.
The average cost of the July 2025 staple food basket slightly decreased to R5 442.72, a modest dip of 41 cents from June 2025.
‘‘This is a glaring red flag and should be at the top of the priority list of authorities right now. It is crucial for government and private sector leaders in the retail food space to come up with comprehensive strategies to strengthen food security and support economic resilience in the face of these ongoing challenges,” Roets said.
While the average monthly cost to feed a child a basic nutritious diet is R957.41, the child support grant of R560 falls 30% short of the food poverty line of R796.
Right now, consumers have little-to-no financial cushion to fall back on, Roets added. “As disposable income drops due to rising inflation and commodity prices, household financial distress is set to worsen and consequently debt levels will Increase.”
