Interest rates ease, but rising food and energy costs keep pressure on South Africans

South Africans may be breathing a little easier following the South African Reserve Bank’s (Sarb) latest decision to cut the repo rate by 0.25%, but financial experts caution that the relief is limited and household budgets remain under pressure.

The repo rate, which dictates what commercial banks pay when borrowing from the SARB, dropped on 1 August, bringing lending rates down slightly from recent highs. This means that consumers with loans or credit facilities should see a small easing in their monthly repayments.

“The rate reduction is welcome news, but it does not mean the financial pressures facing many households have disappeared,” said Sarah Nicholson, customer experience and platform manager at JustMoney.co.za, a platform that helps South Africans make good money choices.

Nicholson pointed out that while the prime lending rate now sits at 10.5%, not everyone benefits equally.

“Clients with lower credit scores or higher perceived risk are offered rates significantly above this. Everyday household expenses also continue to bite. If you feel your grocery bill is creeping up every month, you’re not imagining it,” Nicholson said. 

According to Statistics South Africa’s Consumer Price Index (CPI), food and energy costs have risen sharply.

In June, the cost of stewing beef was up more than 20% compared to the previous year, while vegetables, fruit, and nuts climbed by 13%. Electricity, gas, and other fuels rose by 11%.

Data released this past week proved for further concern for consumers, as consumer price inflation (CPI) accelerated to 3.5% year-on-year in July, from 3.0% in June, driven mainly by higher electricity, water and food costs. 

“This was a relatively high survey month, with the South African Reserve Bank (Sarb) continuing to target the lower limit of the 3% to 6% inflation band,” Investec chief economist Annabel Bishop  said.

The latest data shows that electricity prices surged by 8.9% and water tariffs by 7.1% in July, well above the Sarb’s 3% target.

Fuel costs also edged higher, with a 52c/litre increase in the petrol price, adding around 0.1% month-on-month to overall inflation.

“While August saw a 28c/litre cut in petrol prices, this is too small to have a material effect on monthly CPI inflation,” Bishop said in an investment note on Wednesday. 

“Understanding what the CPI tells us about rising prices is helpful, but it’s even more important to know how to manage these costs in our daily lives,” Nicholson explained.

To help households stretch their budgets further, JustMoney shared practical tips across key spending areas:

Food and groceries: Rotate expensive meats with chicken, fish, or legumes; buy local and seasonal produce; bulk-buy non-perishables; and reduce food waste by freezing extras.

Transport: Optimise fuel usage by driving smoothly, maintain vehicles to avoid costly repairs, and use fuel loyalty cards or ride-sharing to cut costs.

Housing and utilities: Install energy-efficient lighting, insulate geysers, fix leaks, and negotiate rent increases. Monitoring prepaid electricity meters can also highlight sudden consumption spikes.

Debt management: Despite the interest rate cut, debt remains a major concern. DebtBusters’ Q1 2025 Debt Index showed that vulnerable households earning R5,000 or less use 76% of their income to repay debt, while higher earners at R35,000 or more spend 77% on debt servicing — the highest ratios recorded since 2016.

Nicholson urged South Africans to avoid complacency.

“Make snowball or avalanche repayments, automate debt payments, and avoid taking on new high-interest credit. Building an emergency fund, even if it’s just R200 a month, can also help you avoid falling back on debt when life throws curveballs.”

She added that seeking help early is critical.

“If you’re worried about debt, find a reputable debt counsellor who will guide you through your options. Reaching out early will relieve stress and put you on the path to financial stability.”

Nicholson further said, “Even with interest rates easing, South Africans cannot afford to let their guard down when it comes to managing money. Vigilance and smart financial choices remain essential if you are to weather financial challenges.”

BUSINESS REPORT