Debt Rescue says the steep interest rate hike – just before the festive season – will have a devastating impact on South Africans who have had to absorb a relentless onslaught of living cost increases this year, and who now, by all accounts, are in for an even rougher ride in 2023.
The November interest rate hike brings the prime lending rate to 10.5% as of 25 November 2022, with inflation showing no signs of easing anytime soon. This brings the main lending rate to 300 basis points (3.00%) so far this year, with inflation showing no signs of moving back to the SARB’s target band of between 3 and 6%.
Kganyago substantiated Stats SA’s statement that the main drivers of inflation are food and transport costs, confirming that local food price inflation is revised up to an expected 8.8% in 2022, due in part to the weaker exchange rate. This, regardless of a drop in global food price inflation.
While food and non-alcoholic beverages increased by 12% year-on-year, with the oil and fats category emerging as the biggest contributor to higher prices, transport increased by 17.1% year-on-year and contributed 2.4 percentage points to the headline number. Fuel was the main driver in this category.
CEO of Debt Rescue, Neil Roets, says this rate hike paints a bleak picture for South Africans who are paying off debt on property, vehicles and credit cards.
“Consumers have felt the brunt of all of these increases on their pockets throughout the year and are struggling financially. Many are not making ends meet, and have had to make so many adjustments already to their living expenses, that there is nowhere left to cut,” he says.
He says the latest interest rate hike may well be the straw that breaks the camel’s back.
Economist Dawie Roodt says consumers have no choice but to bite the bullet a bit longer. He says if the SARB had done nothing this year to tame inflation, the situation would have looked far worse. Roodt says inflation expectations have probably peaked, and this means in the next 8 months inflation, and thus rates, will start coming down again.
Kganyago did indicate this latest spike in rates may not be the last, and consumers may well have to prepare for another hike early next year.
