The South African Reserve Bank’s decision to increase interest rates has sparked concern among economists, debt experts and financial coaches who say millions of households are already in survival mode.
Image: Ayanda Ndamane/ Independent Newspapers.
South African households already battling rising food prices, fuel costs and mounting debt are expected to face even greater financial pressure following the South African Reserve Bank’s decision to increase the repo rate by 25 basis points.
The Monetary Policy Committee’s latest decision takes the repo rate to 7% and the prime lending rate to 10.5%, a move economists say reflects growing concerns around inflationary pressures linked to global conflict, energy market instability and rising agricultural input costs.
Frank Blackmore, Lead Economist at KPMG South Africa, said the Reserve Bank’s decision was largely driven by ongoing upside risks to inflation.
“The risks to inflation remain on the upside, not only from energy markets and the ongoing elevated prices given the situation in the Strait of Hormuz, but also because of the agricultural sector, where farmers could face increases in diesel and fertiliser costs,” Blackmore said.
He noted that while the increase will add short term pressure, the Reserve Bank indicated that rate cuts may still be possible later in the year if geopolitical tensions ease and inflation begins moving closer to the Bank’s new 3% target.
“At the current point, forecasts under a base condition see that towards the end of the year, a decrease again in interest rates is possible if the war ends relatively soon,” he said.
Blackmore added that the Reserve Bank also modelled more severe economic scenarios involving sustained energy price shocks, agricultural disruption and drought conditions.
“That scenario reflected a potential three 25 basis point increases in inflation,” he warned.
For consumers already stretched financially, however, the immediate concern is the impact on monthly budgets.
Hayley Parry said the latest increase will further squeeze disposable income for households carrying debt.
“For consumers with home loans, vehicle finance, credit cards and personal loans, this latest increase will mean higher monthly repayments and ultimately less disposable income at the end of the month,” Parry said.
She warned that financially stressed households may increasingly rely on short term debt simply to cover daily living costs.
“This may significantly increase their reliance on short term debt just to cover everyday expenses,” she said. “Ultimately, this deepens the long term financial pressure we are seeing on families.”
Parry urged consumers to reassess their spending habits and avoid unnecessary borrowing.
“Now is the time, where possible, to tighten your belt and specifically your budget by reducing any unnecessary spending,” she said. “Avoid taking on new debt wherever possible.”
The latest rate hike comes as new research points to deepening financial distress across South Africa.
Neil Roets, CEO of Debt Rescue, said the organisation’s latest consumer survey shows many South Africans are already at breaking point.
“Our consumer survey findings show that South Africans are already at breaking point financially,” Roets said. “Nine out of ten respondents told us they are under serious financial strain, while more than half said they do not know how they will cope going forward.”
He warned that the latest interest rate increase would intensify an already unsustainable situation for many households.
“The ripple effect will be far reaching among all South Africans and will exacerbate affordability pressures for people servicing home loans, vehicle finance and personal debt,” he said.
According to Debt Rescue, 41% of South Africans now cite inflation on essential goods as their top household budget concern, while 35% expect they will be unable to pay at least one bill or loan in full by June 2026.
The financial pressure is also changing consumer spending patterns dramatically.
Roets said South Africans are no longer cutting luxury spending alone but are increasingly sacrificing essentials such as food and electricity to survive.
“People are now being forced to cut back on food, electricity, water and other basic necessities just to survive,” he said.
Debt Rescue survey data found that 87% of respondents expect to reduce spending on food and household basics due to rising living costs, while 60% fear grocery prices may soon make necessities unaffordable.
Ayesha Hatea, Director of Research and Consulting at TransUnion said households are increasingly shifting into survival mode.
“What we are seeing is a shift toward more deliberate financial behaviour, where households are actively adjusting spending, prioritising obligations and, where they can, building financial buffers,” Hatea said.
The worsening cost of living crisis has also intensified concerns around food insecurity and child hunger.
Disturbing statistics released by the South African Human Rights Commission show that 38% of South African children live below the food poverty line, while more than one in four children under five suffer from stunted growth linked to chronic malnutrition.
Roets described the situation as a growing humanitarian crisis.
“This has escalated to the level of a humanitarian crisis that needs to be managed as a priority by the country’s authorities,” he said.
Andy du Plessis, Managing Director of FoodForward SA, said rising living costs, unemployment and limited access to nutritious food are deepening hardship for millions of South Africans.
“The growing number of children suffering from hunger and malnutrition remains among the world’s most preventable causes of death,” du Plessis said.
The economic strain is also taking a toll on mental health.
Dr Themba Hadebe said ongoing global instability and financial pressure are contributing to heightened anxiety and burnout.
“When people are faced with instability and conflict narratives, even if events are occurring far away, the body can remain in a sustained stress response,” Hadebe said.
“Over time, this compounds into burnout and emotional exhaustion that we are increasingly seeing in members.”
Roets urged struggling consumers to seek help before financial pressure becomes overwhelming.
“Stress linked to financial strain has real emotional and mental consequences,” he said. “Never ignore the early signs of burnout and seek help early before you develop more serious conditions.”
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